The head of the International Monetary Fund’s European department stepped down less than a year into the job and was replaced by a veteran staffer in the midst of the worsening European debt crisis.
Antonio Borges, a native of Portugal whose unit oversees bailouts in the euro region, resigned for “personal reasons,” the Washington-based IMF said Wednesday in an e-mailed statement. His successor is Reza Moghadam, who has made his career at the fund and headed the strategy department.
The management change comes as the IMF, which is co-financing bailouts in Greece, Portugal and Ireland, is preparing to send a team to Italy for an unprecedented audit of the country’s efforts to cut its debt. Borges, a former vice chairman at Goldman Sachs International, last month retracted comments he made about the fund’s possible involvement in the European bond market. He could not immediately be reached for comment Wednesday.
“He has been a person who has been perhaps not particularly careful about his message discipline” at a time of “acute sensitivity for the IMF,” said Jacob Funk Kirkegaard, research fellow at the Peterson Institute for International Economics in Washington. By contrast, he said, Moghadam “is an in-house guy — he’s been there for a very long time and he’s clearly someone who knows the ins and outs of the IMF.”
The European department has been in the spotlight as the Washington-based agency lends to a dozen countries from Romania to Portugal on the continent. The IMF is set to also co-fund a second loan program to Greece, just as European officials seek to pull together as much money as they can to show investors they can stamp out the region’s worsening turmoil.
Borges “has led the European Department during an extremely difficult period for the region’s euro-zone members,” IMF Managing Director Christine Lagarde said in a statement.
In an e-mail sent to the IMF staff, she said that “in the present circumstances in Europe, I consider that we cannot afford a long interregnum in the European Department.” She called Moghadam “the ideal person to succeed Antonio.”
As the head of the strategy, policy and review department, Moghadam has been involved in all areas of the fund’s activities, from creating new lending instruments to making sure yearly assessments of countries’ economies are consistent with IMF guidelines. He was also a mission chief to Turkey and has worked in the Asia-Pacific department.
“He’s a heavyweight,” said Edwin M. Truman, a former assistant Treasury secretary who’s now a senior fellow with the Peterson Institute. The strategy department “on policy matters is the most powerful department,” he added.
Borges strayed from the IMF line when he told reporters in Brussels on Oct. 5 that it was “hypothetically possible” for the fund to intervene in bond markets to restore confidence in Spain and Italy. He retreated from those comments later that day.
“Let me be clear about some earlier comments I made,” he said. The IMF “can only lend its resources to countries, and cannot use these resources to intervene in bond markets directly.”
Borges joined the fund in November 2010 after overseeing a group in Europe that set standards for the hedge-fund industry, the London-based Hedge Fund Standards Board.
He was with Goldman Sachs 2000 to 2008 and served as a professor of economics and dean of Insead Business School in Fontainebleau, France, from 1993 to 2000 and as a deputy governor of the Banco de Portugal from 1990 to 1993. He received a doctorate in economics from Stanford University.
His quick replacement “shows why the IMF is a good crisis manager,” and it is “testament to the institutional strength of the IMF,” Kirkegaard said.