French Finance Minister Christine Lagarde had the upper hand but faced solid competition on Monday from Mexico and Israel as the International Monetary Fund (IMF) executive board begins deciding who will lead the crisis lender.
All three declared candidates — Lagarde, Mexican central bank chief Agustin Carstens, and late entry Israeli central banker Stanley Fischer — have strong credentials but only Lagarde has picked up major endorsements, first and foremost from the powerful European bloc.
The 24-member IMF executive board was expected to officially reveal the nominees as early as Monday, while Carstens was in Washington to lobby for support from the United States in a meeting with treasury secretary Timothy Geithner.
But Carstens admitted that Lagarde would be hard to beat.
“I know that it’s an uphill battle,” he told CNBC television.
“It’s like starting a baseball game with a score of 5-0 without a single pitch having been pitched, because you know the Europeans haven’t embraced the spirit of the process.”
“They went ahead and supported Madame Lagarde without even knowing who the candidates were.”
Legal entanglements
Lagarde’s candidacy — driven by Europe’s traditional hold on the job and their determination to get someone who is already involved in the multiple fiscal crises of the eurozone — gained momentum in recent days with official support from Egypt, Indonesia, and a number of African countries.
Carstens meanwhile only comes into the process with the expressed support of a dozen Latin American countries, notably not including Brazil or Argentina.
Meanwhile, Fischer faced his own difficulties: at 67, he would have to obtain a variance on IMF rules which set a limit of 65 for an incoming managing director.
Moreover, with dual US-Israeli citizenship, he would complicate the 65-year-old arrangement that a European leads the IMF, an American serves as the IMF number two, and an American leads the World Bank.
But Lagarde’s candidacy also faced a new wrinkle on Friday when a French court delayed a decision on whether to investigate her role in an alleged abuse-of-power scandal until July 8 — after the end-June target for the IMF executive board to choose a new head.
That could become an opening for either Carstens or Fischer, according to analysts.
“Lagarde’s legal entanglements could throw her candidacy off track, opening up the race,” Eswar Shanker Prasad, a Cornell University professor and former IMF researcher, told Agence France-Presse.
One who can travel
The executive board, representing the IMF’s 187 members, aims to reach a consensus choice by June 30 on the successor to Dominique Strauss-Kahn, who resigned on May 18 to fight charges of sexual assault in New York. Strauss-Kahn has denied the charges.
Bogged down by Greece’s fiscal crisis, and with Ireland and Portugal also under European Union-IMF bailout programs, Europe’s leaders quickly united behind Lagarde after Strauss-Kahn’s arrest.
Carstens meanwhile put himself forth as a developing-country challenge to the European lock on the job.
But despite lobbying around the world, he has been unable to pull endorsements from other leading emerging economies, much less the other Fund heavyweights: the United States, Japan, and Europe.
Lagarde has also been touring the world, pitching herself against worries that she could over commit the IMF to a struggling Europe. Washington and Tokyo so far remain uncommitted.
Fischer, meanwhile, only jumped into the race at the last minute, and though he has not been lobbying for support, is well known as the former IMF deputy managing director as well as chief economist at the World Bank
He told the Wall Street Journal in an interview that the IMF head should be an economist, an implicit dig against Lagarde who is a lawyer by training.
“Without having that [economic] training, it’s very hard to know who’s right and who’s wrong. You have to have a framework to think through the problems,” he told the newspaper, adding that the contest should not be “left to who can travel around the world most often”. — AFP