Horst Koehler was all smiles last week as he accepted congratulations from friends and future colleagues on his appointment as president of the International Monetary Fund (IMF), the most powerful financial institution in the world. But the father-of-two can have few illusions about the formidable task ahead of him and the severe credibility deficit he must first overcome if he is to accomplish it.
Mr Koehler (57), who currently heads the European Bank for Reconstruction and Development (EBRD) in London, would not have been nominated at all but for the failure of Germany's Chancellor Gerhard Schroder to secure Washington's approval for his first choice, Germany's junior finance minister, Caio KochWeser. President Clinton was reported to be lukewarm about Mr Koehler too but he was reluctant to humiliate the German leader a second time and gave his grudging backing to Berlin's nominee.
The failure of Mr Schroder's sledgehammer diplomacy to secure the nomination for Mr Koch-Weser has damaged the chancellor's international reputation and could have unfortunate consequences for other European candidates for top international positions. Berlin insiders blame the chancellor's foreign policy adviser, Michael Steiner, for ignoring strong signals from the US and from Germany's EU partners that Mr Koch-Weser was not qualified to lead the IMF.
On the face of it, Mr Koehler is no better qualified than Mr Koch-Weser and he does not fulfil the unofficial criteria for the IMF job, never having served as a finance minister or a central banker. But as one of the authors of the Maastricht Treaty when he was a junior finance minister and an architect of Economic and Monetary Union, Mr Koehler enjoys an excellent reputation among EU colleagues.
A tough pragmatist with a robust manner that some describe as excessively blunt, Mr Koehler has successfully turned around the EBRD in his two years there, lifting it out of the red and stemming a stream of headlines about the bank's wastefulness and inappropriate splendour.
"The Americans will be sorry that they have accepted him and not Koch-Weser," warns one hedge fund manager who has worked with Mr Koehler.
The idea that a German should head the IMF, which is traditionally led by a European, was born during a chat between Mr Schroder and the former chancellor, Mr Helmut Schmidt, last year. Mr Schmidt suggested that Mr Koehler, who is a Christian Democrat, would be ideal for the job but Mr Schroder was at first unwilling to nominate a figure with such close links to the former government.
Washington insists that it has no difficulty with the idea of a German occupying the top job at the IMF and that its objection to Mr Koch-Weser was solely based on his lack of experience. But Berlin claims the US wanted to install its own man at the IMF in order to transform the very nature of the organisation and bring it more closely into line with the interests of Wall Street.
The IMF acts as an international financial police force, intervening throughout the world to bale out governments hit by financial crises. Some of the fund's beneficiaries complain that the conditions attached to IMF aid, which usually involve the restructuring of the economy, amount to a modern form of imperialism.
But some of the 182 countries that contribute to the IMF are unhappy too and the US, which provides 18 per cent of the fund's budget, is demanding radical change. As the IMF intervenes more often to prevent the collapse of national economies, the sums demanded from the fund's contributors have swollen dramatically.
During the past decade, the IMF gave Mexico and Brazil $18 billion (€18.4 million) each, poured $20 billion into Russia and spent $35 billion propping up the crisis-hit economies of south-east Asia.
Washington wants to reform the IMF so that, instead of using taxpayers' money to fund its interventions, it would raise money on the capital markets. This proposal finds favour among some Europeans who complain that many financial crises are caused by the irresponsibility of international investors and currency speculators and who resent using taxpayers' money to clear up a mess caused by the private sector.
But there is little support among Europeans for Washington's second proposal - to limit IMF intervention to "macro-economic stabilisation", reducing state deficits and inflation to encourage economic growth in the crisis-hit countries.
Mr Koehler has already made clear his opposition to this proposal and his conviction that international organisations such as the IMF should not only focus on economic data but take account of the nature of the countries and peoples they are trying to help.
"We can only realise a market economy and democracy in the long term if we anchor them in the culture, history and traditions of the country," he said, criticising the IMF's record in Russia.
Mr Koehler will face fierce opposition from US politicians, who have frequently used the IMF to defend US economic interests, pushing the outgoing president, Mr Michel Camdessus, to pump billions of dollars into Mexico in 1994 and promoting a questionable loan to Korea during the Asian crisis.
Meanwhile, opponents of globalisation are planning a massive protest at the next meeting of the IMF and the World Bank at the beginning of April, including a parade behind a puppet depicting the IMF president as the lackey of cold-hearted financial speculators. At least they know now whose face the puppet will bear.
