Europe should be celebrating the continuation of its leadership at the International Monetary Fund (IMF). Instead, the race to find a new European head has become another divisive issue, thanks to the efforts of France and Germany to dominate.
Horst Koehler resigned as IMF chief on March 4 to run for the German presidency. This has led to a global debate as to whether the status quo, by which an American heads up the World Bank and a European the IMF, should continue. Although this debate also raged three years ago, when Mr. Koehler, a German, was appointed, it is a foregone conclusion that another European will head up the fund again. Fortunately, this time there appears to be an agreement that when the next IMF head steps down, the European monopoly over leadership will end.
Despite that agreement, much of the poor and developing world is bitter about having another European at the IMF helm. Given this sensitivity, some European countries came up with a sound compromise: a Spaniard could head the IMF. Given Spanish investors’ extensive investments in Latin America, awarding the post to a Spaniard implies clout for the developing world. Rodrigo Rato, Spain’s outgoing finance minister, has the support of 17 Latin American countries, led by Brazil and Mexico.
Unsurprisingly, France and Germany do not accept this. Now that a German is on his way out at the IMF, France regards the post as its entitlement and is backing its own candidate: Jean Lemierre, head of the European Bank of Reconstruction and Development. Germany has publicly backed Mr. Lemierre. The only apparent beneficiaries of having a French candidate would be France and Germany. The Guardian reported Thursday that Germany agreed to back Mr. Lemierre in exchange for France’s support for a German head of the most powerful economics post in the new European Union (EU) commission.
This backroom maneuvering is especially troubling given that France and Germany are already poised to hold greater sway at EU policy-making institutions. European nations are aggravated not only with the dimensions of French and German power, but also with how it is used. Berlin and Paris have decided, for example, that they need not comply with EU fiscal requirements outlined in the Stability Pact (which was crafted by Germany), but that those requirements must still apply to other European countries. It’s difficult to imagine how European unity can be maintained if Berlin and Paris are intent on dominating every European fiefdom.
Giving the IMF post to Mr. Lemierre would alienate poor and developing countries and damage the fund’s already bruised credibility. Fortunately, the Spanish candidate, Mr. Rato, was given a significant boost this week by the brokering efforts of Gordon Brown, chair of the international monetary and financial committee. Mr. Rato is likely to win the IMF post.
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