York on sex crime charges, the prevailing view in the markets and in
policymaking circles is that it’s only a matter of time before he quits
himself or is forced out by the IMF board.
Even before his arrest
Sunday, Strauss-Kahn was widely expected to resign from the IMF later
this year to pursue the French presidency in 2012.
A number of
names were touted as potential candidates but the final choice will
largely hinge on whether the U.S. and the European Union continue their
arrangement of splitting the jobs of the two Washington D.C.-based
sister organizations — the International Monetary Fund and the World
Bank. The IMF focuses on stability in the international financial
system, while the World Bank funds projects in developing countries.
World War II, a European has headed the IMF while the U.S. has grabbed
the top job at the World Bank. This arrangement might be in peril as
developing nations such as China and Brazil become more potent forces in
the world economy.
Simon Johnson, a professor at MIT’s Sloan
School of Management and a former IMF chief economist, said there’s no
guarantee the U.S. will continue to want the World Bank leadership, and
may back the nomination of an official from a big developing nation such
as China. That would raise questions about Europe’s claim to the IMF
“A brilliant move on behalf of the Americans would be
to get China more involved in the development process,” Johnson said.
“The Europeans need to line their ducks up; they want this more than
European leaders would blanche at the thought of giving up
their traditional claim to nominate the IMF chief, as one of the IMF’s
main jobs now is to help solve Europe’s debt crisis. Strauss-Kahn,
France’s finance minister when the euro currency was created in 1999,
has been viewed favorably for his leadership in handling the 17-nation
Possible Europeans touted at the moment to
lead the IMF include French Finance Minister Christine Lagarde, the
former head of the German central bank Axel Weber, the head of Europe’s
bailout fund Klaus Regling, and Peer Steinbrueck, a former German
finance minister. Marek Belka, the head of Poland’s central bank who
also worked as the director of the IMF’s Europe sector, took himself out
of the running Tuesday.
“They need a heavyweight and they need a
European heavyweight,” said Jan Randolph, head of sovereign risk
analysis at IHS Global Insight.
If Europe agrees to let someone
outside the continent take the IMF helm, the list of candidates could
include Turkey’s former finance minister Kemal Dervis or Singapore’s
finance chief Tharman Shanmugaratnam.
Others tipped include Trevor
Manuel, South Africa’s former finance minister, Mexico’s central bank
governor Agustin Carstens, former Brazilian central bank president
Arminio Fraga and China’s Min Zhu, a special adviser to Strauss-Kahn.
Chancellor Angela Merkel on Monday sought to dampen speculation that
the next leader of the IMF should come from the developing world.
think that, in the current phase, in which we have a lot of discussions
connected to the euro, there are good reasons for Europe also to have
good candidates available,” Merkel said.
Analysts say Merkel’s
comments suggest Europe will try to get a European at the head of the
IMF one more time before possibly handing the next term to someone from a
Although Strauss-Kahn has not said anything
about his future at the IMF, experts say it’s a matter of time before he
leaves. He was denied bail and is currently in a New
York prison following his weekend arrest for allegedly attempting to
rape a maid in a Manhattan hotel. He is due to appear next in court on
Austria’s finance minister Maria Fekter was the first to
suggest that Strauss-Kahn should resign as uncertainty over his future
might damage the fund at a crucial time.
situation, that bail was denied, he has to figure out for himself, that
he is hurting the institution,” Maria Fekter told journalists Tuesday as
she arrived at a meeting of European finance ministers in Brussels.
IMF has said it’s business as usual despite the arrest and installed a
deputy to lead while Strauss-Kahn is indisposed. But Europe’s debt
crisis is showing few signs of abating and Greece, in particular, is
widely tipped to need more international aid.
should recognise that while they’re still the biggest shareholders (in
the IMF), they are also the biggest debtors now so they no longer have
an automatic right to nominate that person,” said Daneil Gros, a
director at the Centre for European Policy Studies.