PoliticsAnalysis

Political horse-trading looms if Paschal Donohoe goes for IMF job

To horror of FG and FF, key role at top of International Monetary Fund appears to be of interest to Minister for Public Expenditure

Minister for Public Expenditure Paschal Donohoe: To get the International Monetary Fund job, he would need the support of both Europe and the US before a vote is taken next autumn. Photograph: Gareth Chaney/Collins

Pat Leahy
Cliff Taylor
Tue Dec 5 2023 - 05:00

The news that Paschal Donohoe could leave Irish politics next year to become head of the International Monetary Fund (IMF) has sent shockwaves through Fine Gael as it considers the possibility of losing one of its foremost political assets in the months before a general election.

The reaction was almost as horrified in Fianna Fáil, where Donohoe is regarded as the Fine Gael minister who does most to make the Coalition work. Along with Minister for Finance Michael McGrath, he is the essential axis of stability and fiscal restraint, in a sometimes fractious administration that will feel more and more pressure on its alliance as the election nears. And with McGrath a possible nominee for the European Commissioners next summer, the Coalition could look very, very different in 10 months’ time.

Hopes within Government that the Bloomberg report which broke the story on Friday night might be idle speculation have been dashed by Donohoe’s studied silence since then. His spokeswoman said simply that he was focused on his work and would be a candidate at the next election. Of a forthright, unambiguous “I will not serve” from the man himself, there was no sign. So it is generally expected that if the job comes to him, he will be interested.

[ No campaign to make Paschal Donohoe next head of IMF, Varadkar says ]

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That prospect, however, is very far from plain sailing. In theory, the next managing director of the IMF will be appointed on the basis of a transparent and open process. In practice, the decision will be the result of fierce, behind-closed-doors, political horse-trading.

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To get the job, Donohoe, the Minister for Public Expenditure, would need the support of both Europe and the US before a vote is taken next autumn. But the race has still to take shape, so – while Donohoe is a credible candidate – his prospects of getting the job remain unclear with higher-profile EU finance ministers and central bankers all possible candidates. The UK also might put someone forward.

Under a longstanding convention, a European gets the IMF managing director job and an American heads the World Bank. With the vital support of France, current IMF managing director Kristalina Georgieva got the job in 2019, after the former incumbent, Christine Lagarde, left to become European Central Bank president. The IMF changed its age rules for the job to allow her to take it – she was 66 at the time. It is not clear if she will decide to seek a second term – there are some reports of tensions with the US over her handling of a World Bank business index in 2018 when, as that organisation’s managing director, it is alleged she bumped up China’s rankings.

While Europe would be expected to put forward the next candidate – or candidates – the support of the US is vital and has on at least one occasion led to a change of European name. Donohoe has a close relationship with Janet Yellen (the pair had dinner together in Washington last week). But other countries around the table, particularly from the developing world, may decide to kick up about the traditional sharing out of the job and have previously proposed their own candidates.

However, if the big two players and funders of the IMF – the EU and the US – do agree, then that candidate would most likely be impossible to beat. On some previous occasions, Europe – unable to agree – has put forward a couple of candidates, leaving the wider group to choose one.

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The process will not start formally until next summer. In 2019, the IMF board kicked it off in late July and made the appointment in late September, after a consensus was reached at the 24-person executive board which makes the decision. But the informal process will start earlier; the Bloomberg reports may indicate it has already started. EU finance ministers (whose chair is, of course, Donohoe) will seek to reach a consensus on a candidate, with the complication of trying to get the UK on board for a single “European” candidate. Last time, they did not decide until August.

If needed, the executive board then narrows the shortlist down to three – and invites them to make presentations. Applicants are expected to have " a distinguished record” in economic policymaking, have a strong professional background including managerial and diplomatic skills, and be able to provide strategic vision for the organisation. While, in theory, the executive board then selects the best candidate, in practice, the outcome will most likely already have been decided.

It’s one of several senior roles that come free next year. A new European Commission will be nominated, with the president’s role up for grabs. Ursula von der Leyen is favourite, but not a shoo-in after recent missteps. The role currently held by Charles Michel, president of the European Council (essentially chairman of the EU’s most powerful body, the group of heads of government) will become free. There are the EU’s high representative for foreign affairs and the presidency of the European Parliament, while Nato will need a new secretary general in October. It’s likely that all or most of these will become part of a giant horse-trading session among EU leaders next summer.

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