European Wrangling Over IMF Job Reaches Stalemate in France

Nikos Chrysoloras, Joao Lima and Catherine Bosley
(Bloomberg) -- European governments need more time to agree on a single candidate to lead the International Monetary Fund, as a stalemate between them leaves the role vulnerable to a challenge against the continent’s traditional hold on it.More than two weeks since they first backed Christine Lagarde’s move to the European Central Bank, finance ministers are still divided on who to push as a replacement for her at the IMF. Talks at the sidelines of a Group of Seven meeting failed to make much headway, as all names floated hit a wall of diverging national preferences and grievances.“We really want to have a European being appointed and chosen as the next leader of the IMF,” French Finance Minister Bruno Le Maire told Bloomberg Television in Chantilly, France on Thursday. “I hope we can get a consensus by the end of July on a European candidate that must be of course a very strong one with all the skills required for such an important post.”Le Maire will lead deliberations to find a contender. The impasse in the meantime risks providing an opening to rival candidates from countries which have previously challenged Europe’s grip on the IMF. Previously, the continent’s galvanized support for a single candidate such as Lagarde had kept such pressure at bay.“It would be a sign of the maturity of emerging markets if they had the job,” said Steven Bell, Managing Director at BMO Global Asset Management. “Sometimes you get unexpected outcomes, as we’ve had for the European jobs.”Bank of England Governor Mark Carney, whose name entered discussions early on, has encountered opposition. Several officials involved in the talks said that Carney isn’t seen as ‘European enough’ even though he holds Irish and British passports.His strongest rival may be former Dutch Finance Minister Jeroen Dijsselbloem -- widely praised as a competent broker and deal-maker when Greek turmoil raised existential risks for the euro area. But the crisis veteran is opposed by southern EU members, mainly because of provocative comments made years ago linking the crisis to southern Europeans spending their money on “women and drinks.”The southern bloc which leads the opposition against Dijsselbloem doesn’t have a united position either. Portugal is pushing the bid of its finance minister Mario Centeno, while Spain is lobbying for its own economy minister Nadia Calvino.If the protracted standoff allowed an emerging economy candidate to gain momentum, such a development could break a decades-old practice of appointing a European to the IMF and an American at the World Bank.While that tradition has been mocked as a relic of the postwar order which doesn’t correspond to today’s global balance of power, any outsider bid would still need the backing of at least one of the pillars of the Western bloc, since the U.S. and the EU -- taken together -- hold most voting rights at the IMF.“It seems likely that Europeans will insist that a European will become the next managing director,” said Gero Jung, chief economist at Mirabaud Asset Management in Geneva, who previously worked at the IMF. “It will in the end depend on the voting rights.’The Dutch government is aggressively campaigning for Dijsselbloem, arguing that it was left out from the apportionment of top jobs at the EU, during a month of dramatic negotiations following the European elections, which saw Germany’s Ursula von der Leyen catapulted at the helm of the European Commission and France’s Lagarde at the ECB.Germany’s support for the former chairman of euro-area finance ministers’ meeting has only been lukewarm, officials involved in the process said. Meanwhile despite the opposition Carney has encountered, his candidacy remains in play, according to an EU official attending the G-7.U.S. Treasury Secretary Steven Mnuchin, who had a meeting with Carney on Wednesday, declined to say if he was backing a specific European candidate.“The objective for the board is to get the right leadership position,” he told reporters. “We’re going to work closely with the Europeans on their thoughts.”(Updates with Le Maire interview in third paragraph.)\--With assistance from Viktoria Dendrinou, William Horobin, Saleha Mohsin, Maria Tadeo and Caroline Connan.To contact the reporters on this story: Nikos Chrysoloras in Brussels at nchrysoloras@bloomberg.net;Joao Lima in Lisbon at jlima1@bloomberg.net;Catherine Bosley in Zurich at cbosley1@bloomberg.netTo contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Craig Stirling, Zoe SchneeweissFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- European governments need more time to agree on a single candidate to lead the International Monetary Fund, as a stalemate between them leaves the role vulnerable to a challenge against the continent’s traditional hold on it.

More than two weeks since they first backed Christine Lagarde’s move to the European Central Bank, finance ministers are still divided on who to push as a replacement for her at the IMF. Talks at the sidelines of a Group of Seven meeting failed to make much headway, as all names floated hit a wall of diverging national preferences and grievances.

“We really want to have a European being appointed and chosen as the next leader of the IMF,” French Finance Minister Bruno Le Maire told Bloomberg Television in Chantilly, France on Thursday. “I hope we can get a consensus by the end of July on a European candidate that must be of course a very strong one with all the skills required for such an important post.”

Le Maire will lead deliberations to find a contender. The impasse in the meantime risks providing an opening to rival candidates from countries which have previously challenged Europe’s grip on the IMF. Previously, the continent’s galvanized support for a single candidate such as Lagarde had kept such pressure at bay.

“It would be a sign of the maturity of emerging markets if they had the job,” said Steven Bell, Managing Director at BMO Global Asset Management. “Sometimes you get unexpected outcomes, as we’ve had for the European jobs.”

Bank of England Governor Mark Carney, whose name entered discussions early on, has encountered opposition. Several officials involved in the talks said that Carney isn’t seen as ‘European enough’ even though he holds Irish and British passports.

His strongest rival may be former Dutch Finance Minister Jeroen Dijsselbloem -- widely praised as a competent broker and deal-maker when Greek turmoil raised existential risks for the euro area. But the crisis veteran is opposed by southern EU members, mainly because of provocative comments made years ago linking the crisis to southern Europeans spending their money on “women and drinks.”

The southern bloc which leads the opposition against Dijsselbloem doesn’t have a united position either. Portugal is pushing the bid of its finance minister Mario Centeno, while Spain is lobbying for its own economy minister Nadia Calvino.

If the protracted standoff allowed an emerging economy candidate to gain momentum, such a development could break a decades-old practice of appointing a European to the IMF and an American at the World Bank.

While that tradition has been mocked as a relic of the postwar order which doesn’t correspond to today’s global balance of power, any outsider bid would still need the backing of at least one of the pillars of the Western bloc, since the U.S. and the EU -- taken together -- hold most voting rights at the IMF.

“It seems likely that Europeans will insist that a European will become the next managing director,” said Gero Jung, chief economist at Mirabaud Asset Management in Geneva, who previously worked at the IMF. “It will in the end depend on the voting rights.’

The Dutch government is aggressively campaigning for Dijsselbloem, arguing that it was left out from the apportionment of top jobs at the EU, during a month of dramatic negotiations following the European elections, which saw Germany’s Ursula von der Leyen catapulted at the helm of the European Commission and France’s Lagarde at the ECB.

Germany’s support for the former chairman of euro-area finance ministers’ meeting has only been lukewarm, officials involved in the process said. Meanwhile despite the opposition Carney has encountered, his candidacy remains in play, according to an EU official attending the G-7.

U.S. Treasury Secretary Steven Mnuchin, who had a meeting with Carney on Wednesday, declined to say if he was backing a specific European candidate.

“The objective for the board is to get the right leadership position,” he told reporters. “We’re going to work closely with the Europeans on their thoughts.”

(Updates with Le Maire interview in third paragraph.)

--With assistance from Viktoria Dendrinou, William Horobin, Saleha Mohsin, Maria Tadeo and Caroline Connan.

To contact the reporters on this story: Nikos Chrysoloras in Brussels at nchrysoloras@bloomberg.net;Joao Lima in Lisbon at jlima1@bloomberg.net;Catherine Bosley in Zurich at cbosley1@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Craig Stirling, Zoe Schneeweiss

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.