EU finance ministers back Dominique Strauss-Kahn, former French minister, for post.
After the announcement, Strauss-Kahn, 58, said: “I am determined to pursue without delay the reforms needed for the IMF to make financial stability, serve the international community, while fostering growth and employment.”
Strauss-Kahn will need to complete reforms initiated by his predecessor intended to strengthen the way the fund monitors the world economy and renovate its voting structures to better reflect the rise of economic powers like China and India.
Loss of interest
The institution aided a number of countries in crisis during the 1990s such as Indonesia, South Korea, Russia, Brazil, Argentina and Mexico.
Nearly all those countries have repaid their debt as their economies strengthened, which has an adverse effect on the IMF as it partly depends on the interest paid on loans to finance operations.
The IMF still runs lending programs for poorer nations, many of them in Africa.
Another key issue is the IMF’s relevancy, which is questioned by many countries because member voting rights and the board’s structure of representation do not reflect the strength of the new economic powers.
Under de Rato, the IMF has been trying to give more influence to the booming countries in its decisions while strengthening its monitoring of global trade imbalances and currency exchange rates.
The issue is at the heart of the debate over the unwritten tradition that leading European powers pick the head of the IMF and the United States chooses the president of the World Bank.
|Sarkozy said Strauss-Kahn’s nomination
was a victory for French diplomacy [AFP]
Strauss-Kahn’s sole rival for the top job was Josef Tosovsky, a former Czech central bank chief who was proposed last month by Russia. Tosovsky, however, was not backed by his own country.
Strauss-Kahn told the board last week: “It will be a hard task for all of us to rebuild the relevance and legitimacy of the organisation, but I am prepared to do that, and I ask you to be prepared as well.”
As the architect of France’s economic recovery in the late 1990s Strauss-Kahn won many fans in the financial markets.
As finance minister in the Soicalist government between 1997 and 1999 he cut the public deficit to qualify France for the euro and took steps that paved the way for the privatisation of some state-owned firms.
He also helped implement the controversial 35-hour work week in France – a reform the current president, Nicolas Sarkozy, says has hamstrung the economy, cut productivity and hit wages.
However the president, a political opponent of Strauss-Kahn in the past, said his selection was “a great victory for French diplomacy” after originally nominating him for the post.
Francois Hollande, Socialist Party leader, also hailed Strauss-Kahn’s election.
Jean-Christophe Cambadelis, a Socialist MP who backed Strauss-Kahn for his party’s presidential nomination last year, said: “We are proud to see DSK’s competence acknowledged on the international stage … But we are a bit bitter that the Socialists let him go.”
Strauss-Kahn’s appointment continues France’s domination of top jobs at international financial institutions.
He joins Pascal Lamy at the Geneva-based World Trade Organisation, Jean-Claude Trichet at the European Central Bank in Frankfurt and Jean Lemierre at the European Bank for Reconstruction and Development in London.