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Europe and Asia Battle Over IMF Post

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Emerging Economies Seek Sway, but U.S. Appears to Back Naming of European

By Sudeep Reddy, Geraldine Amiel and David Gauthier-Villars

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.

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. Read More in The Wall Street Journal.

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Written by Theophyle

May 20, 2011 at 7:31 am

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