IMF forced into leadership search early by Lagarde exit

WASHINGTON: The reshuffle of leadership positions in Europe now forces world finance officials into a search for a new manager for the International Monetary Fund two years ahead of schedule.

After her nomination on Tuesday to lead the

European Central Bank, Christine Lagarde has stepped away from post she has
held since 2011 and in which she led the IMF bailouts to restore order
following the global financial meltdown.

But the outcome of the search for her

replacement almost certainly will end in the same place that it has since the
global crisis lender was created in the aftermath of World War II: with a
European picked to serve as managing director.

While large emerging market nations have long

called for more representation in important financial bodies to reflect their
increased weight in the global economy, the choice earlier this year of
American David Malpass to lead the World Bank, the IMF's sister institution,
showed the unwritten rule remains in place.

"The ease with which the US preserved the

duopoly, means the Europeans will definitely want to keep their mitts on
it," former US Treasury official Mark Sobel told AFP.

A French government source agreed: "It

must be a European," he said.

Five of the IMF's 11 leaders have been French

nationals and they have been the longest serving in the institution's 75 year
history.

Early candidates mentioned as possible

successors to Lagarde include Bank of France chief François Villeroy de Galhau,
French politician Pierre Moscovici, the EU finance commissioner, and Mark
Carney, a Canadian who also holds British and Irish citizenship and whose term
as leader of the Bank of England is up next year.

Another possibility is Kristalina Georgieva,

the Bulgarian chief operating officer of the World Bank, who served as its
interim president before Malpass was named. If selected, she would only be the
second woman to lead one of the institutions.

A More Open Process

Advanced economies were the epicenter of the

2008 global financial crisis, and in the aftermath the leaders of the Group of
20 countries agreed that major developing nations like China, India and Brazil
should have greater representation in the multinational institutions, including
serving in leadership roles.

But when the top job at the IMF suddenly opened

up in 2011, the European nations balked. With the crisis at their doorstep, and
Greece almost literally going up in flames, leaders argued that the time was
not right.

Emerging markets called out the hypocrisy but

never unified behind Agustin Carstens, then head of the Mexican central bank
and now leader of the Bank for International Settlements, and a veteran of
senior posts at the IMF and widely seen as qualified.

Carstens was the lone candidate to challenge

Lagarde in 2011 but never received sufficient support.

When the World Bank job opened up this year

there was no competition to the US choice.

"My view is it should be open to everyone

in the world," Sobel said. But the emerging markets "didn't step up
to the plate."

With 16.5pc of the voting shares, the United States has a veto at the IMF, as do the EU members with just over 21pc combined, although they are dispersed among different voting blocs.

The IMF board includes 24 directors representing the 189 members, with only the Washington, Tokyo (6.2pc) and Beijing (6.1pc) representing their countries alone.

Last week, before the leadership change, Carstens said it was "urgent" to reform the IMF to give the emerging markets more voice since that would improve the fund's legitimacy.

"If they are represented, that would give

more legitimacy to the advice that the fund provides," he said. "I
think that is an urgent reform and hopefully we can move more quickly in that
direction."

In principle, the IMF board has established an

open, merit-based selection process for choosing a managing director, and now
accepts nominations from any member country. Candidates would be narrowed down
to a short list of three and then interviewed.

The board has said a candidate "will have

a distinguished record in economic policymaking at senior levels. He or she
will have an outstanding professional background, (and) will have demonstrated
the managerial and diplomatic skills needed to lead a global institution."