The race to lead the IMF is turning into a tug of war between Europe and emerging economies.
Mexico is seeking support for Agustin Carstens, its central bank governor. But all the hot money is on undeclared candidate Christine Lagarde, France’s finance minister. The EU seems to have reached a virtual consensus that the former lawyer, a fluent English speaker, is the right person for the job. Paris says China would back her, too.
Conceived at a UN conference in Bretton Woods in the USA during World War Two, the IMF has always been run by a European under a gentleman’s agreement by which the US appoints the leader of the World Bank.
The IMF’s main purpose is to ensure the stability of the international monetary system. But it has long focussed on providing financial assistance to countries in difficulties via loans granted in exchange for tough austerity measures.
The IMF is currently committed to loans worth 254 billion US dollars. Its biggest borrowers are two EU nations, Romania and Greece, also a euro zone member. Ukraine has had a hefty helping hand, too
With the body so heavily involved in Europe’s debt crisis, Europeans insist that one of their own must succeed Dominique Strauss-Kahn following his resignation to fight sex charges.
Each of the International Monetary Fund’s 187 members is represented on the Board of Governors.
The organisation’s day to day work is conducted by its 24-member Executive Board, representing all member countries. It is chaired by the Managing Director, the post that is up for grabs, who is in charge of 2,500 staff.
The US and Europe have traditionally had the biggest voting share at the IMF. At a conference last year, an historic deal was struck to give more weight to emerging countries. Yet the trans-Atlantic duo has retained its position of strength.
With votes weighted on the basis of a country’s subscription to the IMF, known as its quota, the USA remains the biggest national decision maker.
The EU’s vote also carries tremendous weight, if it stands united.
In comparison, even the fastest-rising emerging economies are lagging far behind.
Mexico seems a tiny fish in the pond. Hence a hugely limited chance for its top banker to get the top job. For now, at least, the status quo looks like it will hold.