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07-10-2007, 04:48 PM
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EU backs former French official to lead IMF
By Dan Bilefsky
Tuesday, July 10, 2007
BRUSSELS: The European Union on Tuesday broadly backed the former French finance minister Dominique Strauss-Kahn to become the next head of the International Monetary Fund, even as Britain said the race remained open and questioned Europe's 61-year grip on the Fund's top job.
Portugal, which holds the EU's six-month rotating presidency, said a majority of EU finance ministers had backed Strauss-Kahn, 58, a respected lawyer and economist who was finance minister from 1997 to 1999. He failed to win the Socialist Party's nomination for president last year.
The Portuguese finance minister, Fernando Teixeira dos Santos, praised Strauss-Kahn for his financial acumen and political experience and said he had been endorsed quickly and with little fuss. But Britain, clearly piqued by the manner in which President Nicolas Sarkozy of France had sought to impose his own candidate, retorted that the decision - made over a one-hour breakfast meeting in Brussels on Tuesday - was not final.
Even as Portugal sent out text messages to reporters announcing Strauss-Kahn's nomination, the British finance minister, Alistair Darling, was saying that the nomination process remained open and that Britain was not bound by the decision. When questioned on Strauss-Kahn's nomination, he appeared startled to learn of the news.
Darling said the time had come to revamp the unwritten agreement dating to the end of World War II under which the Washington-based IMF is headed by a European, while its sister institution, the World Bank, is run by an American.
"We think there needs to be an opportunity for all members of the IMF to make their own assessments as to individual candidates and then pick the best candidate for the job," he said.
He said candidates from outside Europe should also be considered to replace the current IMF chief, Rodrigo de Rato, a Spaniard, when he steps down in October. "We don't believe the situation whereby it is assumed that there will automatically be a European candidate for the IMF just as there is an American candidate for the World Bank is sustainable in the long term."
It remained unclear, however, whether Britain would put forward its own candidate or move to block Strauss-Kahn's nomination. EU officials noted that the IMF board, by convention, is expected to approve the candidate chosen by Europe. They said Britain, which has called Strauss-Kahn a competent candidate, would face an uphill struggle if it tried to take on 26 other member states who backed him.
Thus far, few other contenders have emerged to challenge Strauss-Kahn. Two other European candidates - Mario Draghi, the Bank of Italy governor, and Gerrit Zalm the former Dutch finance minister - took themselves out of the running on Monday, while Poland failed to get endorsement for the nomination of Marek Belka, a former prime minister.
But Britain's call for a more open selection process was echoed by the Netherlands and Italy, possibly setting the stage for an acrimonious process to confirm Strauss-Kahn. The Dutch finance minister, Wouter Bos, said "it's still an open race." The Italian finance minister, Tommaso Padoa-Schioppa, said he supported Strauss-Kahn but stressed that his "passport shouldn't be the determining thing."
Britain's decision to question the nomination process threatens to open up a rift with Washington, which has shown little inclination to question the tradition governing the leadership of the IMF and World Bank. Following the recent resignation of Paul Wolfowitz as the World Bank president in an ethics scandal, Washington categorically rejected suggestions by some countries that his replacement should be chosen solely on merit rather than on nationality.
The French finance minister, Christine Lagarde, said on Tuesday that questioning how the IMF candidate was selected would also mean reopening Washington's prerogative to pick the World Bank president. Diplomats said EU countries, including France, were frustrated with the long delay in Wolfowitz's departure, but had not pressed the issue with Washington for fear that it would respond by trying to circumscribe Europe's leadership at the IMF.
Despite the broad endorsement of Strauss-Kahn, some European officials questioned whether appointing him would give France too much control over European financial institutions. Frenchmen are currently in charge of the European Central Bank, the European Bank for Reconstruction and Development and the World Trade Organization. But the officials also noted that Jean-Claude Trichet, the head of the Central Bank, and Pascal Lamy, the head of the WTO, had proven to be economically liberal internationalists, despite their country's well-known aversion to globalization.
Strauss-Kahn would lead the 185-member IMF at a time when the institution is searching for a way to be relevant to the world economy. The IMF, which shepherds the global financial system by monitoring exchange rates and offering financial assistance to developing countries, has seen its lending portfolio shrink to $11.8 billion from a high of $81 billion in 2004.
Washington, which is eager for the IMF to become more of a financial monitoring agency than a bail-out organization for poor countries, has been frustrated with what some observers perceive as the IMF's lack of purpose.
Henry Paulson Jr., the U.S. Treasury secretary who is traveling in Latin America this week, had no comment on the choice of Strauss-Kahn as head of the IMF, his office said. A Treasury official said that Paulson had told his European counterparts that his main interest was that whoever is selected carry out the "reform agenda" of the IMF.
The two main elements of that agenda are to have the IMF play a more assertive role in monitoring currency imbalances, particularly the Chinese practice of suppressing the value of its currency against the dollar. The United States maintains that China intervenes in the currency markets to keep the yuan low in order to encourage exports.
The United States is also seeking governance changes at the IMF giving China and other growing economies in the developing world more voting rights. The American fear is that if they do not obtain more voting rights, they will set up their own regional monetary mechanisms supplanting the IMF.
Last year, the IMF contribution quotas, which determine voting power and lending potential, were adjusted to accommodate the greater weight of China, South Korea, Turkey and Mexico.
The IMF's importance has also declined as Asian economies have strengthened. It rode to the rescue in the currency crisis of the late 1990s, but now Asian countries have such massive reserves that they are highly unlikely to need IMF assistance. About 75 per cent of the fund's lending portfolio now goes to Turkey.
A former professor with a preference for free market economics, Strauss-Kahn is credited with overseeing, as finance minister, France's economic recovery in the late 1990s, and preparing the ground for the country to join the euro.
A Socialist, he nonetheless played a leading role in clearing the way for the privatization of France Telecom and other state-owned companies, earning him praise from economists and suspicion from within his own party. He is married to a well-known television journalist, Anne Sinclair.
Strauss-Kahn officially confirmed his candidacy on Tuesday for the first time. In a brief statement, he welcomed a "first important step."
In an apparent effort to silence those who have called into question the tradition of a European heading the fund, he also vowed to give emerging countries a greater role if he was chosen.
If Strauss-Kahn were to take over the IMF for a five-year term in October, it would be the latest in a string of early successes for Sarkozy's young presidency. But for Sarkozy, Strauss-Kahn's candidacy is as much a domestic policy move as an international one, analysts say. By offering the job to a Socialist, the president has dealt another blow to an already weakened opposition camp, following a series of high-level appointments of leftists in his administration.
Katrin Bennhold contributed reporting from Paris, Carter Dougherty from Frankfurt and Steven R. Weisman from Washington.
http://www.iht.com/articles/2007/07/10/business/europe.php
http://img.iht.com/images/2007/07/10/10europeb250.jpg
EU backs former French official to lead IMF
By Dan Bilefsky
Tuesday, July 10, 2007
BRUSSELS: The European Union on Tuesday broadly backed the former French finance minister Dominique Strauss-Kahn to become the next head of the International Monetary Fund, even as Britain said the race remained open and questioned Europe's 61-year grip on the Fund's top job.
Portugal, which holds the EU's six-month rotating presidency, said a majority of EU finance ministers had backed Strauss-Kahn, 58, a respected lawyer and economist who was finance minister from 1997 to 1999. He failed to win the Socialist Party's nomination for president last year.
The Portuguese finance minister, Fernando Teixeira dos Santos, praised Strauss-Kahn for his financial acumen and political experience and said he had been endorsed quickly and with little fuss. But Britain, clearly piqued by the manner in which President Nicolas Sarkozy of France had sought to impose his own candidate, retorted that the decision - made over a one-hour breakfast meeting in Brussels on Tuesday - was not final.
Even as Portugal sent out text messages to reporters announcing Strauss-Kahn's nomination, the British finance minister, Alistair Darling, was saying that the nomination process remained open and that Britain was not bound by the decision. When questioned on Strauss-Kahn's nomination, he appeared startled to learn of the news.
Darling said the time had come to revamp the unwritten agreement dating to the end of World War II under which the Washington-based IMF is headed by a European, while its sister institution, the World Bank, is run by an American.
"We think there needs to be an opportunity for all members of the IMF to make their own assessments as to individual candidates and then pick the best candidate for the job," he said.
He said candidates from outside Europe should also be considered to replace the current IMF chief, Rodrigo de Rato, a Spaniard, when he steps down in October. "We don't believe the situation whereby it is assumed that there will automatically be a European candidate for the IMF just as there is an American candidate for the World Bank is sustainable in the long term."
It remained unclear, however, whether Britain would put forward its own candidate or move to block Strauss-Kahn's nomination. EU officials noted that the IMF board, by convention, is expected to approve the candidate chosen by Europe. They said Britain, which has called Strauss-Kahn a competent candidate, would face an uphill struggle if it tried to take on 26 other member states who backed him.
Thus far, few other contenders have emerged to challenge Strauss-Kahn. Two other European candidates - Mario Draghi, the Bank of Italy governor, and Gerrit Zalm the former Dutch finance minister - took themselves out of the running on Monday, while Poland failed to get endorsement for the nomination of Marek Belka, a former prime minister.
But Britain's call for a more open selection process was echoed by the Netherlands and Italy, possibly setting the stage for an acrimonious process to confirm Strauss-Kahn. The Dutch finance minister, Wouter Bos, said "it's still an open race." The Italian finance minister, Tommaso Padoa-Schioppa, said he supported Strauss-Kahn but stressed that his "passport shouldn't be the determining thing."
Britain's decision to question the nomination process threatens to open up a rift with Washington, which has shown little inclination to question the tradition governing the leadership of the IMF and World Bank. Following the recent resignation of Paul Wolfowitz as the World Bank president in an ethics scandal, Washington categorically rejected suggestions by some countries that his replacement should be chosen solely on merit rather than on nationality.
The French finance minister, Christine Lagarde, said on Tuesday that questioning how the IMF candidate was selected would also mean reopening Washington's prerogative to pick the World Bank president. Diplomats said EU countries, including France, were frustrated with the long delay in Wolfowitz's departure, but had not pressed the issue with Washington for fear that it would respond by trying to circumscribe Europe's leadership at the IMF.
Despite the broad endorsement of Strauss-Kahn, some European officials questioned whether appointing him would give France too much control over European financial institutions. Frenchmen are currently in charge of the European Central Bank, the European Bank for Reconstruction and Development and the World Trade Organization. But the officials also noted that Jean-Claude Trichet, the head of the Central Bank, and Pascal Lamy, the head of the WTO, had proven to be economically liberal internationalists, despite their country's well-known aversion to globalization.
Strauss-Kahn would lead the 185-member IMF at a time when the institution is searching for a way to be relevant to the world economy. The IMF, which shepherds the global financial system by monitoring exchange rates and offering financial assistance to developing countries, has seen its lending portfolio shrink to $11.8 billion from a high of $81 billion in 2004.
Washington, which is eager for the IMF to become more of a financial monitoring agency than a bail-out organization for poor countries, has been frustrated with what some observers perceive as the IMF's lack of purpose.
Henry Paulson Jr., the U.S. Treasury secretary who is traveling in Latin America this week, had no comment on the choice of Strauss-Kahn as head of the IMF, his office said. A Treasury official said that Paulson had told his European counterparts that his main interest was that whoever is selected carry out the "reform agenda" of the IMF.
The two main elements of that agenda are to have the IMF play a more assertive role in monitoring currency imbalances, particularly the Chinese practice of suppressing the value of its currency against the dollar. The United States maintains that China intervenes in the currency markets to keep the yuan low in order to encourage exports.
The United States is also seeking governance changes at the IMF giving China and other growing economies in the developing world more voting rights. The American fear is that if they do not obtain more voting rights, they will set up their own regional monetary mechanisms supplanting the IMF.
Last year, the IMF contribution quotas, which determine voting power and lending potential, were adjusted to accommodate the greater weight of China, South Korea, Turkey and Mexico.
The IMF's importance has also declined as Asian economies have strengthened. It rode to the rescue in the currency crisis of the late 1990s, but now Asian countries have such massive reserves that they are highly unlikely to need IMF assistance. About 75 per cent of the fund's lending portfolio now goes to Turkey.
A former professor with a preference for free market economics, Strauss-Kahn is credited with overseeing, as finance minister, France's economic recovery in the late 1990s, and preparing the ground for the country to join the euro.
A Socialist, he nonetheless played a leading role in clearing the way for the privatization of France Telecom and other state-owned companies, earning him praise from economists and suspicion from within his own party. He is married to a well-known television journalist, Anne Sinclair.
Strauss-Kahn officially confirmed his candidacy on Tuesday for the first time. In a brief statement, he welcomed a "first important step."
In an apparent effort to silence those who have called into question the tradition of a European heading the fund, he also vowed to give emerging countries a greater role if he was chosen.
If Strauss-Kahn were to take over the IMF for a five-year term in October, it would be the latest in a string of early successes for Sarkozy's young presidency. But for Sarkozy, Strauss-Kahn's candidacy is as much a domestic policy move as an international one, analysts say. By offering the job to a Socialist, the president has dealt another blow to an already weakened opposition camp, following a series of high-level appointments of leftists in his administration.
Katrin Bennhold contributed reporting from Paris, Carter Dougherty from Frankfurt and Steven R. Weisman from Washington.
http://www.iht.com/articles/2007/07/10/business/europe.php