Strauss-Kahn's Successor Why the New IMF Head Can't Be European

Dominique Strauss-Kahn is in jail, and the debate over his successor as IMF head has already begun. German Chancellor Angela Merkel wants to see another European get the job. But that would be a fatal signal to emerging powers such as China and India.
IMF headquarters in Washington.

IMF headquarters in Washington.

Foto: Jim Lo Scalzo/ dpa

It seemed as if they had the best of intentions. On April 2, 2009, Europeans and Americans indicated their intention to cease dividing up the leadership posts of the World Bank and the International Monetary Fund among themselves. The agreement was reached at that year's G-20 summit in London. "We agree that the heads and senior leadership of the international financial institutions should be appointed through an open, transparent and merit-based selection process," read the leaders' statement at the conclusion of the summit. In other words, the Europeans gave up their privilege of choosing the head of the IMF.

But now, with the sexual assault charges  against current IMF Managing Director Dominique Strauss-Kahn and the likely need to replace him, German Chancellor Angela Merkel would seem to have forgotten that pledge.

Just last week, Merkel indicated that she still sees the IMF leadership position as a European plaything. Reports claimed that she was interested in installing the Italian central bank head Mario Draghi at the head of the IMF as a way to ward off his candidacy to take over the European Central Bank.

While she has since warmed to Draghi as the next ECB president, Merkel would still like to see a European in charge at the IMF. And on Monday, she was even more upfront about it. "In the current situation, which finds us engaged in very many discussions about the euro, there are good reasons for Europe to put forward good candidates," she said, in reference to the search for a successor to Strauss-Kahn.

She did allow that candidates from rising powers such as China, India and others would be able to occupy the top job "in the mid-term." But the attempt to cover up her violation of the 2009 agreement was weak.

Hanging on to Prerogatives

The signal Merkel is sending is a fatal one: Europeans want to hang on to their prerogatives from the old world order as long as possible. And they will stop at nothing to defend their possessions.

Europe demonstrated as much last autumn as well, when it fought against a reduction of its influence at the IMF, in terms of its voting rights. A greater role for China, India, South Africa and Brazil had been long overdue at the institution. And Europe's outsized say on the IMF's Board of Governors -- where it had 33 percent of the votes, despite having just a 20 percent share of global economic output -- was difficult to ignore.

Europe, though, resisted giving up its votes. It finally agreed to a marginal reduction to 30 percent of the total votes, but the negotiations left a bitter aftertaste. That farce has now been outdone by the current debate, however.

The excuse for the tight European grasp on the top IMF slot is the ongoing euro crisis. But while Merkel may not immediately grasp the paradox of this argument, countries like Mexico and Brazil certainly do. During the Latin American and Asian financial crises, Europeans certainly didn't make the case that the IMF should be led by someone from the affected regions.

But now that Europe itself is in trouble, it has suddenly become of paramount importance that the IMF is led by a European. Only then, so goes the argument, will the IMF be able to fully understand the complicated decision-making procedures in the euro zone and European Union. As if a talented Indian, South Korean, Brazilian or South African wouldn't be able to do the euro crisis justice, particularly given the teams of specialists at the IMF who have years of experience with Europe.

Encouraging a Constructive Role

A tight grip on the top IMF post weakens Europe because it damages Europe's credibility at a time of significant and rapid global power shifts. And without credibility, Europe will find it more difficult to encourage rising powers to play a constructive role in international institutions. Newcomers to the power stage have in the past hidden behind the argument that they have not been allowed to wield influence -- an argument that allowed them to cover up a lack of political will or courage to face tough international issues. That argument would evaporate if Europe were to relinquish its privileges.

And Europe would be able to push the emerging powers to live up to their new responsibilities to the global economy and financial system. Given the unresolved questions on the role and legitimacy of the IMF in the new world order, there is certainly a need for the rising powers to step up to the plate.

But the precondition is that Europe takes its G-20 promise seriously. Adhering to an "open, transparent and merit-based selection process" for the new IMF head would send a strong signal that, in the future, what counts when filling the world's top jobs is the quality of the candidates -- not their passports. This should also apply to the soon-to-be-filled post of IMF deputy managing director, one which the US has traditionally claimed.

There is certainly not a lack of good candidates from developing and newly industrializing countries. And after a waiting period of five or 10 years, a European could of course head the IMF again -- if he or she turns out to be the best qualified candidate. But this time around, it is up to Europe to show that it honors its promise by supporting a non-European candidate.

Instead of maintaining an iron grip on outmoded prerogatives, Europe should speak with a single voice on the International Monetary Fund. This is what is decisive for Europe's influence -- not whether a European occupies the top job. Turning the present crisis into an opportunity would result in a stronger Europe in a stronger International Monetary Fund.

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