Christine Lagarde Leads Agustin Carstens in IMF Race as Nominations Close
Christine Lagarde, who has taken her campaign to head the International Monetary Fund to India and China while keeping her fans posted on Twitter, may be poised to defeat her main rival, Agustin Carstens.
With hours before the deadline to submit nominees, the French finance minister has the backing of European Union countries, and Russian Prime Minister Vladimir Putin has voiced his support. Carstens, Mexico’s central bank governor, says he’s backed by 12 Latin American nations while he hasn’t garnered endorsements from Argentina and Brazil.
Lagarde has benefited from the failure of emerging markets to coalesce around a candidate from their own ranks after vowing to end a six-decade European lock on the position. She 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.
“There’s a wide perception that Lagarde is the front- runner,” said Domenico Lombardi, a former IMF board official and a senior fellow at the Brookings Institution in Washington. “She’s seen by many of her political interlocutors as the best chance to contain the turmoil in the euro area and avoid that it could escalate to a full flow-blown systemic crisis.”
The next IMF chief will preside over an institution reeling from last month’s arrest of its former managing director, Dominique Strauss-Kahn, on charges of attempted rape. The former French finance minister pleaded not guilty.
The U.S., the IMF’s single largest shareholder with almost 17 percent of the votes, hasn’t announced support for a candidate, and Treasury Secretary Timothy F. Geithner has said both Lagarde and Carstens are qualified.
Backing a non-European for the IMF could mean relinquishing U.S. control of the World Bank -- an outcome members of Congress who decide on funding for development banks are not ready to contemplate. Under an informal agreement, an American has always headed the World Bank, while a European has led the IMF.
Lagarde, 55, who was a partner in Chicago-based law firm Baker & McKenzie LLP, still may face a legal setback of her own. A French court is considering whether to investigate if Lagarde abused her power in 2007 when she sent a case involving a supporter of French President Nicolas Sarkozy to arbitration. Her action resulted in a 385 million-euro ($559 million) award to businessman Bernard Tapie, who was once a minister in a Socialist French government. Lagarde has denied wrongdoing.
After meeting today, the court said it will decide on July 8 whether to proceed with an investigation or close the file.
The IMF approved a record $91.7 billion in emergency loans last year and provides a third of bailout packages in Europe.
“The IMF job is one of the most important in the whole world economy,” said C. Fred Bergsten, who heads the Washington-based Peterson Institute for International Economics. “Managing directors do make a difference.”
Grigori Marchenko, the chairman of the central bank of Kazakhstan, told the Daily Telegraph newspaper yesterday that Lagarde’s victory was a “done deal.”
Marchenko said in a CNN interview that he is not running for the job. Russian Finance Minister Alexei Kudrin said on May 26 that his country supported Marchenko though it would “study” other candidates.
“I think it’s better to withdraw and not to put some of the countries into embarrassing positions,” Marchenko told CNN. The deadline for nominations is midnight in Washington today.
IMF spokeswoman Conny Lotze said the fund would not make any announcement on the candidacies until June 13 or June 14 “at the earliest.”
South Africa’s former finance minister Trevor Manuel said today he won’t seek the job. “I’m not available” for the position, Manuel told reporters in Johannesburg. “I haven’t thrown my hat in the ring.”
Lagarde and Carstens have embarked on world tours to lobby governments for support.
Carstens, 53, who served as IMF deputy managing director from 2003 to 2006, met Indian Finance Minister Pranab Mukherjee and Prime Minister Manmohan Singh in New Delhi today and will be in Washington next week, before flying to China and Japan. He’s already been to Brazil, Argentina and Canada.
“They at this stage say that they were going to evaluate the candidates and once they finish their evaluation, they will make up their mind to see which direction will be their vote,” Carstens told reporters in New Delhi. “They were completely neutral. They were very attentive, but they were responsible and they said they needed to evaluate the candidates,” he said.
Trip to Brazil
Lagarde went to Brazil last week and is headed to Saudi Arabia and Egypt. She has sought to reassure officials in these countries that she will give them a bigger voice at the agency, which lends to nations in financial distress.
“The IMF does not belong to anybody, it belongs to the 187 members of the fund,” she told reporters yesterday in Beijing. “Management of the fund does not belong to any particular” nation or region. She also said she was “very positive” about her trip to China, while adding that China’s position on her candidacy belongs to that country’s leaders.
Yesterday she answered questions from Twitter users, describing her strengths as “my ability to include, to build consensus, to mediate when needed, to give confidence, and to reach out to governments.” Today in Lisbon Lagarde said the IMF needs to show “flexibility” when setting terms of support packages by adapting them to the situation of specific countries.
Carstens, a former finance minister, has said he expects emerging markets to support his candidacy once there is a final list of nominees. The IMF board aims to pick a candidate by June 30.
He says emerging markets should have a greater voice in the management of the IMF and supports the use of measures such as capital controls and accumulation of foreign reserves to fight excessive capital inflows to developing nations. He has criticized European nations for publicly backing Lagarde before all the candidates are known.
“I find it strange that they are advocating in some forums for an open, transparent, merit-based candidate and they have made up their minds before the candidates are on the table,” Carstens said in a June 2 interview in Sao Paulo. “All the other countries are playing by the book.”