August 30 - Issue 26 - Deadline for IMF Nominations This Friday, Support for Two Candidates Uncertain
New York, August 30, 2007 - The deadline for nominations for Managing Director of the IMF is tomorrow - Friday, August 31. Two candidates have been nominated so far, and reportedly they both will be invited to Washington, DC to meet with the IMF Board of Executive Directors soon after the nomination period ends tomorrow.
The Board has committed to evaluating candidates based on their qualifications and the candidate profile developed in July, without regard to nationality of the candidates. The Board must select a new Managing Director in time for the annual World Bank-IMF meeting in October, when the resignation of the current MD, Rodrigo de Rato, will become effective.
The candidates are Dominique Strauss-Kahn of France, who was endorsed informally by Eurogroup finance ministers (ECOFIN) on July 10, and Josef Tošovský of Czech Republic, nominated by Russia on August 22. (Biography of Tošovský available here.) While it is not common for an IMF member country to nominate a national of another country, it is allowed by the IMF's new appointment guidelines negotiated in July.
Continuing Calls for Reform and Additional Candidates
The Group of 24 developing countries (which includes Brazil, China and India) has called for an open selection and appointment process that ends the tradition by which the EU selects the head of the IMF and the U.S. has its choice of president of the World Bank. In order to achieve this goal, a G-24 representative said this week, "Countries really have to say, these are not bloc nominations: we have to keep the slate open." However, no G-24 member or other developing country has yet nominated a candidate. This is presumably due to their mistrust that a non-European candidate would be considered fairly, as well as wariness about opposing an EU-U.S. candidate.
Oxfam International also said this week "It's really positive that the UK [opposed the EU's early endorsement of Strauss-Kahn], but it's disappointing that they didn't nominate their own candidate, or put out a statement saying that they would support a developing country candidate."
One Washington, DC-based observer speculates that last-minute nominations will emerge, and if one candidate has the consensus support of developing country constituencies, it could shift the political momentum away from the EU's candidate.
Recent statements of support and doubt regarding the two candidates are as follows.
- Morocco announced support for Strauss-Kahn's candidacy, reportedly because they believe he will advocate for the developments of the Mediterranean's southern shore region.
- Meanwhile, a Financial Times editorial (August 28) called him unqualified for the job and suggested his would be an illegitimate appointment, because of the EU's domineering approach to his candidacy: "No genuine European interest is served by forcing on the Fund a man who is neither qualified nor legitimate." Their comments echoed those of the Russian representative to the IMF, who said that Strauss-Kahn's experience as a "career politician" did not give him the "necessary technical skills to do the job.
- The French finance ministry expressed confidence that the Russian nomination would "not put into question the momentum behind Dominique Strauss-Kahn's candidacy."
- After mixed reports last week about Brazil's support for Strauss-Kahn, Brazil clarified that it had not yet decided to back a particular candidate.
- Strauss-Kahn met with India's prime minister but no statement of support emerged from the Indian government.
- One media source reported that the United Kingdom had agreed to support Strauss-Kahn, although the UK previously insisted on reviewing all candidates that emerged without regard for nationality.
- Jean-Claude Juncker, the prime minister of Luxembourg, who is also the current president of the Eurogroup, suggested that the EU selected Strauss-Kahn because he was committed to "adjusting" the IMF "firmly to the expectations and interests of developing countries." Part of the necessary reforms, he added, would be reform of the appointment process for the Managing Director. He told the Financial Times, "The next director will certainly not be a European.... In the Euro group and among EU finance ministers, everyone is aware that Strauss-Kahn will probably be the last European to become director of the IMF in the foreseeable future.... We have to start thinking about these reforms now." The Financial Times interpreted these comments as a conditionality from Juncker, an implication that if developing countries supported Strauss-Kahn now, the EU monopoly on the position would be broken next time. Juncker said upon backing Strauss-Kahn on July 10, "It's our turn." The US just had been permitted to select the new president of the World Bank.
- Russia's finance minister portrayed Tošovský as a proven manager of financial crises, including the division Czechoslovakia into two countries. During that period Tosovsky served as head of the Czech National Bank and then as "caretaker" prime minister. Another Russian official stressed that the candidature was not aimed simply at creating a competitive selection process, but a result of Tošovský's superior qualifications for the job. (This view contrasts with Finance Minister Kudrin's comment last week that the nomination signalled "real elections.")
- However, one analyst suggested that Tošovský's candidacy could be seen as a Russian initiative, lacking the involvement of other emerging economies, although the candidacy has been presented as an effort to empower the developing world in international financial institutions.
- India said it had not yet decided on its position on Tošovský.
- Russia still has not revealed which developing country IMF Board members they believe will support Tošovský, but they are said to be depending on Venezuela and Brazil, among other Latin American countries. An IMF source reportedly suggested that several Latin American countries are likely to support Tošovský.
Implications of Voting Shares
Many media reports have referred to the fact that the European Union and United States have a combined voting weight of over 50% in the IMF. However, since an 85% "supermajority" is required to appoint a new Managing Director, the EU-U.S. weight is not sufficient. But they can easily block a supermajority for a candidate they do not support. Thus, a candidate needs to be acceptable to both the EU and U.S. to be appointed. Likewise, the U.S. acting alone can block a candidate, because it has almost 17% of the voting shares. This effective veto power is shared by no other single state.
To build momentum for Tošovský, Russia reportedly is dependent on support from developing countries such as India, China, South Africa, Indonesia, Mexico, Latin American countries, and Saudi Arabia. If it can accumulate 16% of the vote it can block the appointment of the EU's candidate, Strauss-Kahn. Further, the "big four" developing countries are considered to be Brazil, China, India, and South Africa, and although their combined voting shares are not enough to ensure a candidate's appointment, their political influence is significant.
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