The debate over who should replace International Monetary Fund chief Dominique Strauss-Kahn is intensifying now that his departure from one of the world's most powerful financial institutions is official.
In a May 18 letter released by the IMF, Mr. Strauss-Kahn, who is held at Rikers Island prison in New York on charges of sexual assault, said he wanted to devote his strength, time, and energy to proving his innocence.
"I deny with the greatest possible firmness all of the allegations that have been made against me," Strauss-Kahn wrote. He was arrested Saturday after a Manhattan hotel maid told police that he had tried to rape her earlier that day.
Strauss-Kahn is leaving the IMF at a crucial moment for European economies – Greece and Portugal are in financial straits – as well as great economic growth by Asian countries. While many potential replacements have emerged, it's also become clear that the tradition of a European leading the IMF will be challenged by emerging economies.
“Clinging desperately to the IMF top post weakens Europe,” says Thomas Benner, deputy director of the Global Public Policy Institute, a think-tank based in Berlin and Geneva. “It undermines Europe’s credibility in a world with a rapidly changing power balance. Plus, it didn’t take an Asian doctor to cure the 1997 Asian financial crisis. Why should Europe’s current crisis need a European doctor?”
China today reiterated demands made earlier in the week that “fairness, transparency, and performance” should be the decisive selection criteria. Brazilian Finance Minister Guido Mantega demanded in a letter to his counterparts in the G20 group that any new appointment be based on merit, and should represent the broad membership of the IMF.
But Europe seems to be determined to keep the post. German Chancellor Angela Merkel said today in Berlin that the EU should nominate its own candidate, and do so quickly. She declined to give names, but announced that the EU would discuss the matter with urgency.
French Finance and Economy Minister Christine Lagarde is widely seen as Europe’s best choice, even though she is currently being investigated over allegations of abuse of office. Her competence is undisputed, and in 2009 the Financial Times ranked her best finance minister in the Eurozone.
“In order to overcome the debt crisis the European countries need the IMF and they need it to play the bad cop,” says Xavier Timbeau, director of analysis at the Center for Economic Research in Paris. “The IMF is the one that tells Greece and Portugal to tighten their belts. So the EU would rather they know the bad cop well, or even better, it’s one of their own. They want to be able to trust the IMF director.”
Dutch central banker and IMF governor Nout Wellink put forward another Frenchman. He told Dutch TV that Jean-Claude Trichet, the president of the European Central Bank, “would make a fantastic candidate.” Mr. Trichet, who steps down from his ECB post in October “knows Europe very well and is totally independent,” said Mr. Wellink. “Since the IMF at the moment deals with European problems mainly it would be good to have a European at the helm.”
Critics argue that if either Ms. Lagarde or Trichet became IMF managing director, it would be the fifth time already that France occupied the post.