Brics complain even as French Lagarde launches IMF bid
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Brics complain even as French Lagarde launches IMF bid

France's finance minister entered the race today to head the IMF and succeed the fallen Dominique Strauss-Kahn, despite anger in big emerging economies over Europe's "obsolete" lock on the job.

business Updated: May 25, 2011 16:26 IST

France's finance minister entered the race on Wednesday to head the IMF and succeed the fallen Dominique Strauss-Kahn, despite anger in big emerging economies over Europe's "obsolete" lock on the job.

Christine Lagarde announced her candidacy on the eve of a G8 summit of industrialised countries in Deauville, France, after securing the unanimous backing of the 27 nation European Union and, diplomats said, support from the United States and China.

"It is an immense challenge which I approach with humility and in the hope of achieving the broadest possible consensus," Lagarde told a Paris news conference, saying she planned travel widely in the coming weeks to consult other member states.

The 55 year old centre right politician, a former corporate lawyer, who speaks fluent English, has won plaudits for her deft chairing of the G20 finance ministers and communications skills.

But unlike Strauss-Kahn, who resigned last week after being charged with the attempted rape of a hotel maid in New York, she is not an economist and may struggle to match his thought leadership over the management of the world economy.

Brazil, Russia, India, China and South Africa sharply criticized EU officials in a joint statement for suggesting the next International Monetary Fund head should be a European, a convention that dates back to the founding of the global lender at the end of the Second World War.

However, the countries known as the Brics failed to unite behind a common alternative candidate, leaving the way clear for Lagarde unless she slips on a French legal case.

Diplomats said their complaint was mostly aimed at securing a commitment from developed countries that nationality will no longer be a covert criterion for selecting future IMF chiefs.

In a nod to the emerging nations' concerns, Lagarde said she would work for "greater representativity and greater flexibility" at the IMF if she were elected.

Brics aggrieved

In the first joint statement issued by their directors at the Fund, the Brics said the choice of who heads the IMF should be based on competence, not nationality. They called for "abandoning the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe."

Hours before the statement was issued in Washington, France's government said China would back Lagarde. The Chinese Foreign Ministry declined comment.

Some emerging market government officials say privately that although they are fed up with advanced economies controlling the selection process, they are not in a position to put forward a challenger who could stand up to Lagarde.

Mexico has nominated its central bank chief for the job and he said some countries had welcomed his decision to run.

South Africa and Kazakhstan may put forward their own candidates.

Under a long-standing agreement between the United States and Europe, the top job at the IMF goes to a European while an American leads its sister organisation, the World Bank.

The United States also fills the number two position at the IMF.

European diplomats said Washington had asked the French government about a pending legal case in which a prosecutor has recommended that Lagarde be placed under investigation for allegedly abusing her authority.

The Court of Justice of the Republic, a special court created to try ministers for alleged offences committed while in office, will rule on June 10 whether to investigate her over a disputed arbitration settlement with businessman Bernard Tapie, a convicted ex-minister who backed President Nicolas Sarkozy.

French officials have told other governments privately the case will not be a show-stopper, the diplomats said. Following Strauss-Kahn's resignation, Europe has made clear it wants to stay in charge of the multilateral lender at a time when it is helping to bail out Greece, Ireland and Portugal.

US backs European

The EU and the United States, which sources in Washington have said will back a European, have enough joint voting power to decide who leads the IMF.

Securing support from some emerging economies would defuse a potentially bitter row over the decision though.

In April 2009, the Group of 20 leading nations endorsed "an open, transparent and merit-based selection process" for heads of the global institutions.

France, which presides over the G20 this year, has made an effort to work with Beijing on key issues for developing nations like global monetary reform and commodity market speculation.

Last week, the head of China's central bank, Zhou Xiaochuan, said the IMF's leadership should reflect the growing stature of emerging economies.

But he stopped short of saying its new boss should be from an emerging economy.

Wu Qing, a researcher with the Development Research Centre government think tank in Beijing, said it was plausible that China would support Lagarde as there weren't many qualified candidates from China or Asia in general.

The IMF's board will draw up a shortlist of three candidates and has a June 30 deadline for picking a successor. Nominations can be made until June 10.

Mexico's central bank chief, Agustin Carstens, told Reuters the United States welcomed his participation in the race for the IMF job but was neutral on whether to support his candidacy.

"They welcomed that I was participating and they thought it was an important part of the process," Carstens said.

Brazil seemed reluctant to back Carstens, with government sources saying he is seen as a long shot for the job. South African Finance Minister Trevor Manuel may also be a candidate to run the IMF, and Russia has said it would back Kazakhstan's central bank chief, Grigory Marchenko.

First Published: May 25, 2011 11:20 IST