EUROPEAN LEADERS want to settle quickly on a single European candidate to succeed Dominique Strauss-Kahn at the helm of the International Monetary Fund (IMF) as they resist pressure to give the job to an emerging economic power.
With French finance minister Christine Lagarde the early favourite to replace her compatriot, well-placed European sources said informal contacts were already under way with a view to European leaders reaching consensus on their preferred nominee “within days”. A summit of G8 leaders next Thursday and Friday in Deauville, France, is seen in many quarters to provide a deadline for a decision.
European leaders may well move before then, given the importance they place on European leadership of the IMF as they grapple with the sovereign debt crisis.
They still face the threat of a backlash from countries such as China and Brazil, who want an immediate end to the tradition where a European has led the IMF since its creation in 1945 and an American leads the World Bank.
While China and Brazil are calling for the succession process to be handled in a fair and open way, European leaders made their intentions clear yesterday.
German chancellor Angela Merkel said a European was needed in light of the crisis in the euro zone and European Commission chief José Manuel Barroso said it was “only natural” for EU members, as the fund’s biggest contributors, to agree on a candidate.
The concentration of power in the IMF’s arcane voting structure means the US and European countries can swing the decision. However, US control of a 16.74 per cent voting bloc gives Washington an effective veto as the winner must win 85 per cent of the votes.
High-level European sources believe President Barack Obama will not veto a European candidate as he will need European support to ensure a US nominee succeeds Mr Strauss-Kahn’s deputy – John Lipsky, an American – when he stands down in summer.
Ms Lagarde has not denied her interest in the job, although she expressed doubts last week about whether other countries would accept the post of managing director being passed from one French national to another.
“Any candidature, whatever it is, should come from Europeans jointly, rallying together,” she said yesterday without saying if she wanted her name to go forward.
A former corporate lawyer who worked in the US for more than 20 years, she is well-regarded in Washington and London and speaks fluent English. She joined Nicolas Sarkozy’s government in 2005 and won praise for her performance in the financial crisis. She is a commanding presence in the battle to contain the euro zone sovereign debt crisis.
A well-placed EU source was quick to laud her talents yesterday, saying Ms Lagarde enjoyed a “very, very strong reputation not only in Europe”. Her international stature was amplified by the ongoing French presidency of the G20 group of advanced and developing nations, the source said.
The source made light of a case in which a French prosecutor is seeking a judicial inquiry into the role she played in a €285 million legal settlement with businessman Bernard Tapie 2008. Ms Lagarde strongly denies any wrongdoing.
According to the EU source, it is important to note no charges have been brought in the case.
It is not without significance that Ms Lagarde is also close to Dr Merkel, who refused yesterday to name a preferred candidate for the job. “It’s of great importance that we find a fast solution,” said the chancellor, who then said she would not be rushed into her choice. “There are talks about this, obviously, but I will not name any names; we will discuss this within the EU.”
Dr Merkel faces a growing clamour for a German to take the job.
“I would ask the government to support a German at the top of the IMF,” said Klaus-Peter Flosbach, financial spokesman of the CDU party. The last German to lead the IMF was former German president Horst Köhler, who served in the four years up to 2004.
Some voices within the chancellor’s Free Democrat coalition partners are backing former Bundesbank chief Axel Weber, but Dr Weber is not in favour because of his controversial decision not to contest the leadership of the European Central Bank.
Other possible German candidates include Thomas Mirow, chief of the European Bank for Reconstruction and Development, and former finance minister Peer Steinbrück. However, Mr Steinbrück wants to run against Dr Merkel in the 2013 election.
"In the situation in which we find ourselves, I would be for Frau Lagarde although I respect Peer Steinbrück greatly," Swedish finance minister Anders Borg told the Frankfurter Allgemeinedaily.
Four years ago, Mr Strauss-Kahn predicted he would be the last European head of the fund and travelled the world to build support for his candidacy to avoid the appearance of a Euro-American stitch-up. How things change.