Europe And Asia Battle Over IMF Post

The U.S. stood behind the International Monetary Fund's longstanding succession guidelines Thursday—averting rising calls by emerging-market officials for more sway over the IMF and boosting Europeans' efforts to name the next IMF chief.

Europe And Asia Battle Over IMF Post The U.S. stood behind the International Monetary Fund's longstanding succession guidelines Thursday—averting rising calls by emerging-market officials for more sway over the IMF and boosting Europeans' efforts to name the next IMF chief.

An international turf battle over the top job at the globe's emergency lender broke out after Dominique Strauss-Kahn announced his resignation late Wednesday amid allegations that he sexually assaulted a New York hotel housekeeper.

The fund said Thursday it had recently changed its ethics code, now censuring staff for personal relationships between supervisors and subordinates. The code was approved May 6, a week before Mr. Strauss-Kahn's arrest in New York. Mr. Strauss-Kahn in 2008 acknowledged having had an affair with a subordinate.

The fund's six-decade tradition calls for appointing a European to lead it, but the post now comes open amid a shift in the longtime balance of global economic power. Emerging-market nations, arguing that their new strength should be reflected in senior management of the IMF, are pressing for more say in the body, which directs the flow of billions of dollars to stabilize the global economy.

"There's no logic to the tradition that the IMF is run by a European," Thailand's Finance Minister Korn Chatikavanij said by telephone Thursday. "The world has come a long way in the past three or four years."

But Europeans say the urgent need to solve their sovereign-debt crisis, a top threat to the global economy, argues for placing a one of their own in the job. France, Italy and Germany all argued Thursday for a European national to assume the post.

The U.S., IMF's largest shareholder, isn't supporting developing countries' call. While U.S. officials stand behind a G-20 commitment for an "open, transparent and merit-based selection process," this language doesn't reflect a change from the existing IMF approach of discussing qualifications of a new director, inviting nominations and then winnowing down the candidates to choose an IMF chief. Together, the U.S. and European countries have a voting majority on the IMF executive board.

Treasury Secretary Timothy Geithner on Thursday stuck to that approach, saying in a statement that "we want to see an open process that leads to a prompt succession." U.S. officials are waiting for nominees to be put forward by other governments and haven't taken a public position on potential candidates.

Europe And Asia Battle Over IMF Post Edwin Truman, a former Obama and Clinton Treasury official, said it is important for the U.S. to appear neutral in the proceedings and not as a deal-cutter with Europe. That means the U.S. isn't likely to back a European candidate unless the person could show broad support outside the continent. In 2000, he said, the U.S. opposed and ultimately killed Europe's first choice for managing director, Germany's Caio Koch-Weser, because he couldn't line up a single country outside Europe. The managing director post went to another German, Horst Köhler.

European governments have coalesced around Christine Lagarde, a corporate lawyer who has been France's finance minister since 2007. Italian Prime Minister Silvio Berlusconi said Thursday evening that Ms. Lagarde would be "an excellent choice" to lead the Washington-based fund.

People close to Ms. Lagarde say she would be interested in the job. The minister herself has indicated that she would at some point like to move back to the U.S., where she once held the top job at law firm Baker & McKenzie.

A senior French official said late Thursday that France hasn't yet decided to propose her for the job. "We would be delighted if Ms. Lagarde got the job and it seems that she wants it," the official said. "Still, if Europeans agree on another candidate, that would be totally fine."

While other high-profile European names have surfaced, including European Central Bank President Jean-Claude Trichet, Ms. Lagarde is the only one to appear to have attracted broad consensus.

Some European leaders have said in recent days that the next leader should be from Europe because they best understand the euro-zone debt crisis.?

"That's interesting logic," said Arvind Virmani, an IMF board member from India. "That means whenever there's an Asian crisis, there should be an Asian managing director? Whenever there's an African crisis, there should be an African managing director?"?

The IMF's executive board began two-day meetings Thursday to begin discussing the selection process. "We want this to happen as expeditiously as possible," said the IMF's acting director, American John Lipsky, in announcing that the fund's board is in discussions to "set the framework of the selection process."

The IMF's head is decided when a candidate gets a simple majority of the votes in its 24-member board. The board members' voting shares are determined roughly by countries' weight in the global economy—though they are tilted toward Europe because the European economy was far larger than that of Asia in the past. Europe has 35.6% of the voting shares, while Asia and the Pacific have 20.93%. The U.S. has the largest vote, at 16.8%.

By longstanding tradition, an American has taken the top post at the World Bank and the No. 2 job at the IMF, while Europeans have taken the lead at the IMF.

Mr. Lipsky has said he will resign from his deputy post when his term ends in August, but U.S. officials will likely push an American to fill the No. 2 spot. If Europe were to surrender its right to the top spot at the IMF, the U.S. would also risk losing its prerogatives at the global institutions.

On Thursday evening, French President Nicolas Sarkozy said that "Europe must decide to be united."
Europe And Asia Battle Over IMF Post
In a statement issued by his office he said: "The European Union, whose member states together are the Fund's biggest shareholders, can put forward a candidacy of a very high quality." He stopped short of naming a candidate or saying EU countries should back European nationals.

The senior French official said there were "several personalities in Europe other than Ms. Lagarde who are competent," He cited the current head of the European Bank for Reconstruction and Development Thomas Mirrow and former U.K. prime minister Gordon Brown. "President Sarkozy would have no difficulty in supporting Gordon Brown."

Any chances for one potential candidate, former British Prime Minister Gordon Brown, have been hit hard after his successor David Cameron, and some European officials, said Mr. Brown's close connection with Britain's record-level debts makes him unsuitable.

German Chancellor Angela Merkel, leader of Europe's biggest economy, said the Continent's pressing concerns required a rapid appointment—something that might favor a European, as the most obvious candidates are European.

"It's of great importance that we find a fast solution" for the IMF succession, she said at a press conference. "I am of the opinion that we should propose a European," she said, adding, "I won't give a name today, but we will talk about it in the E.U."

Her spokesman later praised Ms. Lagarde, though did not say Ms. Merkel would back her.

Ms. Lagarde has already secured backing in European capitals, such as Sweden. The U. K. is not wedded to the idea of the head of the IMF being European, but its officials have in the past expressed admiration for Ms. Lagarde.

Ms. Lagarde was visiting a Paris supermarket Thursday, where she said that any proposal for the post would need European agreement. Asked by reporters whether she would like to take over the IMF, she smiled and said: "Vive l'Europe!"

A volley of statements from Asia on Thursday seemed designed to pre-empt any hasty appointment of a European. Philippine Finance Secretary Cesar Purisima said Asia's role as an engine of growth for the global economy meant an Asian should take the reins at the IMF.

Given the shifting global economic landscape, Mr. Purisima said in a statement, "there is no time more fitting than now for an Asian leader to take the helm of such a distinguished organization."

Thai Finance Minister Mr. Korn argued that Asians knew how to deal with financial problems after the region's 1990s financial crisis, which erupted in Thailand before spreading across Southeast Asia and beyon "We've all had hands-on experience, and credit should go to Mr. Strauss-Kahn and the IMF for the way they have learned from their mistakes in Asia in the past," Mr. Korn said.

Mexico has pushed its own candidate, former IMF deputy director Agustin Carstens, currently the head of Mexico's central bank. Mexican Finance Minister Ernesto Cordero told reporters he thought Mr. Carstens was the "best candidate" to lead the Fund, and that the next head should be chosen on merit.

Other names that have emerged include former South African finance minister Trevor Manuel and former United Nations Development Program director, Turkey's Kemal Dervis.

The Wall Street Journal