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All about the war over IMF chief's post

Last updated on: May 27, 2011 09:54 IST

All about the war over IMF chief's post

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This is the world's most wanted job now. Never before have nations competed so aggressively for an international post.

The scramble for International Monetary Fund managing director's chair has escalated into a war of sorts with developing nations calling for a change in the power equation.

Most of the developing nations seek an end to European dominance over the IMF's top job. Prime Minister Manmohan Singh on Wednesday said the developing countries should be together in the attempt to reform the global financial institutions.

"I am not very well informed on what is going on with regard to managing director of IMF but I do recognise that the struggle for transformation of global institutions, including Bretton Woods, is not a one shot operation. It is a long process in which all developing countries have to stand united," Prime Minister Manmohan Singh said.

Indeed, only a united group of developing nations can pressurise the global fraternity to select the best and most suitable candidate for the coveted job.

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The post of the IMF managing director fell vacant following the exit of Dominique Strauss-Kahn, who is being tried for charges of sexual assault in the United States.

Although some European nations have declared their support for French Finance Minister Christine Lagarde, the BRICS nations -- Brazil, Russia, India, China and South Africa -- have issued a joint statement in Washington questioning the methodology of selection of IMF chief on the basis of nationality.

"We believe that, if the Fund is to have credibility and legitimacy, its managing director should be selected after broad consultation with the membership," BRICS said.

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Image: International Monetary Fund (IMF) chief Dominique Strauss-Kahn appears in Manhattan Criminal Court.
Photographs: Shannon Stapleton/Reuters.
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Leaders from across the developing countries now state that merit and experience should rule over nationality.

BRICS said it is time to 'abandon the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe'.

Meanwhile, unconfirmed news reports said that the European Union has offered the post of the deputy managing director of the IMF to a Chinese candidate in exchange for its support to Christine Lagarde.

Amid dissenting voices raised by developing nations over a European holding top IMF post, French finance minister Christine Lagarde is planning to visit India, China and Brazil to drum up support for her bid to become the chief of the global lender.

Lagarde, said that she was prepared to visit China, India and Brazil to muster broad support and not just the backing from Europe.

"China, Brazil and India are an absolute necessity...," she told the Wall Street Journal.

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Image: Prime Minister Manmohan Singh (L) is greeted by China's President Hu Jintao in Sanya.
Photographs: Nelson Ching/Reuters.
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While countries like India, South Africa, Singapore and Turkey also have candidates with a good track academic and economic record, the front runner for the post is France's finance minister Christine Lagarde.

"I have decided to present my candidacy for the job. This decision was made after mature reflection. And I have a perfectly clear conscience about that affair," Christine Lagarde said.

The 55-year-old Lagarde, was earlier France's Minister of Agriculture and Fishing and Minister of Trade. Lagarde is the first woman ever to become minister of Economic Affairs of a G8 economy.

A noted lawyer, Lagarde made history as the first female chair of the international law firm Baker & McKenzie. The Financial Times ranked her the best minister of Finance of the Eurozone in 2009.

Lagarde was ranked the 17th most powerful woman in the world by Forbes magazine in 2009.

Interestingly, women workers at IMF have been complaining about the male culture at the IMF and they now want a woman to as their top boss.

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Image: France's President Nicolas Sarkozy (R) and France's Finance and Economy Minister Christine Lagarde.
Photographs: Bob Edme/Reuters.
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If elected, Lagarde would be the first woman to lead the IMF.

France's President Nicolas Sarkozy has said that she is supported by several countries.

With a strong contender Turkish economy minister Kema Dervis backing out of the race, her chances have become stronger.

The Organisation for Economic Co-operation and Development (OECD) has also supported Lagarde with its chief, Angel Gurria saying Lagarde meets all the criteria to be the IMF chief.

US Treasury Secretary Timothy Geithner said Lagarde has an excellent mix of economic and political skills.

She helped France tide over its worst recession much better than other nations.

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Image: France's Finance and Economy Minister Christine Lagarde (R) chats with French President Sarkozy.
Photographs: Reuters.
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She has been applauded for chairing of the G20 finance ministers' meet and for her strong communication skills. She has also supported extending support to debt ridden nations.

The EU bloc leaders suggest that only a European chief can understand the region and manage the financial crisis in countries like Greece, Ireland and Portugal which are indebted to the IMF.

As France's trade minister between 2005 and May 2007, Lagarde focused on opening new markets for the country's products, focusing on the technology sector.

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Image: France's Finance Minister Christine Lagarde (R) chats with Finance Minister Pranab Mukherjee.

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However, there is a blotch on Christine Lagarde's credentials. She is under investigation for allegedly favouring a court decision to grant 270 million pounds to help a businessman Bernard Tapie, who is a staunch supporter of her party.

It is alleged that Largarde intervened in a dispute between the Tapie and Credit Lyonnais bank and offered this huge sum as compensation.

The decision on whether Lagarde would be prosecuted will be known in June. This could affect her chances of winning the top job at IMF.

Even as the developed world supports her candidature, opposition parties have upped their ante against Largarde whom they accuse of misusing public funds.

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Image: IMF Managing Director Dominique Strauss-Kahn (L) talks to Christine Lagarde.
Photographs: Yuri Gripas/Reuters.
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"The convention that the selection of the managing director is made, in practice, on the basis of nationality undermines the legitimacy of the fund," executive directors representing the BRICS had said in a statement.

Experts say a change of guard, especially a candidate from developing counties, can boost economic ties between developing nations and the developed world.

The person can play a decisive role in representing the developing countries. It can also solve major problems in small nations and extend more financial assistance in times of need.

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Image: BRICS upset over European candidate for IMF chief's post.
Photographs: Jason Lee/Reuters.
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The International Monetary Fund is an organisation of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

As part of its efforts to support countries during the global economic crisis, the IMF is beefing up its lending capacity.

It has approved a major overhaul of how it lends money by offering higher amounts and tailoring loan terms to countries' varying strengths and circumstances.

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Image: IMF's Acting Managing Director John Lipsky holds economic surveillance meeting with senior staff.
Photographs: Reuters.
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According to experts, IMF's capacity to prevent crises on a global level can be mitigated with leaders from developing countries being at the helm.

The IMF has already granted more than $280 billion to crisis-hit countries like Greece, Ireland, Portugal, Romania, and Ukraine.

The IMF is also stepping up its lending to low-income countries to help prevent the crisis undermining recent economic gains and keep poverty reduction efforts on track.

However, developing nations feel that reforms can be taken forward only by individuals with the right experience and exposure in handling crises.

Pressing for reforms, the BRICS statement said that the multilateral institution should reflect the growing role of developing countries in the world economy.

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Image: A police motorcycle is on flames in front of the parliament during riots in Athens.
Photographs: John Kolesidis/Reuters.
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Developing countries have an equal right to have their representative take over the top job as countries like China and India have a higher share of the global gross national product and robust foreign reserves.

"We have to recognise that international relations are power relations and those in power do not wish to yield ground easily," Manmohan Singh said.

Meanwhile, Timothy Geithner said the selection of the new president of IMF should be open and transparent.

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Image: Chinese Premier Wen Jiabao and Prime Minister Manmohan Singh.
Photographs: B Mathur/Reuters.
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Timothy Geithner said the United States was working with emerging economies and Europe to make sure IMF's governing body 'reflects the balance of power in the world today'.

Adding that the person must have an outstanding professional background, Geithner said French Finance Minister Christine Lagarde and Mexico's central bank governor Agustin Carstens are best candidates for the job.

Former United Kingdom Prime Minister Gordon Brown is also in the fray. Interestingly, since the beginning, the IMF has been led by a European, the World Bank by an American.

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Image: (L-R) Timothy Geithner, Christine Lagarde and Strauss-Kahn chat prior to a meeting in April.
Photographs: Mike Theiler/Reuters.
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Even as Europe backs her candidacy, experts point out that the worsening European crisis is all the more reason for a non-European to head the post.

The IMF said the candidate needs a high-level economic policy-making has a record of excellence, with outstanding professional background and management of leading global organisations and diplomatic skills.

US Treasury Secretary Timothy Geithner said in a statement that the United States to support the candidate should have "the necessary depth of experience and leadership, while the IMF members to win broad support."

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Image: L-R T Geithner, Christine Lagarde, Bank of France Guv Christian Noyer and Ben Bernanke.
Photographs: Charles Platiau/Reuters.
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Nominations for the post can be submitted till June 10. The IMF executive board will meet in Washington to decide on the final list of candidates. The final decision will be announced by June 30.

The fact that Europe has the highest percent of the votes is a deciding factor. Countries hold just over 30 per cent of the votes while the United States has 16.7 per cent votes.

Japan and Canada have 6 per cent and 3 per cent of the voting rights. Developing nations have a right over 44.7 per cent of the votes.

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Image: Dominique Strauss-Kahn (L-R), Timothy Geithner and Christine Lagarde.
Photographs: Jonathan Ernst/Reuters.
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Will the age-old tradition of having a European as the IMF chief remain or will developing nations win world's top finance job? It's the million-dollar question.

This may not be an easy win for Europe this time as IMF boss must get 85 per cent of the votes.

Experts say developing countries will stand a chance if they agree on a single candidate than recommending individuals from their own respective countries.

However, BRICS nations still have their own candidates and are yet to arrive at a consensus


Image: Christine Lagarde (L) shakes hands with Dominique Strauss-Kahn at a conference in June, 2010.
Photographs: Benoit Tessier/Reuters.
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