IMF battle over

Doug Henwood dhenwood at
Tue Mar 14 08:03:36 PST 2000

[from the World Bank's daily clipping service]


The acrimonious struggle to find a new managing director for the IMF effectively ended Monday when the US promised to back Europe's new candidate for the high profile position, reports Reuters. Ending months of bickering between Washington and Europe, White House spokesman Joe Lockhart said US President Bill Clinton would support EBRD President Horst Köhler, the new European candidate to head the global lender.

The Washington Post (p.A1) notes that US officials had earlier raised questions about Köhler, who heads a bank that lends to Eastern Europe (EBRD). But in a telephone call to German Chancellor Gerhard Schröder yesterday, President Clinton pledged US backing and suggested that Köhler come to Washington as soon as possible to meet IMF board members and try to garner support from developing countries, White House spokesman Joe Lockhart said.

In a separate report, AFP notes that Japanese Finance Minister Kiichi Miyazawa gave his backing Monday to Köhler's bid, although his ministry said Japan was still backing its own candidate, former Japanese Vice-Finance Minister for International Affairs Eisuke Sakakibara. Miyazawa said he agreed to support Köhler after speaking to German Finance Minister Hans Eichel. "[Eichel] asked me to support [Köhler] once Germany settled the matter with the US," Miyazawa is quoted as saying. "And I think Japan must cooperate with that."

Meanwhile, "I cannot comment on the minister's remark but basically Japan is not withdrawing its support for Sakakibara," said Finance Ministry spokesman Hideo Fukushima.

Earlier, EU finance ministers unanimously endorsed Köhler as the EU's candidate to head the Fund, Agence France-Presse reports. "Today's unanimous nomination by the members of the EU is a great honor," Köhler is quoted as saying in a statement. "It is a crucial step towards establishing the necessary support of the broad majority of IMF shareholders." News of the EU nomination is widely reported by the European media.

After the EU endorsement, Washington faced the choice of getting on board or moving toward a repeat of the bruising confrontation earlier this month over Germany's original candidate, the Washington Post adds (p.A1). Deputy Finance Minister Caio Koch-Weser withdrew last week after the US publicly declared it would not support him for the job.

The story notes Köhler has a solid resume in international finance, having worked closely with former German Chancellor Helmut Kohl on the adoption of the euro currency and now ruling a major international lending institution, the EBRD. US officials felt that his qualifications were in an entirely different class than Koch-Weser's.

The New York Times (p. A1), meanwhile, reports that in interviews yesterday, senior US officials who had been far from enthusiastic about Köhler last week began to speak of his strengths, describing him as an important player in the economic unification of Germany and the creation of the European Monetary Union.

The newspaper notes the rift that had opened during the selection process leaves open many questions about how the much-criticized institution will change, and about the tradition-bound method by which its leaders are chosen. It adds that White House spokesman Lockhart said Köhler "should retain the talented management team at the IMF." That was a thinly veiled code to suggest that Stanley Fischer, the No. 2 official of the Fund and the man promoted by African and Middle East nations, should remain in place, the story points out.

The Wall Street Journal (p.A25), USA Today (p.3B), Washington Times (p. B7), Los Angeles Times (p.C2), Christian Science Monitor (p. 20) also report.

Separately, in Europe, Finnish Minister of Finance Sauli Niinistö noted that Köhler was a professional banker and that his leadership experience from the EBRD, which is a major financier of projects in Russia, is a great advantage, reports Hufvudstadsbladet (Finland). "From a Finnish point of view, the fact that there is much knowledge within the IMF about Russia is very positive," Niinistö is quoted as saying after the nomination was announced yesterday.

IMF sources expect Europe to nominate Köhler formally today, and say the board could hold an informal straw poll on his candidacy later this week. If a consensus emerges in the informal vote, a final, formal vote could be held and Köhler would win the job, Reuters reports..

Commenting in the Guardian (UK, p.20), Hugo Young writes that big international vacancies offer jobs for the boys. Alas, they cannot be relied on to go to the best qualified boys. Assuming Köhler makes it, he will be seen to have survived only for grubby diplomatic reasons. It follows that the influence which Europe is supposed to be conceded by having its hands on the IMF appointment will be much diminished. So much for the brilliant diplomacy of the nation states of Europe.

The world should perhaps demand a new and fairer system to decide the leadership of the IMF if it is to remain an important multilateral institution, comments the Business Times (Singapore). There is no doubt that the IMF has played an important role in stabilizing the world financial system in the past, but there is equally no doubt that it could have done a better job in the 1997 crisis. Nobody, however, seems to want to take the blame for its policy failures. There is merely wide recognition that the institution must be overhauled.

In a 124-page report to the US Congress last week, notes the Business Times, the International Financial Institution Advisory Commission [chaired by economics professor Allan Meltzer] proposed a radical revamp of the IMF and the World Bank. Unfortunately, the report said nothing about IMF leadership. The Fund should take its cue from another global forum that the US also dominates, the piece says: at the Asia Pacific Economic Cooperation (APEC) forum, the principle of rotation is applied strictly-and successfully. Why not rotate the Fund's stewardship among the regions-the US, Europe, Asia, Latin America, and Africa-along the same lines?

There are clearly a few dark clouds on the horizon in global finance, writes former US Undersecretary of State for Economic Affairs Richard T. McCormack in a letter to the editor of the Financial Times (p.14). It would be important to get a new IMF team in place at an early moment. Köhler is qualified for this job, McCormack says.

Separately, IMF external relations director Thomas C. Dawson writes in a letter to the editor of the Wall Street Journal (p.A31) that in an era in which foreign aid to the neediest countries are declining, it is mystifying that George Melloan [in a WSJ op-ed on March 7) would fret about a multilateral effort to finance the economic foundations essential for growth and poverty reduction. Moreover, this effort produces results, Dawson notes. During 1996-98, real per-capita income grew an average 2.5 percent a year in poor countries supported by IMF lending. He concludes that the IMF has remained faithful to the purposes laid down by its founders.

More information about the lbo-talk mailing list