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Lagarde wins race for top IMF post

Lagarde wins race for top IMF post

Big economies back French minister

Tough decisions on debt crisis needed

By Alan Beattie in Washington
 

Christine Lagarde, the French finance minister, was appointed as the new managing director of the International Monetary Fund on Tuesday and will face tough decisions on the troubled Greek financial bail-out within days.

Ms Lagarde, who had been clear favourite for the job, maintained the long history of recruiting a European to head the IMF. As is traditional, she was appointed by consensus by the fund’s 24-member board.

The only other candidate, the Mexican central bank governor Agustín Carstens, had already admitted that his candidacy was a longshot, but he was praised by the board and by Tim Geithner, US Treasury secretary, for his qualifications and abilities.
Ms Lagarde’s appointment was all but assured after the US and other big economies, including China, declared support for her on Monday and Tuesday. Australia and Canada had backed Mr Carstens, but he was unable to command broad support across emerging market countries.
Ms Lagarde will become the fifth French managing director of the IMF and the 11th European out of 11. The convention of putting a European in the job, which had become a largely symbolic tradition, has now assumed much greater importance.

The IMF has been dragged into what many of its shareholder governments regard as an increasingly problematic bail-out of Greece, in which much of the direction has been set by the eurozone governments and the European Central Bank.

Ms Lagarde will take up her post on Tuesday, immediately presenting her with difficult decisions about Greece.

She insisted during her campaign for the managing directorship that she was well placed as a Europeanto lead the IMF’s role in the crisis. She will have to show that her ability to use her European contacts to manage the fund’s response will outweigh a potential conflict of interest – that she may not want to be the one to infuriate French banks and the French government by pulling the plug on a failing programme.
“The immediate priority for Lagarde is to reset the IMF’s engagement with the debt crisis in Greece in a manner that avoids a blow-up but doesn’t smack of favouritism,” said Eswar Prasad, a former senior IMF official now at the Brookings Institution. “Having been embroiled in dealing with the European debt crisis, it remains an open question whether she can shed that baggage when shecomes into the IMF job.”

Her appointment could also create interesting cross-currents around the issue of the role that the big emerging market countries such as Brazil, India and China will play in the fund. At one level, those governments have shown the limits of the talk of emerging market solidarity, after failing to unite around Mr Carstens.

IMF watchers will be on the alert for what Ms Lagarde might have promised those governments in return for their support. Ms Lagarde may intervene to promote senior management from emerging market countries, perhaps including Zhu Min, the Chinese adviser to the managingdirector.

But as the Europeans have proved over the years, having management of a particular nationality in place does not guarantee that a particular view of the world will prevail.

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