Fight to succeed IMF head Strauss-Kahn may pit Europe against developing nations

The fight to succeed Dominique Strauss-Kahn as head of the International Monetary Fund is shaping up as a bare-knuckled match between the developed nations that pay the agency’s bills and the developing nations that are reshaping the global economy.

In a statement on Thursday, U.S. Treasury Secretary Tim Geithner called for “an open process that that leads to a prompt succession for the Fund’s new Managing Director.” He said that in the wake of Strauss-Kahn’s resignation, acting managing director John Lipsky “will provide able and experienced leadership to the Fund at this critical time for the global economy.” Lipsky is scheduled to retire from the agency this summer.

In his first public appearance since being named acting IMF chief, Lipsky took Strauss-Kahn’s place at a conference in Washingon -- the first of two high-profile events Thursday where he is to fill in for the former IMF head.

“I deeply regret the circumstances that have made it necessary for me to substitute for Dominique Strauss-Kahn,” Lipsky said before addressing the annual meeting of the Bretton Woods Committee.

Lipsky said he expected the board to act “expeditiously” to pick a successor and that meetings would begin Thursday.

“The interregnum is going to proceed without any problem,” he said, adding that his approach is to “get up in the morning, come to the office and operate as we always do.”

He did not comment on whether competition for the top job should be opened to non-Europeans, saying that was an issue for the board to decide.

Lael Brainard, Treasury undersecretary for international affairs, said at a luncheon later at the IMF that the United States had not settled on a candidate.“We have not taken a position on any particular candidate,” she said, echoing Geithner’s statement that “it’s important that we move quickly to an open process to promptly select the next managing director.”

European officials, however, were quick to close ranks Thursday, insisting that one of their own be allowed to serve the remainder of Strauss-Kahn’s five-year term, which was to end next year. French Finance Minister Christine Lagarde is considered a top possibility.

Since World War II, the head of the IMF has been a European male, a tradition that developing economic powers such as China, India and Brazil think it is time to end.

A host of European leaders, however, said Thursday that they were hunting for a consensus candidate among themselves. As a bloc, the European nations hold about a third of the votes within the IMF.

“I think that in the current situation, in which we have significant problems with the euro and the IMF is strongly involved in this, there is something to be said for it being possible to put up a European candidate and to canvass for that in the international community,” German Chancellor Angela Merkel said in Berlin.

She said the developing nations had a “legitimate claim” to hold the position, but in the “medium term.” Europe is involved in sensitive negotiations to resolve a series of government debt and other economic problems, and European officials argue that someone with strong political credentials within the European Union — like Strauss-Kahn had — should at least complete Strauss-Kahn’s term.

The French economist and politician resigned late Wednesday after being charged with sexual assault for allegedly attacking a maid in a New York hotel on Saturday.

There is a long list of possible contenders for the job. Officials from developing economies, as well as a number of outside analysts, have begun to argue that there is no reason someone such as Lagarde or former British prime minister Gordon Brown should have an automatic advantage over Singapore Finance Minister Tharman Shanmugaratnam, former Turkish finance minister and current Brookings Institution scholar Kemal Dervis, or former South African finance minister Trevor Manuel.

Organizations including the Group of 20 top economic powers, which includes the United States and major European nations, have endorsed an open competition for both the top IMF job and the post of World Bank president, which by tradition has been an American appointment. An array of advocacy groups and outside analysts that track global financial institutions argue that it is time to recognize the growing clout — and local economic talent — of the major developing nations.

“There has been a clear understanding repeated in communique after communique that the time has come to change past practice” that allowed Europe to nominate a candidate that the other nations accepted, said Amar Bhattacharya, director of the Group of 24, an organization based inside the IMF that coordinates policy among developing nations. “There are very, very strong, able candidates from the developing world.”

Strauss-Kahn focused during his four years in office on building the IMF’s credibility among developing nations, which had come to regard it as too strict in the conditions it applied to countries that needed its help during economic troubles in Asia and Latin America.

IMF watchers say his work toward that end could easily come undone if those countries are now told they cannot offer candidates to replace Strauss-Kahn — particularly in the wake of a world financial crisis that emanated from the United States and Europe.

As a practical matter, however, changing the tenor of the selection process will require help from the Obama administration.

The United States contributes the most to the IMF’s operations and holds about 16 percent of the voting rights on its 24-member executive board, which chooses the managing director.

While the IMF tries to operate by consensus — and would hope mightily to do so in this case, given the difficult circumstances around Strauss-Kahn’s departure — the U.S. voice is always influential and in this case could be decisive. Its voting power and influence would probably be enough to put either a European candidate, or a consensus nominee from the major emerging markets, into the job.

The administration has not said what it intends to do.

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