May 25th, 2011
05:27 PM GMT
‘I have decided to present my candidacy. I did this after an agreement with the President and Prime Minister of France. I have received a number of phone calls from countries supporting my candidacy.’
It took Christine Lagarde seconds to deliver these three sentences.
In doing so, she solved a puzzle that had press and politicians occupied for days: would she run to replace disgraced compatriot Dominique Strauss-Kahn as managing director of the International Monetary Fund?
But Lagarde’s decision to throw her hat into the ring raises more questions than it answers. It has also unleashed a ‘Battle Royale’ between ‘old and new world’ superpowers for control of the institution charged with managing the global economy.
Europe and the United States have traditionally dominated the top positions at the IMF and the World Bank. France has provided 4 of the 10 past MDs at the IMF, since its founding in 1945.
However the world’s emerging markets now want more of a say.
In anticipation of Lagarde’s candidacy today, IMF representatives from the world’s BRICS countries (Brazil, Russia, India, China and South Africa) released a statement saying Europe’s stranglehold over the most senior position undermined the fund’s role.
In an open letter, the BRICS called for a leader to be chosen on merit, not on nationality.
While saying the future MD should have solid ‘political acumen,’ their choice of words was a far cry from the more opaque diplomacy we are used to hearing from such top brass.
Lagarde certainly made her move at the right time.
Today British Prime Minister David Cameron holds talks with U.S. President Barack Obama. And with the eurozone lurching back towards a crisis combined with the West’s reluctance to relinquish its control at the helm of the IMF, you can bet the topic of Strauss-Kahn’s succession will be high up on the agenda.
The subject is likely to be revisited in Deauville at the end of this week when heads of the world’s eight most industrialised nations hold their twice-yearly summit.
The bloc-otherwise known as ‘the G8’ is no stranger to France nor is it unfamiliar with the country’s new IMF candidate. France actually created the group (albeit with two fewer members) back in 1975 to respond to the oil shock. Lagarde was actually the first woman finance minister among G8 nation in 2007.
But is Lagarde the best person for the job?
Below I lay out the ‘pros’ and ‘cons’ of her candidacy, as I see them:
1) PRO: She’s Qualified:
Economists and politicians alike agree that Lagarde certainly has the credentials to run for MD. She enjoys the support of Britain’s Chancellor of the Exchequer George Osborne and the German Chancellor Angela Merkel, among others, as a preferred candidate for the post. Even Silvio Berlusconi, Italy’s charismatic Prime Minister, has backed her.
2) CON: She’s French:
However, they also concede that her nationality –being French-could work against Lagarde as much as run in her favour.
· One IMF economist told me this week: "Some have argued that a European should run the IMF because of the eurozone crisis. But others here would disagree. Perhaps a candidate from the emerging markets would be more neutral and take a stronger stance on issues such as Greece, which are very unpopular here."
3) CON: She’s Facing a Probe:
· Sophie Pedder, Paris Bureau Chief of The Economist magazine, told me that Lagarde may have to overcome a judicial review of her handling of a settlement between prominent French businessman Bernard Tapie and the state. In an interview with CNN’s Jim Bittermann in Paris today, Lagarde rebuffed such suggestions.
4) PRO: She’s a Woman:
· Emails obtained by CNN show some female employees at the IMF have called for a woman at the helm. Private economists agree.
· Jens Larsen of RBC capital markets says: ‘I certainly think a female head of the IMF could be a good thing.’ Larsen continues: ‘Internally I think it’s a good thing to have a different perspective and externally I think it would project the right image.’
5) CON: She’s a Politician:
· Economists within the IMF tell me they are concerned about an institution of such monumental importance being held hostage to candidates’ future domestic political ambitions. The question of ‘why’ Christine Lagarde wants the job will almost certainly be one of she’ll have to answer to the fund’s executive committee, when she’s summoned to Washington for interview. For the moment though it’s certainly got economists from both inside and outside the IMF guessing upon her motives.
· RBC’s Larsen says: ‘I’m really keen to see the IMF getting someone who is committed to the organization and to the IMF’s cause, which is also to provide assistance to countries that are sustainable.’
· Larsen says what really concerns him is ‘when it comes to politicians they tend to be focussed not so much on the organization and more on what they are going to do next.’
Lagarde will qualify as a candidate but whether she gets the job will depend less on what’s on her resume and rather on the political power play that her candidacy will generate.
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