Business Maverick

Europe Set to Keep Hold of IMF Leadership as Lagarde Leaves

By Bloomberg 5 July 2019
Caption
A handout made available by the Intrernational Monetary Fund (IMF) of IMF Managing Director Christine Lagarde (C) being escorted by Nigeria’s Finance Minister Kemi Adeosun (L) and Nigeria’s Central Bank Governor Godwin Emefiele (R) upon arriving at the Nnamdi Azikiwe International Airport in Abuja, Nigeria, 04 January 2016. Lagarde will meet with Nigeria’s President and their economic team on 05 January 2016. EPA/STEPHEN JAFFE / HANDOUT

European governments expect to maintain the seven-decade tradition of selecting the leader of the International Monetary Fund as Christine Lagarde prepares to step down.

Christine Lagarde’s  likely exit for the European Central Bank will fire up the debate over whether an emerging market candidate would be better suited to running the Washington-based lender. But officials from two key European governments said they anticipate pressing for continuity.The recent appointment of American David Malpass to the presidency of the World Bank continues the unwritten transatlantic agreement on how to split the two jobs and creates leverage given President Donald Trump’s pick faced no opposition from Europe.It remains too early to predict who Europe’s candidate will be with Lagarde only nominated for the ECB presidency on Tuesday after a weekend of haggling between governments. She’s not set to move to the ECB until after October 31 and EU lawmakers need to sign off on the appointment first.

U.K. Interest

Former U.K. Chancellor of the Exchequer George Osborne is considering seeking the position, according to a person familiar with the matter.

Osborne was an early endorser of Lagarde when she sought the IMF role and as the editor of the Evening Standard newspaper recently backed Boris Johnson to be Britain’s next prime minister, potentially easing the way for him to be nominated.

A Briton has never run the IMF and the new government may want to push a candidate as a way to buttress its post-Brexit standing on the world stage.

At the same time, euro area governments may seek to mete out punishment for Brexit and Osborne’s imposition of fiscal austerity as Chancellor may not sit well with emerging markets who have long chafed at the IMF’s hardline budget approach which it has itself sought to dilute.

Another London-based candidate could be Bank of England Governor Mark Carney, who is set to leave office next January and carries British, Irish and Canadian passports. The Bank of England decline to comment.

Names Floated

Other contenders could include those who lost out to Lagarde in the race to replace Mario Draghi at the ECB. Bundesbank President Jens Weidmann has already worked as an economist at the IMF, though his office said Thursday he won’t apply for the IMF job. Benoit Coeure, a member of the ECB’s executive board, is qualified yet his appointment is unlikely given the last two IMF chiefs have been French.

Olli Rehn, governor of Finland’s central bank, could also be a runner although like Osborne he earned a reputation for promoting austerity in the post-financial crisis years when he was European Commissioner for Economic and Monetary Affairs.

He may face competition from home from former Finnish Prime Minister Alexander Stubb and Jyrki Katainen. Helle Thorning-Schmidt, the former Danish prime minister, has also been mentioned. Bulgarian Kristalina Georgieva, the chief executive of the World Bank, missed out on the presidency of the European Commission.

The selection process is managed by the IMF’s board of 24 executive directors, which represents its member countries and has in the past pledged to select managing directors based on merit and with a consensus vote.

Still, emerging markets have proposed candidates in the past and may be emboldened to do so again given the increasing weight they carry in the world economy.

French Connections

Nominees could include Mexican Agustin Carstens, the head of the Bank for International Settlements, former Reserve Bank of India Governor Raghuram Rajan, Monetary Authority of Singapore Chairman Minister Tharman Shanmugaratnam and Credit Suisse Group AG Chief Executive Officer Tidjane Thiam.

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