Lagarde set to win IMF post as US offers support

The US formally offered its backing on Tuesday for French finance minister Christine Lagarde to take over the top job at the International Monetary Fund (IMF), ensuring a win for her over Mexico’s central bank governor Agustin Carstens.

IMF’s 24-strong board meets later on Tuesday to go through the formalities of picking a successor to former managing director Dominique Strauss-Kahn, who resigned in May after being charged with sexually assaulting a New York hotel maid.

But the 55-year-old Lagarde was set to continue the tradition of having a European head the global lender while also becoming the first woman to lead IMF.

Announcing the support to Lagarde, US treasury secretary Timothy Geithner nodded to emerging markets’ unhappiness at the tradition—of having a European head IMF and an American leading its sister institution, the World Bank— by saying he was pleased that Lagarde had received “broad support...including from emerging countries”.

“Minister Lagarde’s exceptional talent and broad experience will provide invaluable leadership for this indispensable institution at a critical time for the global economy,” Geithner said in a statement.

The US, which holds the most voting power at IMF, had refused until the final stage of the process to say who it was supporting, although it was widely assumed it would swing its weight behind Lagarde.

In the end, the backing that Carstens garnered from Latin America, Canada and Australia was too thin to break Europe’s 64-year hold on the IMF post.

IMF board directors, who represent the fund’s 187 member countries, want to try to reach a consensus deciding on a successor that would let them avoid a formal vote.

The race has been one of the most hotly contested succession battles in IMF history.

In a convention dating back to the creation of IMF and World Bank after the World War II, Europe has always held the top IMF job, while the World Bank’s top post has always gone to an American.

Developing countries have warned against another US-European stitch-up, but some potential candidates from emerging markets decided not to step up because they did not feel they had a fair chance.

Although a long-shot candidate, Carstens vigorously campaigned on his experience as a former IMF official who had first-hand knowledge of developing world economic crises.

Washington holds close to 17% of the vote at IMF, while European nations account for around 40%. China and Russia, two of the so-called BRICS emerging market countries, have already said they back Lagarde, with Russia announcing its formal support on Tuesday. Brazil also announced on Tuesday its support to Lagarde. The two other BRICS nations—India and South Africa—have been quiet on who they support.

Fears of contagion over an escalating debt crisis in Greece have played in Lagarde’s favour over the last several weeks because of her political punch across Europe, IMF board officials said.

Assuming Lagarde gets the official nod, she will have to immediately deal with further IMF-EU financing to keep Greece afloat and focus on potentially thorny IMF “spillover reports” that analyze the economic and policy actions of the world’s major economies. REUTERS

Source:-
http://www.livemint.com/2011/06/29002626/Lagarde-set-to-win-IMF-post-as.html?atype=tp


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Ankit Wani
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