Christine Lagarde strengthened her lead in the race for the International Monetary Fund’s top job after the institution discarded the candidacy of Bank of Israel Governor Stanley Fischer and rival Agustin Carstens described his chance of winning as “slim.”
The IMF executive board said in a statement late yesterday in Washington that it retained Lagarde and Carstens as the candidates for the post of managing director, excluding Fischer, who exceeds the age limit for the job. Earlier, Carstens had described Lagarde’s chances of being chosen as “quite high.”
The IMF will meet with both candidates in Washington with the aim of making a decision by June 30, a month and a half after the arrest of former chief Dominique Strauss-Kahn on charges including attempted rape. He has pleaded not guilty. A Lagarde win means an extension of the 65-year tradition of a European heading the IMF; Americans have run the World Bank.
“The emerging markets are not happy with the current guarantee that the slot’s going to the European, I suspect this time they will be satisfied to make some noise,” said David Cohen, a Singapore-based economist at Action Economics Ltd., who formerly worked at the U.S. Federal Reserve. “Emerging-market economies are looking towards the future for next time, they are confident the world is definitely evolving in their direction.”
Carstens, Mexico’s central bank governor, yesterday said chances are “quite high” that Lagarde, France’s finance minister, will win. He said that he put his name forward in an effort to help emerging markets get the post in the future.
“I’m not fooling myself,” Carstens said in Washington after meeting with U.S. Treasury Secretary Timothy F. Geithner. “It’s like starting a soccer game with a 5-0 score,” given Lagarde’s early front-runner status, he said.
Lagarde is solidly backed by the European Union. In recent days she got endorsements from Morocco, Bahrain, Egypt and the United Arab Emirates. French news agency Agence France-Presse said Indonesian Finance Minister Agus Martowardojo also added his support.
Carstens says he is backed by 12 Latin American nations, while he hasn’t won an endorsement from the region’s biggest economy -- Brazil.
Fischer, 67, had bet that his experience, including a stint as the No. 2 IMF official, would prompt fund members to waive an age requirement that would exclude him from the managing director position, a person familiar with the situation said.
“I am of the opinion that the age limitation, which was set in the past by the Fund at 65, is no longer relevant today, and I had hoped that the IMF directors would have discussed the subject and changed the regulation, not just for my benefit but for those who will come in the future,” Fischer said in an e-mailed statement today.
The IMF stuck by its by-laws, which put an age limit at 65 to assume leadership of the lender that has extended one-third of the assistance in euro-area bailout packages. Age isn’t a barrier for Carstens, 53, or Lagarde, 55.
The board of directors in a statement yesterday said that it will consider Lagarde and Carstens in a move “consistent with the Board decision adopted on May 20 specifying the procedures for the selection of the next Managing Director, and the applicable By-Laws of the IMF.”
Carstens said yesterday he entered the competition to be coherent with developing economies’ claim that the selection of the IMF head should be open and based on merit. The job has traditionally gone to a European as part of an agreement in place since start of the postwar era that also has the U.S. pick the head of the World Bank.
“We emerging markets might take more than one round to get to the final position, but if we don’t start at some point, we will never get there,” he said. “Our intention is to raise the bar, also to invite emerging markets to be better coordinated in this process.”
The U.S., the IMF’s single biggest shareholder with almost 17 percent of the votes, hasn’t announced support for a candidate.
Geithner is “pleased that there is such a strong field of candidates” vying for the top job of the IMF, the Treasury Department said in an e-mailed statement. Geithner described Carstens as an “exceptionally capable candidate” after the two men talked, according to the Treasury, calling their meeting a “good discussion.”
For the U.S., favoring a non-European could mean relinquishing control of the World Bank -- an outcome that members of Congress who decide on funding for development banks have said they aren’t ready to accept.
Carstens spent most of his early career at Banco de Mexico before becoming a deputy managing director of the IMF and then his country’s finance minister.
Lagarde has tried to turn attention away from her nationality by focusing on her gender and her role in European efforts to head off a Greek sovereign-debt default.