Geithner: Strauss-Kahn Succession Process Should Be Quick

Thursday, 19 May 2011 02:40 PM

 

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U.S. Treasury Secretary Timothy F. Geithner called for the quick appointment of a successor to Dominique Strauss-Kahn to head the International Monetary Fund as European governments rallied to support French Finance Minister Christine Lagarde.

“We want to see an open process that leads to a prompt succession,” Geithner said in a statement today. John Lipsky, the Washington-based IMF’s acting managing director, “will provide able and experienced leadership to the fund at this critical time for the global economy,” Geithner said.

European officials, who have picked IMF heads for 65 years under a deal that also gives the U.S. control over the top World Bank post, moved to retain the privilege. Sweden backed Lagarde and Handelsblatt newspaper reported that the German government is preparing to support her. Emerging-market nations haven’t unified behind one candidate.

“I would argue that Christine Lagarde has outstanding credentials,” Swedish Finance Minister Anders Borg said in a Bloomberg Television interview today. Her gender is an “advantage” since “half of the world has not been represented as managing director” of the IMF, Borg said.

Strauss-Kahn resigned as the 10th leader of the IMF four days after his arrest in New York on sexual-assault charges.

“I want to devote all my strength, all my time and all my energy to proving my innocence,” Strauss-Kahn said in a statement by the Washington-based IMF. The fund said it will comment “in the near future” on the succession. Strauss-Kahn, 62, had been leading in polls for France’s 2012 presidential election.

Quick Decision

European Union President Herman Van Rompuy urged a quick decision on a new IMF leader, saying Strauss-Kahn’s arrest has hurt efforts to tackle Greece’s financial crisis.

“We can’t lose time,” Van Rompuy told a conference today in Brussels. “We are feeling a lack of leadership in solving the Greek crisis.”

The IMF approved a record $91.7 billion in emergency loans last year and provides a third of the euro-region’s bailout packages. Lipsky, 64,the No. 2 official at the fund, will remain acting leader, the fund said in a statement yesterday. Lipsky, a former chief economist at JPMorgan Chase & Co., is scheduled to retire in August.

Strauss-Kahn’s five-year term had 17 months remaining. In past successions, managing directors were appointed to fresh five-year tenures.

IMF Rules

Under the IMF’s rules, its executive board selects the managing director and any member can make a nomination. Prior to appointing Strauss-Kahn in 2007, the board said candidates must have a “distinguished record in economic policy-making at senior levels” and “demonstrated the managerial and diplomatic skills needed to lead a global institution.”

The 2007 nomination period ran from early July to the end of August. The board then met with each candidate and sought to make its choice through consensus rather than majority vote. The appointment was made three months to the date after the resignation of Rodrigo de Rato.

German Chancellor Angela Merkel told reporters today that Europe’s sovereign-debt crisis “speaks for a European candidate” to head the IMF and that a decision must be made swiftly. She declined to specify a preference for the job.

Merkel’s chief spokesman, Steffen Seibert, said he can’t confirm the Handelsblatt report that the German government is preparing to throw its support behind Lagarde.

Must Be European

Lagarde, 55, declined to comment on her potential candidacy when questioned by reporters in Paris today. She said that any successor to Strauss-Kahn should come from Europe.

Writing in Time magazine in 2009, Geithner said Lagarde had shown “what it takes to break down barriers” by becoming the first female Group of Seven finance minister and that he admired her “lightning-quick wit, genuine warmth and ability to bridge divides while remaining fiercely loyal to French interests.”

“Rarely do the names Descartes and Voltaire emerge during a debate on global economic policy. But when they do, it often means Christine Lagarde is using philosophy to drive home a sophisticated point about the markets,” Geithner wrote.

Europe is likely to succeed in getting Lagarde the job as developing nations are too divided to back a single candidate, said Nouriel Roubini.

“The Europeans are going to be united in wanting a European, and I think the European candidate is going to be Christine Lagarde,” Roubini, an economist who predicted the recent global financial crisis, said in an interview on Bloomberg Television’s “Last Word” with Andrea Catherwood today.

Favorite for Job

Lagarde is the favorite for the job, according to odds at London-based bookmaker William Hill Plc. It is offering six pounds ($9.71) for every four pounds bet that Lagarde will be the next IMF head, narrowing from 20-1 odds.

Other potential candidates were suggested by officials in Europe and Asia.

Nout Wellink, a European Central Bank Governing Council member, told the Dutch talk show Knevel & Van den Brink late last night: “I know a fantastic candidate. That’s Jean-Claude Trichet,” whose term as ECB president ends in October.

Japan, which has the second-biggest share of voting power at the IMF with 6.25 percent, hasn’t decided on its stance, Tetsuro Fukuyama, the government’s deputy chief cabinet secretary, told reporters in Tokyo today.

The U.S., which has the largest share of votes at 16.8 percent, has also gave no indication of a preference.

Emerging Economies

South African and Russian officials said yesterday the next head should come from an emerging economy. Trevor Manuel, head of South Africa’s National Planning Commission, is “highly respected in the world,” Finance Minister Pravin Gordhan said of his predecessor in an interview in Pretoria.

Russian central bank Deputy Chairman Sergei Shvetsov said a developing country should be given the chance to run the IMF to better reflect the role of those economies in global trade. South Korea’s central bank governor made similar remarks before the announcement late yesterday that Strauss-Kahn would resign.

Thai Finance Minister Korn Chatikavanij said in an interview today that Asia has “good candidates.” Singapore Finance Minister Tharman Shanmugaratnam is “one of the most capable, technically sound, well rounded and experienced finance ministers in the world,” he said. He described former Indonesian Finance Minister Sri Mulyani Indrawati as “capable.”

Always From Europe

“So far the leader of IMF is always from Europe,” Indonesia’s current finance minister, Agus Martowardojo, told reporters today in Jakarta. “We would welcome an opening to a candidate from Asia.”

Morris Goldstein, a fellow at the Peterson Institute for International Economics in Washington who was an IMF official for 24 years, said earlier this week that potential emerging- market candidates include Singapore’s Shanmugaratnam, former Turkish Economic Minister Kemal Dervis and India’s Montek Singh Ahluwalia, a top aide to the prime minister.

Turkish Finance Minister Mehmet Simsek said there is no reason it can’t be him. Kazakh Prime Minister Karim Massimov wrote on his Twitter account today that his government will nominate central bank Chairman Grigori Marchenko for the post.

World Bank President Robert Zoellick said he is “sure” that the choice will be made on the basis of merit.

Strauss-Kahn, a former French finance minister, was arrested May 14 on accusations of sexually assaulting a hotel maid and has been held at New York’s Rikers Island jail complex since he was ordered held in custody at his arraignment May 16. He is asking a second judge to release him on bail.

© Copyright 2014 Bloomberg News. All rights reserved.

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