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Monday, May 23, 2011

Europe’s push to head IMF riles other nations

France — European officials are rallying around Christine Lagarde, the French finance minister, as their choice to succeed Dominique Strauss-Kahn as managing director of the International Monetary Fund, despite fresh warnings that handing the job to another European could undermine the fund’s legitimacy.

The British chancellor of the Exchequer, George Osborne, backed Lagarde over Gordon Brown, the former prime minister, on Saturday, effectively ending Brown’s bid for the post.

Strauss-Kahn resigned last week to fight charges that he sexually assaulted a housekeeper in a New York hotel May 14.

Osborne said he thought it would be “a very good thing to see the first female managing director of the IMF in its 60-year history.’’ Osborne’s announcement followed endorsements by Germany, Italy, and other European countries.

But other countries are taking a dark view of the aggressive European push.

Australia and South Africa issued an unusual joint statement yesterday, criticizing a longstanding arrangement between Europe and the United States in which a European typically heads the IMF and an American leads the World Bank. A European has held the top IMF post for more than 40 years.

In a sense, the Fund followed the Bank – particularly with the Robert S. McNamara [1968-81] presidency. McNamara, in expiation for his perceived Vietnam War role, shanghaied it from its original financing of long-term infrastructure into “soft” balance of payments lending [a former Fund monopoly] and ephemeral “social” goals. Both bureaucracies, as used to be said of 19th century Hawaiian missionaries, increasingly came to Washington to do good and did well — an overpaid, tax free, highly ideological, self-annointed “priesthood.”

In any case, in a new world of megabillion investment lending through all sorts of new combines — at least before the 1007-8 meltdown — the Bank grew increasingly irrelevant. That was not true of the Fund — as the Euro crisis has proved. European politicians, initially rebuffed Fund participation.

They feared, despite Washington’s own problems, it would bring America directly into their family fracas. And they suspected Mr. Strauss-Kahn would try to mitigate North European pressure on their Southern European profligates to straighten up and fly right. In the end, with the hodgepodge of band-aid solutions requiring constant renegotiation for all the myriad European political reasons, Mr. Strauss-Kahn would play a major role. And he publicly did call for more slack when Greek politicians were endangered by austerity many in northern Europe already thought too little and too late.

Selecting a new IMF director is likely to be more than usually messy in always sordid multilateral organization leadership selection. As though the world financial policymakers needed one more problem, l’affaire Strauss-Kahn has injected new indecision into the long goodbye to the European Union’s common currency, postponing getting on with the closely-related but perhaps more-threatening problem of massive East Asian currency imbalances.

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