Emerging giants denounce Europe lock on top job of world's key lender

PARIS / BEIJING - France's Christine Lagarde announced her candidacy for the presidency of the International Monetary Fund, amid calls from the five major emerging economies for an end to the tradition that a European chairs the IMF.

France's Finance Minister Christine Lagarde announces her candidacy to head the IMF during a press conference in Paris, May 25, 2011.[Photo/Agencies]

 

"It is an immense challenge which I approach with humility and in the hope of achieving the broadest possible consensus," Lagarde told a news briefing.

Former IMF chief Dominique Strauss-Kahn, a French citizen, resigned last week after being charged with attempted rape.

Brazil, Russia, India, China and South Africa on Tuesday criticized EU officials for suggesting that the next IMF head should be a European, a convention that dates back to the founding of the global lender at the end of World War II.

However, the countries, known as the BRICS, failed to unite behind a common alternative candidate.

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In the first joint statement issued by their directors at the IMF in Washington, the BRICS said that the choice of who heads the IMF should be based on competence, not nationality. They called for "abandoning the obsolete, unwritten convention that requires that the head of the IMF be from Europe".

The statement was made one day after nominations for the job opened.

"The recent financial crisis which erupted in developed countries underscored the urgency of reforming international financial institutions so as to reflect the growing role of developing countries in the world economy," said the statement.

Chinese experts said the statement should be taken seriously.

"If developed countries don't respect the opinion of the BRICS, Lagarde is very likely to fail to win enough votes," said economist Guo Tianyong, director of the Research Center of the Chinese Banking Industry at the Central University of Finance and Economics.

BRICS account for about 11 percent of the voting rights, and Lagarde needs 85 percent of the votes to get the position.

Indian Prime Minister Manmohan Singh said at a news conference in Addis Ababa on Wednesday at the close of the India-Africa trade summit that emerging countries should take a united stand on this issue.

"The reform of the global institutions, and that includes the Bretton Woods institutions (the IMF and World Bank), has been high on the agenda of developing countries for a long time," AFP quoted him as saying.

"But we have also to recognize that international relations beyond a point are power relations and that those who wield power do not wish to yield ground very easily," he said.

Public statements made recently by high-ranking European officials contradict public announcements made in 2007, at the time of the selection of Strauss-Kahn.

Jean-Claude Junker, president of the Eurogroup (finance ministers of the eurozone), then declared that "the next managing director will certainly not be a European" and that "in the Eurogroup and among EU finance ministers, everyone is aware that Strauss-Kahn will probably be the last European to become director of the IMF in the foreseeable future".

He Weiwen, an expert at a research institute affiliated to the Ministry of Commerce, said whether the convention will end depends on the US, which holds 17.75 percent of IMF shares and 16.8 percent of the voting rights.

"It's still very difficult for emerging economies to challenge the tradition" because the US is very likely to favor a European candidate as it will get reciprocal support from Europe for an American to run the World Bank, he said.

Officials from the BRICS emphasized that the new managing director should be selected after broad consultations with the membership, and said that adequate representation of emerging markets and developing members in the IMF management is critical for its legitimacy and effectiveness.

Developing countries have spent years attempting to reform the key global economic institution, as emerging economies became the major drivers of world economic development.

China last week said that the new IMF leader should be chosen on "merit, transparency and fairness".

Li Daokui, an adviser to the Chinese central bank's monetary policy committee, said earlier that the chances of a European taking the position are slim, but supporting a Chinese candidate is not the best choice for the country.

"I think a talent from a neutral and small country would accord more with the interests of the world, including China, because big countries such as India and Brazil have too many national interests," he said.

Agencies-China Daily