French Finance Minister Christine Lagarde considered IMF front-runner
Treasury Secretary Timothy F. Geithner said the U.S. will support a successor to Dominique Strauss-Kahn at the International Monetary Fund who can command “broad support,” and he renewed his call for a quick decision.
“We are consulting broadly with the fund’s shareholders from emerging markets, as well as advanced economies,” Geithner said in a statement Friday in Washington. “It is important that this be an open process and one that moves quickly to select new leadership for the IMF.”
French Finance Minister Christine Lagarde emerged as the leading contender to replace Strauss-Kahn, who was indicted Thursday on charges including attempted rape, as European officials moved to maintain control over the institution that approved a record $91.7 billion in emergency loans last year and provides a third of the euro-area’s bailout packages. When Strauss-Kahn was picked in 2007, the process took three months.
Italy and Sweden backed Lagarde, while German Foreign Minister Guido Westerwelle said he holds her in high esteem, the first public hint of German support. Officials in Thailand, Russia and South Africa said the next managing director should come from a developing nation even as they failed to unite behind one candidate the way Europe coalesced around Lagarde.
“I would argue that Christine Lagarde has outstanding credentials,” Swedish Finance Minister Anders Borg said in a Bloomberg Television interview yesterday. Her gender is an “advantage” since “half of the world has not been represented as managing director” of the IMF, Borg said.
Italian Prime Minister Silvio Berlusconi said Lagarde would be “an excellent choice” as Europe’s candidate, the Italian government said in an e-mailed statement yesterday. Berlusconi said it’s “fundamental” that Europe should reach a common position on whom the candidate should be as soon as possible, the statement said.
Lagarde is now the “odds-on” favorite for the IMF’s top job after being a “20-1 outsider when betting began,” London- based bookmaker William Hill Plc said in an e-mailed statement today. Trailing her were former Turkish Economy Minister Kemal Dervis and South Africa’s ex-Finance Minister Trevor Manuel, at 3-1 and 5-1 odds, respectively. Dervis today ruled himself out as a candidate, saying he wants to focus on his work at the Brookings Institution.
Officials in emerging markets including Thailand, Russia and South Africa said the next IMF managing director should come from a developing nation even as they failed to unite behind one candidate the way Europe coalesced around Lagarde.
While Chinese officials haven’t publicly endorsed any candidate, Thailand and the Philippines backed Singapore Finance Minister Tharman Shanmugaratnam as a possible choice to succeed Strauss-Kahn at the IMF.
Philippine Finance Secretary Cesar Purisima said in an interview today that Shanmugaratnam “is certainly well qualified,” and his Thai counterpart Korn Chatikavanij said yesterday Asia has good candidates, including Shanmugaratnam.
“I think the U.S. and Europe should take it upon themselves to really open this up to all candidates that are qualified, not necessarily just Europeans,” Purisima said in an interview with Bloomberg Television.
The time has come for a non-European to head the IMF, according to Angel Gurria, secretary general of the Organization for Economic Cooperation and Development. “The moment has come to change what is a tradition, which is that the IMF is led by a European,” the former Mexican finance minister told reporters in Paris today.
‘Fine Candidates’
Brazilian ex-central banker Arminio Fraga, South Africa’s Manuel, India’s Montek Singh Ahluwalia and Shanmugaratnam would all make “fine candidates” to lead the IMF, Raghuram Rajan, a professor at the University of Chicago and a former chief IMF economist, wrote in the Financial Times.
China’s government has asked Peter Mandelson, a former U.K. business secretary and European trade commissioner, whether he’s interested in the job, the Guardian reported, citing no one.
Strauss-Kahn resigned as the 10th leader of the IMF four days after his arrest in New York on sexual-assault charges.
“I want to devote all my strength, all my time and all my energy to proving my innocence,” Strauss-Kahn said in a statement released by the IMF. The fund said it will comment “in the near future” on the succession. Strauss-Kahn, 62, had been leading in polls for France’s 2012 presidential election.
Strauss-Kahn, a former French finance minister, was arrested May 14 on accusations of sexually assaulting a hotel maid and has been at New York’s Rikers Island jail since May 16.
He may be released from jail as early as today after he was granted bail. While he has denied the accusations, he hasn’t entered a formal plea to any of the charges, which include attempted rape. The indictment in the case was filed yesterday.
Greek Crisis
European Union President Herman Van Rompuy urged a quick decision on a new IMF leader, saying Strauss-Kahn’s arrest has hurt efforts to tackle Greece’s financial crisis.
“We can’t lose time,” Van Rompuy told a conference yesterday in Brussels. “We are feeling a lack of leadership in solving the Greek crisis.”
Europeans have picked IMF heads for 65 years under a deal that also gives the U.S. control over the top World Bank post. The No. 2 person at the IMF has traditionally been chosen by the U.S.
Lipsky, 64, the No. 2 official at the fund, will remain acting leader, the fund said in a statement May 18. Lipsky, a former chief economist at JPMorgan Chase & Co., is scheduled to retire in August. He called Lagarde “very, very talented” and a “capable leader.”
Five-Year Tenure
Strauss-Kahn’s five-year term had 17 months remaining. In past successions, managing directors were appointed to fresh five-year tenures.
Strauss-Kahn earned an annual salary of $441,980 after taxes as of July 2009, plus an expense allowance of $79,120, also tax-free. The allowance would enable him to maintain “a scale of living appropriate to your position as managing director,” according to his contract. In addition, he could be reimbursed for “reasonable” entertainment expenses as well as first-class travel.
Under the IMF’s rules, its executive board selects the managing director and any member can make a nomination. Prior to appointing Strauss-Kahn in 2007, the board said candidates must have a “distinguished record in economic policy-making at senior levels” and “demonstrated the managerial and diplomatic skills needed to lead a global institution.”
The 2007 nomination period ran from early July to the end of August. The board then met with each candidate and sought to make its choice through consensus rather than majority vote. The appointment was made three months to the date after the resignation of Rodrigo de Rato.
‘European Candidate’
Lagarde “is an internationally recognized personality and is highly regarded also in Germany,” Germany’s Westerwelle said in an interview during a trip to Switzerland yesterday. “We Europeans have an interest in maintaining the European influence at the IMF.”
German Chancellor Angela Merkel told reporters that Europe’s sovereign-debt crisis “speaks for a European candidate” to head the IMF and that a decision must be made swiftly. Her chief spokesman Steffen Seibert said he couldn’t confirm a Handelsblatt report that the government is preparing to throw its support behind Lagarde.
Swiss National Bank bank President Philipp Hildebrand “does not consider himself a candidate” for the IMF job as he “remains deeply committed” to his current duties, the Zurich- based central bank said in an e-mailed statement today.
Europe is likely to succeed in getting Lagarde the job as developing nations are too divided to back a single candidate, said economist Nouriel Roubini.
“The Europeans are going to be united in wanting a European, and I think the European candidate is going to be Christine Lagarde,” Roubini, who predicted the recent global financial crisis, said in an interview on Bloomberg Television’s “Last Word” with Andrea Catherwood Thursday.