Europe votes on IMF candidate as Britain objects to the process

The IMF's next leader will confront a world economy at its weakest since the aftermath of the financial crisis.
The IMF's next leader will confront a world economy at its weakest since the aftermath of the financial crisis.PHOTO: AFP

BRUSSELS/PARIS (BLOOMBERG) - The European Union narrowed the field seeking the top job at the International Monetary Fund to four on Friday (Aug 2), as the Portuguese candidate withdrew and Britain objected to what has become a contentious scramble for the bloc to avoid losing a post that traditionally is held by one of its own.

France, which is organising the selection process, had delayed a vote until Friday to allow London to put forward a new nominee in light of the recent change in its government. But Britain said they did not have enough time, and that they could ignore the Paris process and still field their own candidate at a later date, according to officials familiar with the matter.

EU governments have so far failed to rally behind a single person to replace Christine Lagarde atop the Washington-based IMF and the frustration has become palpable across capitals. The fund will stop accepting applications on Sept 6 and is seeking to complete the process by Oct 4.

Finance ministers began voting Friday morning on the four remaining candidates: Spanish Economy Minister Nadia Calvino, former Dutch Finance Minister Jeroen Dijsselbloem, World Bank Chief Executive Kristalina Georgieva and Bank of Finland Governor Olli Rehn. There may be several rounds to the ballot, which will be done by qualified majority, which takes into consideration countries' populations.

Global Headwinds

The top vacancy comes after Lagarde resigned this month to lead the European Central Bank. The IMF's next leader will confront a world economy at its weakest since the aftermath of the financial crisis. Last week, the fund further reduced its global growth outlook, already the lowest since 2009, to a projected 3.2% expansion this year.

Yet Europe has struggled to rally behind a single candidate, with geographic and political considerations deepening the divisions between camps pushing for different hopefuls. Growing frustration over the decision-making process - especially from countries whose nationals are being considered - has weighed on the talks.

There are practical issues, too. If Georgieva gets the EU's nod, the bloc would have to ask for a change in the IMF's bylaws to allow her to take over the post as she will be above the age limit by the time the term starts. Some officials have voiced concerns that this could raise eyebrows among non-European members of the fund, which would be keen to put forward their own qualified candidates who meet such criteria.

Under a half-century-old agreement, the head of the IMF is a European while the US picks the World Bank chief. That tradition prevailed when David Malpass was selected as the World Bank's president in April.

But Europeans are uncertain whether US President Donald Trump's administration will return the favour - and emerging markets have been arguing for years that the current arrangement does not reflect a world that has since evolved.