EU urges European leader for IMF after Strauss-Kahn steps down

The European Commission has insisted that the next leader of the International Monetary Fund must come from the European Union, a stance backed by Germany, the continent’s economic heavyweight.

The European Commission has insisted that the next leader of the International Monetary Fund must come from the European Union, a stance backed by Germany, the continent’s economic heavyweight.

Frenchman Dominique Strauss-Kahn resigned as IMF chief on Wednesday, saying he wanted to devote “all his energy” to fighting sexual assault charges in New York.

The move heated up cross-border debate over his successor, with Europe aggressively staking its traditional claim to the job to ensure that the continent’s debt crisis is given priority.

Fast-growing nations such as China, Brazil and South Africa are trying to break Europe’s grip on an organisation empowered to direct billions of dollars to stabilise the global economy.

EU Commission spokeswoman Pia Ahrenkilde Hansen said the EU wants continuity at the helm of the IMF and said its members can “identify strong candidates in the midst of the European Union”.

In Berlin, German Chancellor Angela Merkel pushed for a quick decision on a successor to Strauss-Kahn and underlined her hopes that a European will get the job.

“It is of great significance, of course, that we find a quick solution,” she said in Berlin, without naming specific candidates.

The IMF’s executive board released a letter from Strauss-Kahn in which he denied the allegations lodged against him but said with “sadness” he felt he must resign, to protect his family and the IMF.

Strauss-Kahn is facing a bail hearing today in New York that could have spelled the end of his leadership of the IMF anyway. He faces charges of assaulting a maid in a New York hotel room and has been jailed in New York since Monday.

The IMF’s statement late on Wednesday said the process of choosing a new leader would begin, but in the meantime John Lipsky would remain its acting managing director.

Europeans have led the IMF since its inception after the Second World War. Americans have occupied both the No 2 position at the IMF and the top post at its sister institution, the World Bank.

The World Bank funds projects in developing countries.

France’s Finance Minister Christine Lagarde emerged as a potential candidate. A sharp, articulate negotiator with impeccable English who lived for many years in the United States, Lagarde has a strong international reputation.

However, Lagarde is a member of French President Nicolas Sarkozy’s conservative UMP party, and if Sarkozy openly pushes for her candidacy, that could feed widespread belief in France that the accusations against Strauss-Kahn were part of a conspiracy to knock him off his path toward the French presidency.

Developing nations see Europe’s stranglehold on the position as increasingly out of touch with the world economy.

China is now the world’s second largest economy. India’s and Brazil’s have cracked the top 10.

Many emerging economies are sitting on stockpiles of cash and have become forces of financial stability, while rich countries have become weighed down by debt.

“We must establish meritocracy, so that the person leading the IMF is selected for their merits and not for being European,” Brazilian Finance Minister Guido Mantega said, calling for a “new criteria” for leadership. “You can have a competent European ... but you can have a representative from an emerging nation who is competent as well.”

China suggested it was time to shake things up at the IMF, with Foreign Ministry spokeswoman Jiang Yu saying the leadership “should be based on fairness, transparency and merit”.

The United States has a major say in determining who will head the fund, in part because it holds the largest number of votes. The prevailing view among analysts and former Treasury officials appears to be that Washington would back a strong European candidate who could be approved in a smooth process.

Other potential European candidates include Germany’s former central bank chief, Axel Weber; the head of Europe’s bailout fund, Klaus Regling; and Peer Steinbrueck, a former German finance minister.

Candidates from elsewhere include Turkey’s former finance minister, Kemal Dervis; Singapore’s finance chief, Tharman Shanmugaratnam; and Indian economist Montek Singh Ahluwalia.

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