Lagarde Signals to IMF Staff More Power for Emerging Markets

July 01, 2011, 1:48 PM EDT By Timothy R. Homan and Sandrine Rastello

July 1 (Bloomberg) -- Christine Lagarde signaled that as the new head of the International Monetary Fund she will follow through on a promise to increase the stature of emerging-market nations at the global lender.

Lagarde, speaking to IMF staff in a video message, distanced herself from her previous role as French finance minister and indicated she would advance efforts to give more voting power to countries such as China and Brazil, according to a transcript obtained by Bloomberg News yesterday. Her five-year term begins on July 5.

“The transformations that have taken place in relation to governance for instance, must be pursued, must be continued, so that the fund does belong to its 187 members,” Lagarde, 55, said. “I am not the director of a particular group of countries. I am the director of the entire institution.”

In the course of an election-style campaign that took her to Brazil, China and the Middle East, Lagarde promised to boost the clout of developing nations at the IMF. In doing so she garnered endorsements from emerging economies as well as European Union countries and the U.S.

Lagarde was selected over Agustin Carstens, Mexico’s central bank governor. Emerging markets failed to rally around a candidate from among their ranks, after calling for an end to Europe’s six-decade lock on the position.

Candidate Lagarde

As a candidate, Lagarde also said she would push for quick implementation of a 2010 agreement that makes China the third- strongest voice in the organization and gives more say to nations such as South Korea. The 2010 agreement also weakens the influence of advanced European economies, which pledged to reduce the number of seats they hold on the IMF’s 24-person executive board.

“I am very concerned that we can enrich the institution as much as we can by using diversity as an asset,” Lagarde said, according to the transcript of the video message. “Gender, geography, academic background, culture -- all that diversity should actually be mixed so well that it produces this unbelievable intellectual talent that you together can produce.”

Women accounted for 45.5 percent of the IMF’s staff and 21.5 percent of its managerial jobs at the end of 2010, according to the organization’s annual diversity report, which also called the number of employees from emerging-market countries “unacceptably small.”

Lagarde is the first woman to head the IMF. She replaces Dominique Strauss-Kahn, who resigned after his arrest last month on charges that include attempted rape. He has pleaded not guilty.

“I know that recent events have not been particularly pleasant for any of you nor for the institution as a whole,” Lagarde said to IMF staff, without mentioning Strauss-Kahn by name.

--Editors: Christopher Wellisz, Kevin Costelloe

To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net; Sandrine Rastello in Washington at srastello@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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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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Lagarde Will Get British Endorsement to Run IMF, Osborne Says

May 21, 2011, 7:22 PM EDT By Gonzalo Vina

May 22 (Bloomberg) -- The U.K. will back French Finance Minister Christine Lagarde to become the next managing director of the International Monetary Fund, Chancellor of the Exchequer George Osborne said, adding to the cascade of European endorsements for her.

Osborne praised Lagarde for her leadership skills during France’s presidency of the Group of 20 and for her “strong” advocacy of countries taking steps to reduce budget deficits. Last week, Osborne had left open the possibility that Britain might endorse a non-European to head the fund.

“On the basis of merit, I believe Christine is the outstanding candidate for the IMF, and that’s why Britain will back her,” Osborne said in an e-mailed statement late yesterday. “Personally think it would be a very good thing to see the first female managing director of the IMF in its 60 year history.”

Lagarde has emerged as the leading contender to replace Dominique Strauss-Kahn at the IMF as developing nations have failed to unite behind one candidate. Strauss-Kahn, who’s also French, resigned on May 19, four days after his arrest in New York on sexual-assault charges.

German Chancellor Angela Merkel yesterday described Lagarde as an “excellent and experienced person” and that consensus was emerging is Europe for her to get the IMF job, Deutsche Presse-Agentur said. Austria may support Lagarde, Finance Minister Maria Fekter said yesterday, according to Agence France-Presse.

Gordon Brown

Osborne’s backing reduces the prospect that former Prime Minister Gordon Brown will get the position. The Financial Times reported last week that Brown, who served as chancellor for 10 years, had told friends he had international backing for his candidacy.

Osborne said in an interview last week that Brown hadn’t asked the British government to support him. This month, Prime Minister David Cameron said Brown might not be the “most appropriate” candidate because the job needs someone who “understands the danger of excessive debt.”

Lagarde’s chances of securing the top IMF role may hinge on how she resolved a two-decade-old dispute involving a supporter of President Nicolas Sarkozy.

France’s Cour de Justice de la Republique, which oversees ministers’ actions in office, has until June 10 to decide whether to investigate if Lagarde abused her powers in agreeing in 2007 to send the case to arbitration. It resulted in a 385 million-euro ($550 million) award to Bernard Tapie, a former Socialist minister who endorsed Sarkozy’s presidential effort.

Lagarde has rejected accusations her decision to take the matter to arbitration and not appeal the award was a reward for Tapie’s support of Sarkozy.

--Editor: Dick Schumacher.

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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Lagarde Favored to Head IMF as Emerging-Market Bid Founders

May 20, 2011, 11:01 AM EDT By Sandrine Rastello and Ian Katz

(Updates with Dervis, Hildebrand ruling themselves out in eighth, 30th paragraphs.)

May 20 (Bloomberg) -- French Finance Minister Christine Lagarde emerged as the leading contender to replace Dominique Strauss-Kahn at the International Monetary Fund as developing nations failed to unite behind a candidate.

U.S. Treasury Secretary Timothy F. Geithner called for the quick appointment of a new managing director yesterday while the Obama administration avoided backing any one person.

“We want to see an open process that leads to a prompt succession,” Geithner said in a statement. John Lipsky, the Washington-based IMF’s acting managing director, “will provide able and experienced leadership to the fund at this critical time for the global economy,” Geithner said.

European officials moved to maintain control over the institution that approved a record $91.7 billion in emergency loans last year and provides a third of the euro-area’s bailout packages. Italy and Sweden backed Lagarde, while German Foreign Minister Guido Westerwelle said he holds her in high esteem, the first public hint of German support.

“I would argue that Christine Lagarde has outstanding credentials,” Swedish Finance Minister Anders Borg said in a Bloomberg Television interview yesterday. Her gender is an “advantage” since “half of the world has not been represented as managing director” of the IMF, Borg said.

‘Excellent Choice’

Italian Prime Minister Silvio Berlusconi said Lagarde would be “an excellent choice” as Europe’s candidate, the Italian government said in an e-mailed statement yesterday. Berlusconi said it’s “fundamental” that Europe should reach a common position on whom the candidate should be as soon as possible, the statement said.

Lagarde is now the “odds-on” favorite for the IMF’s top job after being a “20-1 outsider when betting began,” London- based bookmaker William Hill Plc said in an e-mailed statement today. Trailing her were former Turkish Economy Minister Kemal Dervis and South Africa’s ex-Finance Minister Trevor Manuel, at 3-1 and 5-1 odds, respectively.

Dervis today ruled himself out as a candidate, saying he wants to focus on his work at the Brookings Institution, a Washington-based research center, the Wall Street Journal reported, citing a statement by the Turkish former minister.

Officials in emerging markets including Thailand, Russia and South Africa said the next IMF managing director should come from a developing nation even as they failed to unite behind one candidate the way Europe coalesced around Lagarde.

While Chinese officials haven’t publicly endorsed any candidate, Thailand and the Philippines backed Singapore Finance Minister Tharman Shanmugaratnam as a possible choice to succeed Strauss-Kahn at the IMF.

Asia’s Push

Philippine Finance Secretary Cesar Purisima said in an interview today that Shanmugaratnam “is certainly well qualified,” and his Thai counterpart Korn Chatikavanij said yesterday Asia has good candidates, including Shanmugaratnam.

“I think the U.S. and Europe should take it upon themselves to really open this up to all candidates that are qualified, not necessarily just Europeans,” Purisima said in an interview with Bloomberg Television.

The time has come for a non-European to head the IMF, according to Angel Gurria, secretary general of the Organization for Economic Cooperation and Development. “The moment has come to change what is a tradition, which is that the IMF is led by a European,” the former Mexican finance minister told reporters in Paris today.

‘Fine Candidates’

Brazilian ex-central banker Arminio Fraga, South Africa’s Manuel, India’s Montek Singh Ahluwalia and Shanmugaratnam would all make “fine candidates” to lead the IMF, Raghuram Rajan, a professor at the University of Chicago and a former chief IMF economist, wrote in the Financial Times.

China’s government has asked Peter Mandelson, a former U.K. business secretary and European trade commissioner, whether he’s interested in the job, the Guardian reported, citing no one.

Strauss-Kahn resigned as the 10th leader of the IMF four days after his arrest in New York on sexual-assault charges.

“I want to devote all my strength, all my time and all my energy to proving my innocence,” Strauss-Kahn said in a statement released by the IMF. The fund said it will comment “in the near future” on the succession. Strauss-Kahn, 62, had been leading in polls for France’s 2012 presidential election.

Strauss-Kahn, a former French finance minister, was arrested May 14 on accusations of sexually assaulting a hotel maid and has been at New York’s Rikers Island jail since May 16.

He may be released from jail as early as today after he was granted bail. While he has denied the accusations, he hasn’t entered a formal plea to any of the charges, which include attempted rape. The indictment in the case was filed yesterday.

Greek Crisis

European Union President Herman Van Rompuy urged a quick decision on a new IMF leader, saying Strauss-Kahn’s arrest has hurt efforts to tackle Greece’s financial crisis.

“We can’t lose time,” Van Rompuy told a conference yesterday in Brussels. “We are feeling a lack of leadership in solving the Greek crisis.”

Europeans have picked IMF heads for 65 years under a deal that also gives the U.S. control over the top World Bank post. The No. 2 person at the IMF has traditionally been chosen by the U.S.

Lipsky, 64, the No. 2 official at the fund, will remain acting leader, the fund said in a statement May 18. Lipsky, a former chief economist at JPMorgan Chase & Co., is scheduled to retire in August. He called Lagarde “very, very talented” and a “capable leader.”

Five-Year Tenure

Strauss-Kahn’s five-year term had 17 months remaining. In past successions, managing directors were appointed to fresh five-year tenures.

Strauss-Kahn earned an annual salary of $441,980 after taxes as of July 2009, plus an expense allowance of $79,120, also tax-free. The allowance would enable him to maintain “a scale of living appropriate to your position as managing director,” according to his contract. In addition, he could be reimbursed for “reasonable” entertainment expenses as well as first-class travel.

Under the IMF’s rules, its executive board selects the managing director and any member can make a nomination. Prior to appointing Strauss-Kahn in 2007, the board said candidates must have a “distinguished record in economic policy-making at senior levels” and “demonstrated the managerial and diplomatic skills needed to lead a global institution.”

The 2007 nomination period ran from early July to the end of August. The board then met with each candidate and sought to make its choice through consensus rather than majority vote. The appointment was made three months to the date after the resignation of Rodrigo de Rato.

‘European Candidate’

Lagarde “is an internationally recognized personality and is highly regarded also in Germany,” Germany’s Westerwelle said in an interview during a trip to Switzerland yesterday. “We Europeans have an interest in maintaining the European influence at the IMF.”

German Chancellor Angela Merkel told reporters that Europe’s sovereign-debt crisis “speaks for a European candidate” to head the IMF and that a decision must be made swiftly. Her chief spokesman Steffen Seibert said he couldn’t confirm a Handelsblatt report that the government is preparing to throw its support behind Lagarde.

Swiss National Bank bank President Philipp Hildebrand “does not consider himself a candidate” for the IMF job as he “remains deeply committed” to his current duties, the Zurich- based central bank said in an e-mailed statement today.

Lagarde, 55, declined to comment on her potential candidacy when questioned by reporters in Paris yesterday. She said that the successor to Strauss-Kahn should come from Europe.

‘Lightning-Quick Wit’

Writing in Time magazine in 2009, Geithner said Lagarde had shown “what it takes to break down barriers” by becoming the first female Group of Seven finance minister and that he admired her “lightning-quick wit, genuine warmth and ability to bridge divides while remaining fiercely loyal to French interests.”

“Rarely do the names Descartes and Voltaire emerge during a debate on global economic policy. But when they do, it often means Christine Lagarde is using philosophy to drive home a sophisticated point about the markets,” Geithner wrote.

Lagarde’s chances may hinge on how she resolved a two- decade-old dispute involving a supporter of President Nicolas Sarkozy. The Cour de Justice de la Republique, which oversees ministers’ actions in office, has until June 10 to decide whether to investigate if Lagarde abused her powers in agreeing in 2007 to send the case to arbitration. It resulted in a 385 million-euro ($551 million) award to Bernard Tapie, a former Socialist minister who endorsed Sarkozy’s presidential effort.

Arbitration Decision

The matter stems from the 1993 sale of Tapie’s Adidas AG, which was handled by then-state-owned Credit Lyonnais SA. At the time, Lagarde was a partner with the Chicago-based law firm Baker & McKenzie LLP, 12 years before she joined the government. The minister has rejected accusations her decision to take the matter to arbitration and not appeal the award was a reward for Tapie’s support of Sarkozy.

Europe is likely to succeed in getting Lagarde the job as developing nations are too divided to back a single candidate, said economist Nouriel Roubini.

“The Europeans are going to be united in wanting a European, and I think the European candidate is going to be Christine Lagarde,” Roubini, who predicted the recent global financial crisis, said in an interview on Bloomberg Television’s “Last Word” with Andrea Catherwood yesterday.

--With assistance from, Heather Smith, Karl Lester Yap and John Dawson. Editors: Kevin Costelloe, Jeffrey Donovan

To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net; Ian Katz in Washington at ikatz2@bloomberg.net.

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.

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Lagarde May Stake French Claim as First Female IMF Chief

May 19, 2011, 10:05 AM EDT By Mark Deen

(Updates with bookmaker’s odds in 14th paragraph.)

May 19 (Bloomberg) -- France may have to rely on Christine Lagarde’s track record as a euro crisis fighter if she’s to become the International Monetary Fund’s first female chief after the resignation of her compatriot Dominique Strauss-Kahn.

Lagarde, 55, has the negotiating skills and an understanding of Europe’s sovereign-debt crisis needed for the post, say analysts including Charles Grant at the Centre for European Reform. IMF shareholders will assess if those qualities are enough to allow France to keep the job for itself after securing four out of the 10 managing directors since 1946.

“We should choose the best candidate, whether European, Antarctican or Uruguayan,” said Grant, executive director of the London-based research group. “The French have a record of strong candidates and the obvious one now would be Lagarde.”

The next IMF chief will be at the center of debates on determining a course for the euro region out of the sovereign debt crisis that still threatens to push the likes of Greece, Ireland and Portugal into default. Strauss-Kahn’s successor will also have to restore the Washington-based fund’s image after the former French finance minister was forced to quit today after being charged with attempted rape and other offenses in New York.

Strauss-Kahn, 62, finance minister from June 1997 to November 1999, was arrested May 14 on sexual-assault charges and is currently detained at Rikers Island prison in New York. He denies the allegations.

Jockeying Begins

Jockeying for Strauss-Kahn’s succession has already begun. European officials have closed ranks to defend their region’s 65-year hold over the top job of the fund, which has never had a female chief. Finance ministers from Sweden to Spain say the region needs one of its own to get a handle on its debt crisis.

“Christine Lagarde has outstanding credentials,” Swedish Finance Minister Anders Borg said today in an interview with Bloomberg Television. “She has a lot of experience in these matters.” Borg also said the IMF may benefit from having a woman at the helm. “The fact that half of the world has not been represented as managing director” gives Lagarde’s candidacy an additional “advantage.”

Lagarde declined to address her own candidacy today, telling reporters in Paris that the next IMF chief should come from Europe.

“Any candidate needs to come from among the Europeans,” she said.

Lagarde is among those with the “truly extraordinary profile” needed for the IMF job, especially for Europeans, said Jacob Kirkegaard of the Peterson Institute in Washington. She may be “brought into play not as a northern European candidate but as the first female head.”

Bridging Divides

A lawyer who became the first female chairman of Chicago- based firm Baker & McKenzie LLP, Lagarde was appointed as finance minister by French President Nicolas Sarkozy in 2007, just before the onset of the financial crisis.

Lagarde’s negotiating abilities helped clinch agreement on the euro area’s sovereign bailout fund announced in the early hours of May 10 last year, according to a person who was there. The 16-member group’s finance ministers worked through the night to create a 750 billion-euro fund ($1.07 trillion) to support financially distressed governments and hold the bloc together.

A fluent speaker of English, Lagarde attended a year of high school as an exchange student at Holton Arms, a private girls’ school in Bethesda, Maryland. An avid swimmer, she was selected for the French national synchronized swim team when she was 15 and competed internationally for two years.

Judicial Inquiry

Lagarde is the favorite for the job, according to odds at London-based bookmaker William Hill Plc said today. It is offering six pounds ($9.71) for every four bet that Lagarde will be the next IMF head, down from odds of 20-1 previously.

Lagarde still faces legal challenges of her own that could overshadow any candidacy. Jean-Louis Nadal, the public prosecutor attached to France’s highest appeals court, this month requested a judicial inquiry into whether she abused powers in reaching a settlement with businessman Bernard Tapie. Lagarde says the allegations are without foundation.

Her potential candidacy faces opposition from nations including South Africa and Russia. Trevor Manuel, head of South Africa’s National Planning Commission, is “highly respected in the world,” Finance Minister Pravin Gordhan said in Pretoria yesterday. Russian central bank Deputy Chairman Sergei Shvetsov said a developing country should be given the chance to run the IMF to better reflect their role in global trade.

‘Disproportionate’

“For a long time people have been saying there have been a disproportionate number of Frenchmen at the top of international organizations,” said John Llewellyn, a researcher at Chatham House in London and a former official at the Paris-based Organization for Economic Cooperation and Development.

Former U.K. Chancellor of the Exchequer Alistair Darling, Bank of Canada Governor Mark Carney and Kemal Dervis, an ex- Turkish economics minister, would be other possible candidates, economists said.

Emerging nations have nevertheless failed to indicate they will rally behind one candidate. That may leave the way open for Europe to get a lock on the position again.

“The way should be open to everybody,” said Uri Dadush, director of international economics at the Carnegie Endowment for International Peace in Washington. Still, “Christine Lagarde would be also an outstanding candidate. She should be put up on her own merits and may even prevail.”

--With assistance from Sandrine Rastello in Washington and Francine Lacqua in London. Editors: James Hertling, Jeffrey Donovan

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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