fight over IMF head

Doug Henwood dhenwood at
Mon Jan 17 13:36:53 PST 2000

Financial Times - January 17, 2000

Frontrunner for IMF job faces opposition Koch-Weser is the favourite, though only Berlin wants him, reports Ed Crooks. But a long struggle for succession could be worse

The race to succeed Michel Camdessus as managing director of the International Monetary Fund is a curious contest. Promising contenders are being kept out of it, and the current favourite, according to almost everyone but his backers, is unfit.

Caio Koch-Weser, a German finance ministry official who has spent 25 years with the World Bank, is the frontrunner, but he faces powerful opposition. Feelings about him in all the G7 capitals except Berlin range from grudging acceptance to hostility.

The issue will be discussed at the Group of Seven industrialised nations finance ministers' meeting in Tokyo next weekend, but will not be resolved there.

The danger is that the IMF could see a long and damaging struggle for succession, as the World Trade Organisation experienced last year.

Governments and analysts argue that the IMF's failure to prevent the financial crises in Asia and Russia shows it urgently needs reform, which cannot be achieved without strong leadership.

The German government has stepped up a gear in its support for Mr Koch-Weser. Chancellor Gerhard Schröder is writing to all 24 of the IMF's executive directors. Today in Berlin 40 foreign ambassadors will be briefed by Mr Schröder's chief foreign policy adviser.

But on Friday night Larry Summers, US Treasury secretary, dropped heavy hints that he would not support the German campaign. The new head of the IMF must have "stature, expertise, ability to command global support and commitment to a process of ongoing reform", he said.

Mr Summers has said he wants an IMF that is much more focused on crisis prevention and resolution, and much less involved in long-term lending for development - a role that does not suit Mr Koch-Weser's experience. Washington also doubts that Mr Koch-Weser possesses the necessary intellect and negotiating skills to handle complex negotiations with governments in financial crisis.

The IMF post has traditionally been a European fiefdom, and if Europe were to agree on a candidate, the US would find it hard to resist. Europe, however, is deeply divided.

The French are now backing Laurent Fabius, former prime minister, as an alternative. He is unlikely to win much backing: his premiership was overshadowed by a scandal over contaminated blood, and few other countries want another French MD, especially not one seen as an old-style socialist.

It is a measure of how strongly the French feel about Mr Koch-Weser, though, that they would even prefer to see a Briton appointed.

Andrew Crockett, head of the Bank for International Settlements in Basle, has a high reputation in London. His problem is that the UK government is refusing to back him, partly because it does not want another row with a fellow EU member.

Italy has a similar problem with the director of its Treasury, Mario Draghi. The Italians are seen as having their share of top jobs since Romano Prodi became European Commission president.

Non-European alternatives look even less convincing. Jacob Frenkel, former Bank of Israel governor, is admired in the US but would be a controversial choice.

It looks as though Stanley Fischer, the first deputy MD, may end up running the IMF for some time after Mr Camdessus departs next month. He might even get the job.

But having made such a public show of support, it would be hugely embarrassing for Mr Schröder to see Caio Koch-Weser fail.

If deals are cut, he could still be successful. The UK might be offered a compromise on EU withholding tax. Jean-Claude Trichet, Bank of France governor and another IMF possible), could take over at the European Central Bank earlier than expected.

But the IMF seems now to be faced with two unappealing alternatives: a painful, protracted battle for succession, or accepting by default a candidate whom almost nobody really wants.

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