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Europe, US under the gun over IMF, World Bank

Europe wants a European as the next chief of the International Monetary Fund but its claim on the post is increasingly questioned, threatening the legitimacy of the international economic agency as a consequence.

There is a jaded sense of deja vu as the finance ministers from the European Union prepare to discuss options next week in Brussels and the IMF's board meets in Washington under pressure from developing nations to hold an open contest for the post.

Washington has just replaced Paul Wolfowitz after his forced exit from the World Bank with another American, Robert Zoellick, and Europe looks set on insisting the IMF job should remain its when Spaniard Rodrigo Rato bows out in October. So far, analysts and commentators see no hint that Europe is ready to relinquish a 60-year-old duopoly where the top IMF job goes to a European, thanks to US support, and an American tops the World Bank, with Europe's return of favour.

"Two wrongs do not make a right," former IMF chief economist Kenneth Rogoff said in an internet-published attack on the leadership carveup, which has existed since the two institutions were established after World War II. Now that the price of oil, food and money depends as much on demand from China and other emerging market economies as what happens in Europe and the US, that shareout no longer reflects the global balance of economic power.

Not just the emerging market nations say so. When he stood down as IMF chief seven years ago, Frenchman Michel Camdessus said it was time Europe and the US thought again about their control of the top jobs.

"This was justified in 1950, when the rest of the world was not there except for a few countries from Latin America," the Frenchman said in 2000, when he had just retired after more than 12 years in the job. "Now the emerging countries are there, now the poorest countries must have their say." Little if anything has changed in the meantime and France, via an aide to President Nicolas Sarkozy, said on Friday it would like a Frenchman back in the job.

Wolfowitz, snared by a furore over promotion of a female companion, has left and handed the World Bank reins over to Zoellick, a former US trade negotiator. At the IMF, Camdessus was replaced by a German, Horst Koehler, who resigned before his five-year term ended to become President of Germany. And now that Rato, who filled Koehler's shoes in 2004, also plans to go early for family reasons, the race is on in Europe to designate a replacement.

"There will be a candidate agreed by the Europeans and it will be a very good solution and an adequate successor for Mr de Rato," German finance ministry spokeswoman Ulrike Abratis said on Friday. There was no hurry, she added. What happens now depends on the extent to which Europe tries to cater to demands that emerging market economies get a bigger say, and the stance of heavyweights such as Germany, France, Italy and Britain, all members of the G7 economic forum.

Among big names entering the fray on Friday were Dominique Strauss-Kahn and Laurent Fabius of France, both former finance ministers and heavyweights with limited options in their own country as their Socialist party is out of power. Sarkozy's chief aide, Claude Gueant, told Le Monde newspaper Paris wanted the job back and the newspaper floated the names of Fabius and Strauss-Kahn, the latter of whom has the advantage of being a polyglot. Among other names one European official cited this week were Jean Lemierre of France, who replied that he likes his current job as head of the European Bank for Reconstruction and Development, Italy's Mario Draghi, who is not interested according to the central bank he runs, and Polish former central bank boss Leszek Balcerowicz. Another European official said the goal for now appeared to be to find someone with the political stature needed to do the job, not just the technocratic expertise of a central banker.

The biggest handicap for a French contender is that they have had most of the running in the decades gone by, in addition to the pressure to satisfy demands for someone who does not come from wealthy Western Europe. The IMF's first chief was Belgian, followed by two Swedes, a Frenchman, a Dutchman, two Frenchmen again in succession, then a German and now a Spaniard - all from Western Europe.

The government of Poland, the biggest emerging market economy among those that joined the European Union in 2004, said on Friday it is willing to back Balcerowicz if he is an official candidate. "Balcerowicz is an experienced top-flight central banker who would make a strong candidate to head the IMF, though there is no reason to restrict consideration to Europeans, even if the "old Europe" definition is broadened to include countries like Poland," Rogoff, now an economics professor at Harvard University said.

Source: The Economic Times
Date: 10.07.2007 [53]
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