The IMF’s executive board meets Monday as the campaign to find a replacement for scandal-tainted former chief Dominique Strauss-Kahn reels from the unexpected twist of a dark horse candidacy.
Bank of Israel Governor Stanley Fischer publicly announced his bid to become managing director after the close of nominations on Friday, creating a three-way race with France’s Christine Lagarde and Mexico’s Agustin Carstens. Lagarde scooped up endorsements Sunday from Egypt, the United Arab Emirates and Indonesia, confirming her status as the favorite to succeed Strauss-Kahn, who resigned in May after being charged with sexually assaulting a hotel maid.
“I am very confident, particularly after several meetings here in Egypt,” Lagarde told reporters after talks in Cairo with her Egyptian counterpart Samir Radwan. “We have had excellent meetings.” Her main rival had been Carstens, the head of Mexico’s central bank, who is trying to break the mold of always having a European in the top job at the International Monetary Fund and an American at the World Bank.
But Fischer’s candidacy, announced Saturday, throws a wild card into the deliberations of the 24-member executive board which is expected to agree by consensus on a candidate by the end of June. Fischer, 67, is credited for guiding Israel’s economy through the global crisis. With years of experience at the IMF and the World Bank, the post would fit him “like a glove,” said Israel’s Finance Minister Yuval Steinitz.
In an interview with the Wall Street Journal, Fischer said his training as an economist would be ‘essential’ to running the IMF and dealing with economic crises, setting himself in direct opposition to Lagarde, a lawyer by training.
But Fischer’s dual US-Israeli citizenship could be an obstacle to his candidacy. And at 67, his age is another handicap, as IMF rules usually cap applications for the top job at 65. In Lagarde, France’s finance minister, board members would have someone intimately up to speed on Europe’s crisis du jour, the crumbling Greek rescue, as well as a leader in the much-needed reform of the global financial system. A lawyer by training, the 55-year-old Paris native became France’s longest serving finance minister earlier this month, having held the position since 2007.
In Carstens, they would have someone who has already served three years as the IMF’s number three and who could satisfy calls by developing countries for new blood at the top of the world lender. But Carstens has strained to gather endorsements, even in Latin America. An emerging economy bloc has not coalesced behind the candidate.
“At this stage, they don’t care enough about this position… to expend the political capital to want to change the status quo,” explained Arvind Subramanian of the Peterson Institute for International Economics.
Europe has come out in force for Lagarde, as it struggles to keep the IMF-led bailouts of Greece, Ireland and Portgual on the rails. The United States and Japan, the IMF’s other power brokers, remain publicly uncommitted. The pullout of two other potential candidates – Grigory Marchenko of Kazakhstan and Trevor Manuel of South Africa – underscores the widespread belief that Europe already has a done deal. “It’s more or less obvious that Christine Lagarde is going to be elected,” Marchenko, the Kazakh central bank chief, told CNN.
“Quite a few people do have credentials… But again, it’s not about a fair competition, it’s about politics. And I think there, a political decision has been taken already.” Manuel, South Africa’s planning minister, praised Lagarde as “very competent” but criticized Europe’s presumption of owning the post.
“A lot more should have been done to persuade Europeans that this birthright is not a birthright that should find a resonance in an institution as important as the International Monetary Fund,” he said. Former Western Hemisphere Director at the IMF Claudio Loser said “the Europeans have a unified vision, while the emerging countries still have a nationalist vision.”
Despite its strength, Lagarde’s candidacy is clouded by a pending investigation in France into her alleged abuse of authority, in a multi-million-euro business dispute. The court will not rule on whether the investigation will go ahead until July 8, after the IMF executive board is to make its decision. Lagarde has repeatedly denied any wrongdoing.