CNN - Job of the week: "one managing director required to run the world's biggest 'lender of last resort'. The successful candidate will be an experienced policymaker with excellent diplomacy skills. Those with a 'colorful' personal life though need not apply."
You can just imagine officials at the International Monetary Fund scrambling to put the final touches to its latest job spec following the resignation of their managing director last night.
Dominique Strauss-Kahn's decision to step down to fight allegations of sexual assault has got the world's highest-profile power-brokers quickly dusting off their resumes. His departure has also sent economists into a frenzy with many drafting their own lists of who might make cut.
The reality is that we may not know for several days or even weeks who will take control of the fund's $750 billion lending capacity and its 2,500 staff. This is because the appointment of a new MD is both political and economic.
The decisions on who gets nominated and eventually chosen occur behind closed doors, first at a country level and then on an international stage.
In fact, the opaque nature of the selection process, combined with emerging markets calls for more of a say, means the IMF has now agreed to increase its transparency about how its next MD will be chosen.
In the meantime though, this is broadly speaking how it worked the last time, when Strauss-Kahn himself became MD in 2007:
The Europeans are in a tricky position. They desperately want to keep the top job at the IMF, but they can’t be seen to be nakedly saying “it’s ours by right.”
So leaders from European Commission President Jose Manuel Barroso to finance ministers from Austria, Sweden and Denmark, (in fact just about anyone from Europe who has opened their mouth on the subject), are turning linguistic cartwheels to promote a European solution.
But while no one could have predicted the drama that was about to unfold in New York last weekend, economists, at least, began addressing the topic of Strauss-Kahn's succession months ago.
Several names have been touted as potential candidates to succeed Strauss-Kahn, 62, and his deputy, John Lipsky, who has already said he will step down in August.
As you'd expect, many of the favorites come from the world's emerging markets which want more of a say in the boardroom, in accordance with their rising economic clout.
Mind you, experts say it's unlikely the West will cede too much control, especially given ongoing concerns about the solvency of certain Eurozone members.
"The key global posts at the IMF and World Bank will still be carved up as privileges for the United States and the Eurozone," says Rachel Ziemba, a senior analyst at Roubini Global Economics in London.
"If that’s the case, keeping the institutions' legitimacy will remain suspect in the mind of the emerging market countries. They could insist Eurozone countries stick to their deficits and other criteria more stringently," she says.
Here's a snapshot of some of the potential successors the market is putting its money on for the top job.
Brussels, Belgium (CNN) – The arrest in New York of Dominique Strauss-Kahn, head of the International Monetary Fund, raises a number of questions across the Atlantic where the organization has been a leading player in the European bailout packages.
One man may not make an organization, but the timing of his arrest on alleged sexual assault charges could not have been worse. European Finance ministers begin two days of meetings late Monday to sign off on a bailout package for Portugal, consider offering Ireland a lower interest rate for its rescue plan and evaluate whether Greece warrants emergency funding.
Strauss-Kahn is expected to make his first court appearance to be arraigned on the charges Monday. The IMF chief's attorney, Benjamin Brafman, vowed to vigorously defend him in court, insisting his client is innocent.
Police have said Strauss-Kahn sexually assaulted the 32-year-old woman Saturday at the Sofitel hotel in Manhattan, then quickly headed off to a New York airport to board a Paris-bound flight.
As ministers sit down in Brussels, auditors from the IMF and the co-lead organization, the European Central Bank, continue their work in Athens on Greek progress in reducing their budget deficit and collecting taxes. IMF officials noted last week that early indications are not promising in Greece – all the more reason the arrest of the organization’s leader can serve as a major distraction.
If you’re looking for a scary summer read, here’s a suggestion: “The World Economic and Financial Surveys Fiscal Monitor” by the International Monetary Fund.
Sure, it’s not Stephen King, but in reading through the IMF’s look at growing public debt and extrapolate the ramifications, you’ll find a chilling tale.
To set the scene: Right now, in the G7 nations, the government debt-to-GDP ratio (essentially how much they owe versus how much they make) is rising “to levels exceeding those prevailing in the aftermath of the Second World War.”
The report suggests that the wave of austerity sweeping the eurozone due to public debt is a mere skirmish compared to the three economies where public debt is truly the largest offenders: The U.S., Japan and the UK.
By 2015, the report estimates the collective debt level of the U.S., Japan and most of Western Europe will hit 110 percent of GDP, compared to 73 percent in 2007.
“Events in Europe are providing the clearest demonstration of the increased attention being paid by markets to differences in underlying fiscal conditions across countries,” the report says. Translation: Just as investors turned sour on Greek bonds, they may turn on bonds from the U.S., Japan and other large economies that are sinking further in the red.
A dystopia as a result of public debt has already turned into popular fiction in Japan. The comic book series “Salary Man, Kintaro,” paints a world where Japan’s debt bomb explodes, swallowing the nation in red in the wake of a worldwide sell-off of Japan’s national bonds, CNN’s Kyung Lah reports.
Japan’s top leaders fear that fiction could turn to fact. New Prime Minister Naota Kan now is talking tough about reducing its public debt – which is the among developed nations – to avoid a similar crisis that Greece faced, saying Japan risks financial collapse if public debt mounts as confidence in the bond market drops.
The IMF report shows the amount of fiscal tightening needed to bring countries’ government debts below 60 percent of gross domestic product by 2030. The report is thick with graphs, appendices and a glossary, but its take-away seems clear: Developed economies need to cut spending, raise taxes and reduce medical benefits for their aging populations.
Yikes. How’s that for a popular platform to woo voters? But unless politicians and their public embrace austerity, the IMF report suggests that greater battles lie ahead than the credit implosion of the Great Recession.
Berlin, Germany - Opinion polls in Germany show most people there don’t want their country to give bailout money to Greece. But people we spoke to in Berlin seemed to have a more realistic view.
Did think she Germany should help Greece, I asked a young woman. "No," was her short and forceful answer.
Did she think her government would help Greece, I then asked. "Yes," she said just as forcefully.
When asked why, she simply said: "Because we have to."
That seems to be the feeling among many Germans. They don’t want their government to back billions of dollars in loans to Greece, but they know there is no other choice.
German Chancellor Angela Merkel should find some comfort in opinions like the one above. With an important May 9election scheduled in Germany's most populated state, Northrhein-Westfalia, political rivals and other observers have accused Merkel of trying to sit it out and postpone a decision on the Greek aid package until after the vote.
Merkel herself denies this. And if it was her intention to wait it out, it backfired, bringing her even more criticism both in Germany and abroad.
"Aid to Greece cannot be automatic," Merkel said shortly after Athens announced it had asked the EU and the IMF to set its bailout in motion last week. Some experts believe the perceived reluctance of the German government further weakened Greece and also possibly affected the credit ratings of Spain and Portugal, both of which were downgraded by the agency Standard and Poor's.
The situation became so dramatic that the head of the International Monetary Fund, Dominique Strauss-Kahn, visited Berlin last Wednesday to urge Merkel and her government to get a move on.
"We must understand that time is of the essence," Strauss-Kahn said, and noted that the stability of the entire euro zone was in jeopardy.
Meanwhile, the opposition Social Democrats and Green party accused the Merkel government of dragging its feet and putting short term political concerns ahead of Europe’s and Germany’s fundamental interest of keeping the euro alive and stable.
Looking at the situation now it appears as though Merkel’s gamble didn’t pay off. Polls in Northrhein-Westfalia point to massive losses of the governing coalition of Merkel’s Christian Democrats and the Liberal Democratic party, although some believe there are other reasons as well, as the Christian Democratic governor of the state faces allegations of campaign finance irregularities.
In a press conference in Berlin on Monday, Merkel justified her government's handling of the situation, saying that, "giving Greece a blank check," would have made the situation even worse.
In the end the voters will judge her handling of the crisis, possibly as early as May 9.
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