IMF Doesn’t Need a European to Solve Crisis, Carstens Says
May 24, 2011, 7:53 PM EDTBy Jonathan Roeder and Margaret Brennan
(Updates with Brazil stance in tenth paragraph, BRIC statement in 16th paragraph.)
May 24 (Bloomberg) -- Mexico’s Agustin Carstens, governor of the country’s central bank and a candidate to head the International Monetary Fund, said a European doesn’t need to lead the Washington-based lender to help it resolve a debt crisis in the euro zone.
Carstens, in an interview, said it was too early to say which countries will back his nomination, though he “has a chance” of winning the race to succeed Dominique Strauss-Kahn if the selection process is conducted in a transparent way that takes into account each candidate’s merits.
“I have heard expressions of sympathy, but most countries in a responsible way are waiting to see who all the candidates are,” Carstens, a former deputy managing director of the IMF, said today from Mexico City in an interview on Bloomberg Television’s “InBusiness” with Margaret Brennan.
Mexico’s nomination of Carstens provides developing nations an experienced candidate they can rally around as they seek to end Europe’s 65-year hold on the job. Still, it may not be enough to overtake French Finance Minister Christine Lagarde, who emerged as the frontrunner after Germany, Italy and Sweden expressed support for her candidacy and a French government spokesman said China is also “favorable” to her bid.
Carstens said he’s aware of press reports that China has thrown its support behind Lagarde, though he hasn’t discussed the IMF position with policy makers from the Asian nation. He said he’s discussed his candidacy with U.S. officials.
Next Crisis
“I don’t see why,” Carstens said, “to contribute to solving the crisis in Europe, a European has to be the managing director.” The fund can help Greece, Portugal and Ireland make “tough decisions” about their debt, though the next managing director will have to focus on economic concerns beyond Europe, he said.
“Right now the crisis is in Europe, but we don’t know where the next crisis will be,” said Carstens, who oversaw 80 countries while IMF deputy managing director from 2003 to 2006.
French government spokesman Francois Baroin, in an interview with Europe1 radio, said China is “favorable” on the prospect of Lagarde leading the IMF. Baroin is also France’s budget minister, working alongside Lagarde.
China hasn’t publicly commented on any candidacy for the IMF job. Spokespeople for the Foreign and Finance Ministries didn’t respond to faxed requests for comment yesterday. Foreign Ministry spokeswoman Jiang Yu told reporters in Beijing May 19 that the IMF’s management should be chosen on the basis of “impartiality” and “merit.”
Brazil Support
Brazil will privately support Lagarde to head the IMF, according to a Brazilian government official who requested anonymity because he isn’t authorized to speak publicly on the issue. In exchange for private support, Brazil will push for Lagarde to run the IMF only until the end of next year, when Strauss-Kahn’s term would have expired, the official said.
Strauss-Kahn resigned as managing director of the IMF to defend himself against criminal charges including attempted rape. The institution said this week it aims to select his successor by June 30. France has supplied four of the 10 IMF chiefs so far, including three of the past five.
The U.S., whose 17 percent share of the IMF board’s votes make it the “swing vote” in the leadership race, can provide a critical boost to Carstens by declaring support for his bid, said Simon Johnson, an IMF chief economist from 2001 to 2008.
Emerging Markets
“Having a European run the IMF at a time like this makes no sense,” said Johnson in a phone interview from Washington, where he’s a senior fellow at the Peterson Institute for International Economics. “The IMF is going to be called upon to commit a lot of its resources to help Europe. You need to have somebody who has some critical distance from the crazy schemes that the Europeans have gotten themselves into.”
Carstens’ bid has yet to win endorsements from any other nation, even as Thailand and the Philippines backed Singapore’s Finance Minister Tharman Shanmugaratnam for the job. Russia and South Africa are supporting policy makers from their own parts of the world.
Peruvian central bank President Julio Velarde said today he was open to supporting a candidate from Latin America and spoke with Carstens about his bid, though hadn’t yet committed to supporting it.
Brazil, Russia, India and China, known as the BRIC countries, are holding consultations on finding a candidate, Arkady Dvorkovich, Russian President Dmitry Medvedev’s economic aide, said today. Leaders from the Group of Eight nations won’t discuss the matter at their meeting this week though informal consultations may be held, he told reporters.
‘Growing Role’
The IMF needs reform to reflect “the growing role of developing countries in the world economy,” according to a statement today from executive directors representing the BRIC nations. Choosing a head based on nationality undermines the IMF’s legitimacy, the directors said.
John Lipsky, the IMF’s acting managing director, said yesterday that Lagarde would make an “excellent” head.
Carstens, who has a doctorate in economics from the University of Chicago and is a Chicago Cubs fan, led Mexico’s response to the global financial crisis as finance minister.
In 2009, Mexico was the first nation to request a flexible credit line from the IMF, a mechanism to help support economies pursuing strong macroeconomic policies. The IMF renewed and boosted the facility to $72 billion in January.
--With assistance from Jose Enrique Arrioja and Carlos M. Rodriguez in Mexico City. Editors: Joshua Goodman, Harry Maurer
To contact the reporters on this story: Jonathan Roeder in Mexico City at jroeder@bloomberg.net; Margaret Brennan in New York at mbrennan25@bloomberg.net
To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net
