- The Washington Times - Friday, March 17, 2000

Two global superpowers are involved in a tug of war over the future direction of the International Monetary Fund (IMF). While one party appears to be mainly concerned with the IMF itself, the other seems preoccupied with ego and power.

Germany has been determined to get one of its own to lead the IMF. The Clinton administration wisely rejected Germany's first candidate, Caio Koch-Weser, a former World Bank economist, because of his lack of macro-economic expertise. Germany has all but forced its second candidate, Horst Koehler, the president of the European Bank for Reconstruction and Development, on the White House and the rest of Europe.

Assuming a petulant tone, Michael Steiner, the chief diplomatic adviser to German Chancellor Gerhard Schroeder, said, "We have discovered that the superpower sees its global role not only in the military area but also in setting the rules of globalization through the IMF," reported the International Herald Tribune Monday. "The superpower in Washington grew stronger, but Europeans are also gaining consciousness of themselves and cannot share the view that the role of the IMF is simply to transport the philosophy of the superpower." If you had closed your eyes, you would have thought it was a French official speaking.

Mr. Steiner's comments were revealing. Clearly, the German government isn't floating candidates in order to improve the efficiency of the IMF. Instead, Germany is seeking to one-up the "superpower" and is using the fund as a vehicle. This is unfortunate because the IMF is in urgent need of reform, if it is to survive. The White House had that urgent need in mind when it rejected Mr. Koch-Weser's candidacy.

Germany's approach towards leadership at the IMF augurs badly. It is important to scale down the IMF's functions and make the organization leaner, more agile and transparent. As the Meltzer commission chartered by Congress recommended last week, the IMF should become a "quasi-lender of last resort," giving only short-term credit at penalty rates. It should lend only to countries that have sound policies already in place and only in crisis situations.

Instead, the Schroeder government would like to maintain the IMF's bloated glory and prefers the status quo. Some, however, are calling for European alternatives to the Meltzer plan. Karsten Voigt, coordinator for German-American relations in the Foreign Ministry, this week called on Europe to pitch its own recommendations for the IMF and said that "many of the ideas of the Americans will be rubbed off or have to be rubbed off." Whatever that means, it sounds pretty ominous.

Although the White House's diplomatic skill in rejecting the Koch-Weser candidacy may have been clumsy, Germany's demands have been petulant and its status quo vision for the IMF is retrograde. American proposals for the IMF should be taken seriously. If Germany and other European countries are unable to put ego aside and support reform, they may find themselves with no IMF at all. There certainly are many economists who wouldn't lament that scenario.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide