Mr Michel Camdessus is stepping down as managing director of the International Monetary Fund, paving the way for an intense diplomatic contest to succeed him.

Mr Camdessus (66) said yesterday his decision to leave, after 13 years in the job, and two years before the end of his third term, was a personal one.

It would be inappropriate, he added, for him to serve what would have been a full 15 years in the job, "in a world in permanent need of renewal of its institutions".

He asked the board to appoint a successor to enable him to leave by the middle of February next year.

The top job at the IMF is traditionally in the hands of European governments, and they are expected again to choose a European as the next managing director.

There is no clear front runner for the post, though a number of names have been circulating in recent weeks as speculation about Mr Camdessus's departure intensified. Except for a five-year interlude in the 1970s, French nationals have held the job since 1963.

Mr Jean Claude Trichet, governor of the Bank of France, is one possibility. Among other names being mentioned are Mr Mervyn King, deputy governor of the Bank of England, and Mr Andrew Crockett, also from the UK, currently head of the Basle-based Bank for International Settlements, the global central bankers' club. Another British official, Mr Nigel Wicks, permanent secretary of the Treasury, who is due to retire next year, has told colleagues he is not interested in the post.

If the French, Germans and British are unable to agree among themselves and look instead for a compromise candidate, Mr Mario Draghi, director-general of the Italian Treasury, is a strong contender and highly regarded in the international financial community.

One problem with Mr Draghi's candidacy is the appointment this year of Mr Romano Prodi as president of the European Commission. Two Italians in very senior international economic positions may be too much for other European governments to tolerate.