Lagarde in lead for IMF, S.Africa’s Manuel opts out

Lagarde in lead for IMF, S.Africa’s Manuel opts out

Paris: South Africa’s Trevor Manuel ruled himself out of the race for the IMF’s top job on Friday, making French finance minister Christine Lagarde an even firmer favourite, although the threat of a judicial inquiry remains.

Emerging market powers like Russia, India and China have declared they want an end to Europe’s grip on the top job at the international lender, calling time on a pact that puts the IMF in European hands while the World Bank is run by an American.

Yet the only declared rival to Lagarde as the window for nominations draws to a close on Friday is Mexican Central Bank chief Agustin Carstens, whose policy views are seen as too conservative by many of his emerging market peers.

Lagarde is backed by the European Union and a handful of smaller countries from Georgia to Mauritius. Paris is hopeful that Washington and Beijing will also stand behind her.

Emerging nations have not rallied as expected behind Carstens, who in particular lacks the explicit backing of big powers like Brazil and India.

Manuel, a respected former South African finance minister, opted not to stand but said it would be “most unfortunate if we end up with a European who is bound by the EU".

“It is important to understand that decisions take place in the context of world politics. Against that backdrop, I have decided not to avail myself," Manuel told a news conference.

The United States and Europe hold 48% of votes at the International Monetary Fund, emerging nations just 12%.

As Lagarde lobbied African officials in Lisbon, Emerging Markets magazine had reported that South Africa would nominate its former finance minister for the job.

Manuel, who handled Africa’s biggest economy deftly for a decade, had long been touted as an ideal developing-world candidate and many had seen him winning more support from emerging powers than Carstens, despite the Mexican’s impressive academic profile.

In New Delhi to drum up support for his candidacy, Carstens said Mexico and India agreed emerging market countries needed greater representation at the IMF. He also said emerging nations needed to have flexibility on capital controls.

Legal inquiry still looms

Lagarde, an adept negotiator with hands-on experience in the euro zone’s debt crisis, is seen as the clear favourite despite a legal investigation into her role in a 2008 arbitration payout that will hang over her candidacy.

A top French court on Friday put off until 8 July its decision on whether to open a formal inquiry into allegations brought by opposition left-wing deputies that she abused her authority in approving a €285 million payout to a businessman friend of President Nicolas Sarkozy.

A French finance ministry official told Reuters the legal process was proceeding normally and Lagarde earlier told reporters in Lisbon, where she attended the African Development Bank’s annual meeting, that she was confident about the outcome.

“No, I am not concerned at all about this particular inquiry, and I reaffirm as I did when I put my candidacy and threw my hat in the ring, that there is absolutely no grounds to that inquiry," she told reporters.

Lagarde has flown to Brazil, India and China to tout her merits for the IMF job, and carries on her tour to Saudi Arabia and Egypt this weekend.

“I am not the candidate of Europe, I am not the candidate of France, I am the candidate to serve the 187 of the IMF, so that the institution can deliver the services they need," she said.

The African Union has said it wants to see a non-European in the job but emerging market powers have failed to coalesce behind one candidate to challenge Europe’s hold on the job.

“Lagarde is still the favourite," said Jacques Reland of the Global Policy Institute. “The BRICS are still quite divided."

The Fund - shaken up by the shock departure of Frenchman Dominique Strauss-Kahn last month over charges that he tried to rape a New York hotel maid - will name its new managing director on 30 June.

A Reuters exclusive report that Secretary of State Hillary Clinton has been in talks about leaving her job next year to head the World Bank made it look even more likely Lagarde will get the IMF job, reaffirming the transatlantic gentleman’s agreement over the two institutions.

Four of the IMF’s 10 managing directors since 1946 have been French but Lagarde, 55, would be the first woman in the job.

A medal-winning former synchronized swimmer and high-flying corporate lawyer, she has played a key role in Europe’s battle to recover from economic crisis and is France’s G20 negotiator on economic issues as it holds the year-long presidency.

Carstens has an economics PhD from the University of Chicago, a haven for proponents of deregulation and laissez-faire economics.