Issue 161 - August 08 - Christine Lagarde appointed IMF Managing Director
New York, 08 August 2011
On June 26, the executive board of the International Monetary Fund (IMF) named Christine Lagarde as its next managing director, ending the selection process that began in May. Ms. Lagarde is the eleventh head of the IMF and the first woman to occupy the position. In her acceptance of the position, she expressed her determination to ensure the IMF was “relevant, responsive, effective and legitimate.” She replaces Dominique Strauss-Kahn, who resigned in May 2011 after being indicted on sexual assault charges.
The Position/Election Process
The IMF Managing Director heads the organization’s operating staff and serves as Chairman of the Executive Board. S/he is assisted by three Deputy Managing Directors. The position represents one of the most powerful positions in world finance, serving 187 member countries throughout the world. It is particularly crucial in the current state of global markets, as the IMF must manage tumultuous regional markets, deal with worsening financial crises in Europe, and reform the financial system.
The five-week selection process for managing director ends when the twenty-four countries of the board vote on the appointment of a candidate. While there is no mention of the director's nationality in the IMF Articles of Agreement, the U.S. and Europe have consistently held the top positions at the World Bank and IMF, respectively, since their creation at the Bretton Woods conference in 1944.
The two candidates, Ms. Lagarde and Mexico’s central banker Mr. Agustin Carstens, each met with the board to present their candidacies. Ultimately, Ms. Lagarde received a substantial majority of support and was appointed by consensus. Mr. Carstens received public support from only three countries.
Ms. Lagarde graduated from the Institute of Political Studies and the law school of Paris West University Nanterre La Défense. Until her appointment, Ms. Lagarde had been the French Minister of Finance since 2007. Formerly, she worked at international law firm Baker & McKenzie, where she was elected chairman in 1999. She served as chairman until 2005, when she was appointed as France’s Minister for Foreign Trade.
Ms. Lagarde quickly received the unified support of Europe. Whether through public announcement or comments made behind closed doors, numerous Asian countries also expressed support for her candidacy. After a vigorous lobbying campaign, she successfully gained endorsements from developed and emerging economies alike. The support of Europe, China, Brazil, Russia, and the U.S. were particularly influential in her eventual selection.
Analysts have consistently applauded Ms. Lagarde’s ability as a manager and diplomat. At Baker & McKenzie, she earned a reputation as a “sharp negotiator with endless stamina,” and as French Minister of Finance, she was praised as “one of Sarkozy’s most competent and charismatic ministers.” At the same time, commentators have expressed reservations about her lack of formal training in economics. Nonetheless, the media has acknowledged her able leadership as French Finance Minister. She was named the number one finance minister in the Eurozone by the Financial Times in 2009.
Otherwise, nearly all commentators have hailed the appointment of the first female to hold the top position at the Fund.
A number of commentators in the international press have called for an end to the “gentleman’s agreement” between Europe and the U.S. Mr. Carstens, various economists, and officials from emerging markets have called on the new IMF head to give a louder voice to emerging economies through increased voting power and appointment to top posts. Even major European publications have acknowledged that the so-called BRIC countries have disproportionately few votes on the Board, whereas the European Union holds a decisive third of votes. NGOs were most vocal of all in protesting the alleged dominance of Western countries throughout the appointment process.
On the other hand, other analysts observed that Carsten’s ability to challenge Ms. Lagarde at all was a good first step towards greater representation. In Asia, journalists lamented that the “rising clout” of Asia remained unrepresented at the IMF, but nonetheless appreciated Ms. Lagarde’s lobbying for the support of the developing world.