Europe demands to name next IMF head, US hesitates

AP News
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Posted: May 19, 2011 8:22 PM
Europe demands to name next IMF head, US hesitates

European officials closed ranks Thursday to demand that the IMF's next leader be one of their own, someone with the political savvy to handle the continent's relentless debt crisis, but the U.S. balked at offering its immediate support.

Frenchman Dominique Strauss-Kahn, who has been widely praised for his leadership of the International Monetary Fund and its involvement in solving Europe's woes, resigned Wednesday to devote "all his energy" to fighting sexual assault charges in New York.

The move heated up simmering debate over his successor, with Europe staking its traditional claim to the post even as fast-growing nations like China and Brazil say it's time to break that monopoly and seek an IMF chief from a developing nation. The IMF is empowered to direct billions of dollars to stabilize the global economy.

In Washington, where the IMF is based, U.S. Treasury chief Timothy Geithner said "We want to see an open process that leads to a prompt succession."

Geithner's statement was ambiguous and leaves open the possibility that the U.S., which has a major say in determining who will head the fund, could support a candidate from either group. Some analysts said the U.S. government will make its preference clearer behind the scenes while keeping a more impartial stance in public.

Hours after Strauss-Kahn's resignation, everyone from the European Commission to the German chancellor to the French finance minister _ herself a potential candidate _ said the replacement should come from Europe. Not because of any tradition, they insisted, but because intimate knowledge of Europe's debt crisis should be a critical element of any candidate's portfolio.

"From a European point of view, it is essential that the appointment will be merit-based, where competence and economic and political experience play the key role," said Olli Rehn, European Commissioner for Monetary and Economic Affairs. "And in this current juncture it is a merit if the person has quite solid knowledge of the European economy and decision making."

There is no indication yet when a decision will be made. But a meeting of the G-8 _ a group of eight developed countries _ takes place next week in the seaside resort of Deauville, France, and all the major decision-makers will be there.

France's Finance Minister Christine Lagarde has in recent days been touted in many European capitals as a good choice. A sharp, articulate negotiator, she has a strong international reputation and impeccable English after living in the United States for many years.

"I am convinced that she is a good candidate. I made a few trips with her to Asia. I was able to verify her popularity among ministers of large emerging countries," France's transport minister, Thierry Mariani, told France-Info radio Thursday.

Despite Lagarde's popularity, Mariani was the first member of the French government to speak publicly about her as a candidate.

That's partly because she is a member of French President Nicolas Sarkozy's conservative UMP party, and if Sarkozy openly pushes for her candidacy, that could fuel the widespread belief in France that the accusations against Strauss-Kahn were part of a conspiracy to knock him off what appeared to be his march toward the French presidency.

Lagarde herself mentioned no names but said she too supported a European for the job.

"I'm a true European and I'm convinced that Europe is the way to go, as far as we are concerned," she told reporters on a visit to a French supermarket. "I am a convinced European and I think that for such a candidacy, the Europeans must be united."

In Berlin, German Chancellor Angela Merkel pushed for a rapid decision and underlined her hopes for another European. "It is of great significance, of course, that we find a quick solution."

The IMF's executive board released a letter from Strauss-Kahn on Wednesday in which he denied the allegations against him but said he felt he must resign to protect his family and the IMF.

Strauss-Kahn was back in court Thursday in New York for a bail hearing that could have spelled the end of his leadership of the IMF anyway. He faces charges of assaulting a maid in a New York hotel room and has been jailed in New York since Monday.

The IMF's statement said the process of choosing a new leader would begin, but in the meantime John Lipsky would remain its acting managing director.

Lipsky said Thursday that he deeply regrets the circumstances that temporarily placed him in the top position.

Europeans have led the IMF since its inception after World War II. Americans have occupied both the No. 2 position at the IMF and the top post at its sister institution, the World Bank. The World Bank funds projects in developing countries.

Developing nations see Europe's stranglehold on the position as increasingly out of touch with the world economy. China's is now the world's second largest economy. India's and Brazil's have cracked the top 10.

"We must establish meritocracy, so that the person leading the IMF is selected for their merits and not for being European," Brazilian Finance Minister Guido Mantega said Wednesday.

Other potential European candidates include Germany's former central bank chief, Axel Weber; the head of Europe's bailout fund, Klaus Regling; and Peer Steinbrueck, a former German finance minister.

Candidates from elsewhere include Turkey's former finance minister, Kemal Dervis; Singapore's finance chief, Tharman Shanmugaratnam; and Indian economist Montek Singh Ahluwalia.

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Rugaber reported from Washington. Geir Moulson in Berlin, Raf Casert in Brussels, Angela Charlton in Paris and Nicolas Garriga in Paris also contributed to this report.