Carstens, Lagarde battle over IMF job

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The pullout of two dark-horse candidates left France’s Christine Lagarde and Mexico’s Agustin Carstens the only apparent competitors to head the IMF as nominations closed at midnight on Friday.

Now the International Monetary Fund’s executive board faces a difficult political, rather than merit-based, decision when it meets on Monday to begin hashing out who will become managing director of the world’s crisis lender.

In Lagarde, France’s finance minister, board members would have someone intimately up to speed on Europe’s crisis du jour, the crumbling Greek rescue, as well as a leader in the much-needed reform of the global financial system.

In Carstens, Mexico’s Central Bank chief, they would have someone who has already served three years as the IMF’s number three and who could satisfy developing country calls to break the Europeans’ 65-year lockhold on the job.

The pullout of two other potential candidates — Grigory Marchenko of Kazakhstan and Trevor Manuel of South Africa — underscored the widespread belief that Europe already has a done deal.

“It’s more or less obvious that Christine Lagarde is going to be elected,” Marchenko, the Kazakh Central Bank chief, told CNN.

“Quite a few people do have credentials. But again, it's not about a fair competition, it’s about politics. And I think there, a political decision has been taken already.”

Manuel, South Africa’s planning minister, praised Lagarde as “very competent” but criticised Europe’s presumption of owning the post.

“A lot more should have been done to persuade Europeans that this birthright is not a birthright that should find a resonance in an institution as important as the International Monetary Fund,” he said.

Neither candidate was acting as if it was settled: Lagarde went to Lisbon to woo members of the African Development Bank, while Carstens was in New Delhi pitching for support.

The job opened unexpectedly after Frenchman Dominique Strauss-Kahn resigned on May 18 to fight sexual assault charges in New York.

The 24-member executive board, representing all the IMF’s members, has targeted the end of June to reach a consensus on one of the candidates, the way it has decided in the past.

But that process has brought harsh criticism of non-transparency and backroom deals that always favors the Europeans — with IMF power Washington getting one of its own to head the World Bank in a longstanding trans-Atlantic quid pro quo.

Europe has come out in force for Lagarde, as it struggles to keep the IMF-led bailouts of Greece, Ireland and Portgual on the rails.

The United States and Japan, the IMF's other power brokers, remain publicly uncommitted.

Carstens has meanwhile strained to gather endorsements, even in Latin America. An emerging economy bloc has not coalesced.

“At this stage, they don’t care enough about this position. To expend the political capital to want to change the status quo,” explained Arvind Subramanian of the Peterson Institute for International Economics.

Former Western Hemisphere director at the IMF Claudio Loser said “the Europeans have a unified vision, while the emerging countries still have a nationalist vision.”

Both candidates have wooed Brazil, Russia, India and China — the so-called BRICs — which could expand their shareholding in the Fund under the next director.

After starting in Brazil, Lagarde was in Beijing and then New Delhi this week. Carstens also launched his campaign in Brazil, and was disappointed when he failed to get the endorsement of a fellow Latin American power.

After New Delhi, he was to land in Washington on Monday before heading to Beijing.

The BRICs haven't tipped their hands, but “in private they have already conceded that they are mostly likely to back Lagarde,” said Brookings Institution analyst Domenico Lombardi.

They see her “as an important backstop to the European crisis,” he added.

Despite its strength, Lagarde’s candidacy is clouded by a pending investigation in France into her alleged abuse of authority, in a multi-million-euro business dispute.

The court will not rule on whether the investigation would go ahead until June 9, after the IMF executive board is to make its decision.

Lagarde has repeatedly denied any wrongdoing.