Lagarde Declares Candidacy to Replace Strauss-Kahn at IMF

May 25, 2011, 1:00 PM EDT By Mark Deen and Simon Kennedy

(Updates with Geithner comments in sixth paragraph.)

May 25 (Bloomberg) -- French Finance Minister Christine Lagarde declared her candidacy to head the International Monetary Fund, saying she should be judged on the basis of experience rather than nationality.

“Being a European should not be a plus and it shouldn’t be a minus,” she said at a press conference in Paris today. “I am not arguing for my candidacy because I am a European.”

The IMF executive directors representing Brazil, Russia, India, China and South Africa united yesterday to protest publicly the presumption that the fund’s next chief once again be a European. The IMF has been led by Europeans since it was set up after World War II.

Lagarde, who would succeed countryman Dominique Strauss- Kahn and become the first woman to lead the Washington-based lender to nations since its founding in 1945, now has the backing of Europe’s main economies and, according to her government, China. Brazil will also privately support her rather than her main rival, Mexican central bank governor Agustin Carstens, a Brazilian government official said.

“It’s looking like it’s almost a done deal for Lagarde,” Desmond Lachman, a former deputy director at the IMF and now a resident fellow at the American Enterprise Institute in Washington, said by telephone. “The emerging markets can’t get their act together and back one candidate.”

U.S. Role

The U.S., which may hold the decisive vote with a 16.8 stake in the fund, has not committed itself publicly. Treasury Secretary Timothy F. Geithner said today that Lagarde and Carstens are “very talented” candidates.

President Barack Obama and fellow Group of Eight leaders plan to convene tomorrow in the French resort of Deauville, where the succession at the IMF is likely to be discussed.

Poland joined the list of those backing Lagarde, PAP newswire cited Jacek Rostowski, the Polish finance minister, as saying. “Minister Lagarde’s candidacy is very good, it’s difficult to imagine a better one, and it has the full support of the Polish government,” Rostowski said today, according to PAP.

Carstens remains the Mexican government’s choice for the IMF even after Lagarde announced her candidacy, Mexican Finance Minister Ernesto Cordero said.

“They are both strong, credible candidates,” Cordero said in Paris after a meeting with Lagarde. “We agreed that what the IMF needs is an open, transparent, merit-based process.”

Developing Nations

Cordero said he wasn’t surprised that other developing nations haven’t openly supported Carstens. “It’s early in the process,” he said. “Everyone is being prudent, which is what we need at this stage.”

Lagarde, 55, has an 88 percent chance of becoming the IMF’s 11th managing director and its fifth from France, according to Dublin-based odds-maker Intrade.com. The 187-member IMF aims to pick a successor to Strauss-Kahn by the end of June, little more than a month after he resigned following his arrest in New York on charges of attempted rape and sexual assault.

A lawyer who practiced in the U.S. before entering French government in 2005, Lagarde would bring frontline experience of the sovereign-debt crisis at a time when Greece is striving to persuade investors it can avert default.

The Swiss franc climbed against all of its 16 most-traded peers, reaching a record versus the euro, on concern Greece’s debt crisis threatens the region’s economic recovery. The franc strengthened 1 percent to 1.2287 per euro at 12:20 p.m. in New York after reaching 1.2272.

U.S. Backing

“No doubt Mr. Obama will come under pressure in Deauville about all of this,” Edwin Truman, a former official at both the U.S. Treasury Department and the Federal Reserve who is now a senior fellow at the Peterson Institute for International Economics in Washington, said by telephone.

Rather than jumping on the European bandwagon, the U.S. will probably reserve its backing for Lagarde until it becomes clear she has the broad support of IMF membership, Truman said.

While the fund’s executive board has pledged to act transparently and make an appointment based on merit, European leaders have moved swiftly to support Lagarde. U.K. Chancellor of the Exchequer George Osborne praised her leadership skills during France’s current presidency of the Group of 20, while Italian Prime Minister Silvio Berlusconi called her “excellent.” Jose Barroso, the European Commission president, said he “fully endorsed” Lagarde’s candidacy in an e-mailed statement today.

China is also “favorable” on the prospect of Lagarde leading the IMF, French government spokesman Francois Baroin said yesterday. Chinese officials haven’t publicly commented on specific candidates.

Strauss-Kahn Term

In exchange for its private support for the European contender, Brazil will push for Lagarde to run the fund only until the end of next year, when Strauss-Kahn’s term would have expired, said the Brazilian official, who requested anonymity because he isn’t authorized to speak publicly about the issue.

Lagarde said today that if named to the job, she’ll stay in it for a full five years, unlike Strauss-Kahn or his predecessor Rodrigo de Rato. “To me, it’s essential that the whole mandate be fulfilled,” she said. “If I’m elected, I promise to complete the mandate.”

“In a large number of countries there are extremely good people,” Charles Wyplosz, director of the International Center for Money and Banking Studies in Geneva, said in a radio interview with Tom Keene on “Bloomberg Surveillance.”

“The field should be open, and I personally am very upset that the Europeans are trying to close it down and prevent any serious competition,” he said.

The IMF provided a record $91.7 billion in emergency loans last year and accounts for one-third of the euro-region’s bailout packages. Its next chief will be at the center of debates on determining an escape route for the euro out of the debt crisis, which still threatens to push Greece, Ireland and Portugal into default and raised concern about the currency’s longevity.

--With assistance from Jose Enrique Arrioja in Mexico City, Lyubov Pronina in Moscow, Gregory Viscusi in Paris, Svenja O’Donnell in London and Sandrine Rastello and Rich Miller in Washington. Editors: Kevin Costelloe, Christopher Wellisz

To contact the reporters on this story: Simon Kennedy in London at skennedy4@bloomberg.net; Mark Deen in Paris at markdeen@bloomberg.net.

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net; Chris Wellisz at cwellisz@bloomberg.net.

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