The New York Times - "French Minister to Seek Top I.M.F. Job" E-mail
Tuesday, 24 May 2011 21:31
The New York TimesBy Liz Alderman

PARIS - Europe’s top candidate to lead the International Monetary Fund, Finance Minister Christine Lagarde of France, formally announced her bid on Wednesday, as developing nations issued an unusual joint complaint about the custom of always naming a European to one of the most important jobs in global finance. 

Declaring her candidacy at a news conference that was called only the night before, Ms. Lagarde said that being European should not disqualify her, and that she would be traveling over the next few weeks to listen to and seek support from other I.M.F. members.

“Being a European shouldn’t necessarily be a plus, but it shouldn’t be a minus, either,” she said. Given that Europe’s festering sovereign debt crisis is the biggest problem facing the fund — a reason cited by European leaders for wanting to hold on to the post for now — Ms. Lagarde said her intimate knowledge of the issues and the players involved could help.

With support from Chancellor Angela Merkel of Germany; the British chancellor of the Exchequer, George Osborne; and most of Europe’s political establishment, she is seen as a front-runner to succeed Dominique Strauss-Kahn, who resigned from the I.M.F. last week to fight charges that he sexually assaulted a maid in a New York hotel.

At the news conference, Ms. Lagarde made clear that she wants a full five-year term and is not seeking to just finish out the remaining 18 months of Mr. Strauss-Kahn’s term. Tanned and smiling, she also said that she had spoken with her main rival, the Mexican central bank governor, Agustín Carstens, two days ago, and that “we are happy with the competition.”

United States Treasury Secretary Timothy F. Geithner said Wednesday in an interview with the Web site Politico that both candidates were “credible.”

Still, the selection process for the job has drawn increasing criticism from leaders of big emerging countries, who are gaining influence in the world as debt crises and economic downturns plague Western countries.

Late Tuesday in Washington, the I.M.F. representatives from Brazil, Russia, India, China and South Africa issued a firmly worded statement condemning the “obsolete, unwritten convention” of reserving the top job for a European, saying that making a selection on the basis of nationality “undermines the legitimacy of the fund.”

The statement stopped well short of rejecting Ms. Lagarde’s candidacy but said technical background and political acumen, rather than nationality, should be the main factors in choosing future managing directors.

The complaint underscored what has become an increasingly common refrain among emerging market nations — that the gradual shift in economic and demographic influence to rapidly developing countries should be reflected in international institutions.

‘We need the emerging economies as partners in managing the global economy,” said Michael Spence, a Nobel Laureate in economics and author of “The Next Convergence.” “Preempting an open process of considering other highly qualified candidates sends the wrong signal to a group of large, high growth developing countries whose systemic importance is high and rising.”

Mr. Geithner said the United States was working with Europe and the emerging markets to make sure the I.M.F. “reflects the balance of power in the world today.”

At a meeting of the Organization for Economic Cooperation and Development in Paris, Prime Minister Francois Fillon of France strongly defended Ms. Lagarde’s candidacy, warning against “the logic of egoism” from countries seeking to put forward alternative candidates from Asia or elsewhere.

“Christine Lagarde’s candidacy is not merely a French candidacy, not a European candidacy,” he told a gathering of senior officials, including Secretary of State Hillary Rodham Clinton. “It is a high quality candidacy.”

Yet in the absence of any consensus among emerging market nations on a candidate from their ranks, there appeared to be little to indicate that a bid by Ms. Lagarde would be derailed.

Despite her political savvy, some believe she does not have the deep economic expertise of executives like John Lipsky, the second in command at the I.M.F., who has taken over the top job until a successor is chosen.

But she has become a prominent figure in France and Europe, and in the world of international finance, having played a key role in managing the euro crisis at a pivotal point in its history. Replacing Mr. Strauss-Kahn would elevate her even more.

“She’s not making a calculation like Strauss-Kahn did, which was to be at the I.M.F. and then come back to France” to leverage any Washington experience in politics, said Daniel Cohen, a professor of economics at the Ecole Normale Supérieure in Paris. “It’s the natural evolution of the type of work that she’s doing now.”

Ms. Lagarde is something of an outsider to French politics, a woman who broke into the old boys’ network of the Paris political elite after working at the Baker & McKenzie law firm for nearly 25-years.

She often recalls how, in one of her first interviews with a French law firm, she was told that her gender meant she would “never make partner.” That’s when she decided to work for an American firm, where she quickly rose through the ranks.

Her gender is one of the reasons her nomination has received attention. No other international institution has been run by a woman. A regular speaker on women’s empowerment issues, she was one of the most outspoken politicians during the financial crisis, condemning an overly masculine culture.

One thing that could throw a shadow on her candidacy involves her role in getting a case involving a supporter of President Nicolas Sarkozy sent to arbitration. Ms. Lagarde was peppered with questions during the news conference about whether she abused her authority in a case that resulted in a lucrative arbitration award to a French businessman, Bernard Tapie, in 2007.

French judges have until June 10 to decide whether to investigate the charges. Ms. Lagarde said she would maintain her candidacy even if judges decided to open an official inquiry.

“I have a perfectly clear conscience, and I operated with total respect for the law,” she said.

Mr. Sarkozy and Ms. Lagarde had a cool relationship when he parachuted her into the Finance Ministry in 2007. The Elysée Palace sought to control economic policy, but Ms. Lagarde soon earned a reputation for holding her own, especially as the global financial crisis unfolded. She would almost certainly be swept out of her current post if Mr.Sarkozy loses the upcoming 2012 presidential elections in France.

Europeans are trying to hold on to the prestigious International Monetary Fund position as a debt crisis on the Continent shows signs of flaring up again. Fears are mounting that a debt restructuring in Greece may be unavoidable, the effects of which could ricochet across Europe.

Nominations for the I.M.F. post must be submitted by June 10, and leaders of the Group of 8 industrialized nations are expected to discuss the matter when they meet in Deauville, France, on Thursday and Friday. The I.M.F. wants to pick a new leader by June 30.

The process, however, could take longer. The United States and Europe together, as the largest shareholders, have the votes to select the candidate of their choice, but they prefer to seek broad support on the board.

When Mr. Strauss-Kahn, for example, was proposed in 2007, the selection took more than two months. He flew around the world garnering support and votes, even after the United States said it would back a prominent European. He was formally nominated by Germany, and the board appointed him by consensus.

Newspaper editorials in Australia, India and other Asia-Pacific countries have taken a sharper tone toward Europe’s claim in recent days. “‘It is not as if Europeans have been doing such a stellar job of managing their sovereign debt crisis,” The Sydney Morning Herald wrote Tuesday.

Since Greece received its bailout of 110 billion euros, or $155 billion at current exchange rates, a year ago, the country has been unable to resolve its financial crisis, sending European leaders and the fund scrambling for a way to keep Greece from default.

Ms. Lagarde recently suggested that France could support a rescheduling of Greece’s debt if banks that own the debt agreed to extend the time for repayment. A spokesman said Tuesday that Ms. Lagarde had not changed her position, which echoes that of the European Central Bank.

“Clearly, whatever you want to call it — reprofiling, restructuring, re-engineering of debt — for the moment, she’s in agreement with the E.C.B. This is not on the table.”

Bettina Wassener contributed reporting from Hong Kong, and Katrin Bennhold and Steven Lee Myers contributed reporting from Paris.

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