EU finance ministers deadlocked on next head of the IMF
EU finance ministers led by France’s Bruno Le Maire began voting Friday to choose the next head of the IMF, but memories of austerity have re-opened a north-south divide — and some are asking why Europe should get the job at all.
It’s one of the top jobs in the world economy and it always goes to a European. This time, however, EU nations are having trouble agreeing on a candidate to replace International Monetary Fund (IMF) chief Christine Lagarde, who will soon leave the Washington-based organisation to head up the European Central Bank (ECB).
Since no compromise candidate has been forthcoming, France pushed for putting the decision to a vote. Any candidate who garners 55 percent of votes from the 28 EU finance ministers – and representing at least 65 percent of the EU population – will win the post.
French Finance Minister Bruno Le Maire launched a first round of voting to select Lagarde’s replacement on Friday, but his principal task will be to break the deadlock.
By longstanding agreement, Europe chooses the head of the IMF while the United States picks the leader of the World Bank. This arrangement, which is a tradition rather than a formal rule, has recently come under fire from countries who remain locked out of the process.
Moreover, despite EU states having their collective hand on the tiller, a north-south divide has opened up, echoing divides seen in the EU at least since the 2008 euro crisis.
Economist George Magnus, noted for predicting the 2008 crisis, says the horse trading between the European states results, at least in part, from the absence of an obvious choice.
“There’s a paucity of shoo-ins,” he told FRANCE 24.
“Normally you expect one or two candidates to be met with, ‘Why wouldn’t we give the job to him or her?’,” he said.
Eyebrows were also raised when former finance minister Lagarde took up the post because the French politician trained as a lawyer and had no banking experience.
“You still have to prove you’ve done something that gives you relevant experience, such as running a finance ministry,” said British economist Vicky Pryce, the former head of the UK’s Government Economic Service.
Portuguese Finance Minister Mario Centeno and his Spanish counterpart, Nadia Calvino, dropped out on Friday as voting began. Britain declined to put anyone forward.
Three candidates remain in the running: Jeroen Dijsselbloem, the Dutch former head of eurozone finance ministers; Finnish Central Bank Governor Olli Rehn; and Bulgaria's Kristalina Georgieva, currently chief executive of the World Bank.
Dijsselbloem is particularly controversial and is seen as a representative of the northern side of the divide that became even more apparent after Greece, Ireland and Portugal were bailed out by the so-called troika of the EU, the European Central Bank and the IMF.
Dijsselbloem, an economist and former Labour Party economy minister in the Netherlands, is a particularly controversial figure.
"I can't spend all my money on drinks and women and then ask for help," he said in 2017, in an interview with the German newspaper the Frankfurter Allgemeine Zeitung.
Dijsselbloem’s remarks were criticised not only by his centre-left comrades but also by conservatives: Manfred Weber, the head of the centre-right European People’s Party, took to Twitter to chastise Dijsselbloem, writing: “[The] Eurozone is about responsibility, solidarity but also respect. No room for stereotypes.”
The IMF has long been seen as the handmaiden of globalisation, economic liberalism and harsh austerity measures. This reputation was cemented with the Argentine financial crisis of the late 1990s, when it refused to accept discounts on repayments of the country’s debt.
However, the organisation has not always taken such a strident view. In 2012, in contrast to the EU institutions, it favoured debt restructuring for struggling Ireland.
Georgieva, the current No. 2 at the World Bank, is considered something of a compromise candidate; she is also thought to be the French choice. But at the age of 65 she would be breaking new ground: Current IMF rules require retirement at 65, so if she is appointed a rule change will be needed.
Lagarde’s 2011 appointment broke the glass ceiling, but a French court subsequently found her guilty of negligence for approving a payout of taxpayer money to French tycoon Bernard Tapie while she was France’s finance chief.
Her predecessor, Dominique Strauss-Kahn, was at the centre of a whirlwind of sexual misconduct allegations that resulted in trials in both the United States and France. Despite being acquitted, lurid details of his sex life were splashed across the pages of the international press.
For Magnus, the truly controversial issue is why Europe should still control the IMF at all.
“In a way it’s the more interesting question,” he said.
“It puts the [question of the] list of candidates under a shadow. The question in 2019 is, ‘What is the IMF and what should its role be?’,” he said.
“Does the deal where Europe gets the [IMF] job and the US gets the World Bank need to be rethought? The answer is, ‘Yes, it does’.”