IMF crisis opens the door to emerging nations

0 CommentsPrint E-mail China Daily via Agencies, May 17, 2011
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The arrest of Dominique Strauss-Kahn has plunged the International Monetary Fund into a leadership dilemma just as it's playing a key role in addressing Europe's debt crisis and other global challenges.

A combination photo of possible successors if Dominique Strauss-Kahn, the head of the International Monetary Fund, leaves the IMF.

A combination photo of possible successors if Dominique Strauss-Kahn, the head of the International Monetary Fund, leaves the IMF. They are (top L-R) Mohamed El-Erian, Stanley Fischer of Israel, Gordon Brown of Britain, Kemal Dervis of Turkey, Peer Steinbrueck of Germany, (bottom L-R) Montek Singh Ahluwalia of India, Christine Lagarde of France, Agustin Carstens of Mexico, Trevor Manuel of South Africa and Axel Weber of Germany. Strauss-Kahn may be forced to leave his post after being accused of trying to rape a maid in his New York hotel room on May 15, 2011.[Photo/China Daily via Agencies]

It also hastens a likely confrontation between Europe and increasingly rich developing countries that have been angling for the top spot at either the IMF or its sister organization, the World Bank. Since their inception just after World War II, the IMF has been led by a European, the World Bank by an American.

Eswar Prasad, an expert in international economics at Cornell University, said the top jobs could become embroiled in horse-trading, with the major countries trying to win positions for their top candidates.

"It will be a knock-down, dragged-out fight because there is a lot at stake," Prasad said.

Prasad said the United States would like to see a developing country official head the IMF. But Prasad noted that German Chancellor Angela Merkel has already said she wants to see the IMF post remain in European hands. Many analysts expect developing nations to push for their own candidates.

Caroline Atkinson, a spokeswoman for the IMF, said it remains "fully operational." The IMF's board met Monday and received a briefing from Acting Managing Director John Lipsky and the fund's lawyer, Sean Hagan. Atkinson announced no further steps.

Among those being mentioned as possible successors to Strauss-Kahn are Kemal Dervis, a former finance minister for Turkey who is now at the Brookings Institution, and Mohammad El-Erian, an Egyptian who heads the giant Pimco bond fund. El-Erian is a former IMF staffer.

Analysts note that Europe, whose debt crisis has consumed the IMF for more than a year, has a large bloc of voting shares in the IMF and won't be willing to yield the top job without a fight. Some suggested that French Finance Minister Christine Lagarde is most likely Europe's leading candidate.

The 187-member IMF lends money to countries unable to pay their debts. The World Bank provides loans to poor nations for building roads, dams and other development projects.

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