Strauss-Kahn Quits IMF, Succession Begins
Dominique Strauss-Kahn resigned as the 10th leader of the International Monetary Fund, kicking off a contest for his successor as Europeans seek to retain the job amid a lack of unity among emerging-market nations.
“I want to devote all my strength, all my time, and all my energy to proving my innocence,” Strauss-Kahn said in a statement released by the Washington-based IMF four days after his arrest on sexual-assault charges. The fund said it will comment “in the near future” on the succession. Strauss-Kahn, 62, had been leading polls for France’s 2012 presidential election.
European officials, who have picked IMF heads for 65 years under a deal that also gives the U.S. the lock on the top World Bank post, moved to retain the privilege, with Sweden backing French Finance Minister Christine Lagarde. Russia and South Africa have called for an emerging-market candidate, while some Asian policy makers suggested someone from their region.
“Time is of the essence,” said Julie Chon, a senior fellow at the Washington-based Atlantic Council and former adviser to the U.S. Senate Banking Committee. “The longer the IMF allows the specter of uncertainty to hang over its leadership, the more exposed it becomes to the jittery actions of sovereign debt and foreign-exchange traders who have been speculating on what the leadership vacuum means for their portfolios.”
Lipsky in Charge
The Washington-based lender that approved a record $91.7 billion in emergency loans last year and provides a third of the euro-region’s bailout packages said John Lipsky, the No. 2 official at the fund, remains as acting leader, according to its statement late yesterday. Lipsky, a former chief economist at JPMorgan Chase & Co., is scheduled to retire in August.
“John Lipsky will provide able and experienced leadership to the fund at this critical time for the global economy,” U.S. Treasury Secretary Timothy F. Geithner said in a statement. “We want to see an open process that leads to a prompt succession for the fund’s new managing director.”
Strauss-Kahn’s five-year term had 17 months remaining. In past successions, incoming managing directors were appointed to fresh five-year tenures.
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” and that a decision must be made swiftly. She declined to specify who she would prefer to get the job.
Merkel’s chief spokesman, Steffen Seibert, said he can’t confirm a report in Handelsblatt newspaper today that the German government is preparing to throw its support behind Lagarde.
“I would argue that Christine Lagarde has outstanding credentials,” Swedish Finance Minister Anders Borg said in a Bloomberg Television interview today. Her sex is also an “advantage” since “half of the world has not been represented as managing director.”
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.
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, down from odds of 20-1 previously.
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, has yet to decide 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 given no indication of a preference.
Choice on Merit
World Bank President Robert Zoellick said he is “sure” that the choice of a new managing director will be made on the basis of merit.
“One thing I would underscore is you have a very strong IMF staff,” he told reporters today in Washington.
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.
“A new brand of leadership will send a positive signal that the IMF is indeed responsive to the changing world,” Philippine Finance Secretary Cesar Purisima said in a mobile- phone text in response to questions. “Wherein Asia increasingly plays a major role as a growth driver of the global economy, there is no time more fitting than now for an Asian leader to take the helm.”
Thai Finance Minister Korn Chatikavanij said in an interview today that Asia has “good candidates” for the role. 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.”
“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’s 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.
“The most important thing is to move decisively to appoint the best qualified person for the job,” Australian Treasurer Wayne Swan said through a spokesman. “Uncertainty around a new managing director of the IMF is not in the interests of the global economy or the institution itself.”
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.
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