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Emerging nations push for say in next IMF chief

Updated: 2011-05-19 10:31

* China calls for fairness and transparency in selection

* Frustrated developing countries lobby for changes at IMF

WASHINGTON - Emerging economies challenged Europe's grip on the leadership of the International Monetary Fund on Tuesday as pressure mounted for the fund's jailed managing director Dominique Strauss-Kahn to quit.

In a significant move China, which last year become the IMF's third most powerful member country, called for "fairness, transparency and merit" in the selection of the next IMF boss.

As emerging nations began staking out their positions in the expected leadership battle, Austrian Finance Minister Maria Fekter suggested that Strauss-Kahn resign to avoid damaging the institution.

The world's fast-growing developing economies have lobbied aggressively for an overhaul at the IMF and have expressed growing frustration at being shut out of the process on who runs the global institution. [ID:nLDE74F1IO]

A long-standing agreement between the United States and Europe has ensured that a European has always headed the IMF and an American its sister organization, the World Bank.

The arrest of Strauss-Kahn for sexual assault and attempted rape of a hotel maid in New York has set off a round of jostling for position on who could replace him and invigorated emerging market countries in their push for change.

Strauss-Kahn, who was refused bail on Monday and is being held in a New York jail, has denied the charges.

IMF board officials said there was a push by some countries for a speedy resolution to Strauss-Kahn's future as head of the fund, while others cautioned against judging him too quickly.

China's Foreign Ministry declined to comment on the charges against Strauss-Kahn, but a spokeswoman, asked about how IMF leaders are chosen, said: "We believe that this should be based on the principles of fairness, transparency and merit."

It was the first time China has weighed in early and so publicly in the IMF selection debate.

All 10 managing directors to have run the fund since it was created after the World War Two have been Europeans, including four Frenchmen, the most recent of them Strauss-Kahn.

IMF experts and analysts have said that if Strauss-Kahn resigns soon, it may force countries to maintain the status quo and choose a European. Throwing open the process may take longer at a time when the job needs to be quickly filled.

Brazil has been one of the most aggressive emerging economies to call for an end to the status quo. Brazilian Finance Minister Guido Mantega told the IMF's steering committee last month it was "high time that we make a political breakthrough in departing from the outdated practice."

BRAZIL WANTS TO END STATUS QUO

A senior Brazilian government official told Reuters Brazilwants the IMF's next chief to come from a large emerging market country, but acknowledged Europe was likely to keep the job.

"We believe India and Brazil would be good options," the official said, speaking on condition of anonymity. "But we also believe that Europe is likely to keep its deep stranglehold on the position, and so we're not planning to push very hard on this issue for now."

German Chancellor Angela Merkel said on Monday that it was not yet time to discuss succession, but there was a good case for a European to occupy the job.

Asked at a European finance ministers' meeting in Brussels whether Strauss-Kahn should resign, Austria's Fekter said: "Given the situation, that bail has been denied, he has to consider that he would otherwise do damage to the institution."

Spain's Economy Minister Elena Salgado said it was up to Strauss-Kahn to make up his own mind, adding: "My solidarity first and foremost is with the woman who suffered the attack, if that was what happened."

The United States, the IMF's largest and most influential shareholder, has yet to comment on the selection process since Strauss-Kahn arrest, but it has made a strong case in recent years for emerging markets to have a greater say in the IMF.

In April 2009 at a meeting of the Group of 20 in London, the world's major economies agreed "that the heads and senior leadership of the international financial institutions should be appointed through an open, transparent, and merit-based selection process."

Strauss-Kahn has been deeply involved in talks over European Union and IMF bailouts for debt-strapped countries.

But another of his signature achievements has been reforming the IMF's voting structure to give emerging market economies more power.

The IMF has named the fund's deputy, John Lipsky, as acting managing director. Lipsky announced last week, however, that he was stepping down when his term expires in August, adding to pressure on the IMF to quickly resolve the leadership issue.

French Finance Minister Christine Lagarde has emerged as a front-runner for the IMF job, but her nationality may count against her. A French citizen has run the IMF for 26 out of the past 33 years and the embarrassment over the Strauss-Kahn affair may make it hard for Paris to make a credible case.

In Washington's inner circles, former Turkish Finance Minister Kemal Dervis, who now runs an economic program at the Brookings Institution, is a leading name. Turkey's status as a large emerging market within the European continent could ease concerns by developing nations that feel shut out of the selection process.

Other possibilities are Agustin Carstens, governor of Mexico's central bank, and Montek Singh Ahluwlia, an economic adviser to Indian Prime Minister Manmohan Singh, as well as South Africa's former Economy Minister Trevor Manuel.