French government says China backs Lagarde for IMF

PARIS Tue May 24, 2011 11:55pm IST

France's Finance and Economy Minister Christine Lagarde attends a G20 Globalisation conference in Paris May 23, 2011. REUTERS/Bob Edme/Pool

France's Finance and Economy Minister Christine Lagarde attends a G20 Globalisation conference in Paris May 23, 2011.

Credit: Reuters/Bob Edme/Pool

PARIS (Reuters) - China would support French Finance Minister Christine Lagarde as the next IMF chief, the French government said on Tuesday, providing backing that would put her in a leading position to succeed Dominique Strauss-Kahn.

Lagarde has emerged as the top candidate to replace Strauss-Kahn, who quit last week to fight sexual assault charges in New York, although there are signs of a rift with emerging nations that say it is time for Europe's 60-year grip on the top job at the International Monetary Fund to be loosened.

Mexico's top central banker said some countries are warming to his candidacy and there are hints that South Africa and Kazakhstan may put forward their own candidates.

European governments want to retain their traditional control over the leadership of the multilateral lender while it is involved in major bailouts of Greece, Ireland and Portugal.

A number, including Britain and Italy, have said they would back Lagarde ,and Ireland added its support on Tuesday. Germany has yet to declare, but Chancellor Angela Merkel says she rates Lagarde highly.

"It's a European consensus," Francois Baroin, France's budget minister and government spokesman, told Europe 1 radio of views on Lagarde as a contender for the job.

"The euro needs our attention. We need to have the Europeans (on board), the Chinese support the candidacy of Christine Lagarde," he said.

LEGAL PROBE A POSSIBILITY

One growing concern about Lagarde's candidacy is a possible legal probe into her role in a 2008 payout to a prominent businessman to settle a dispute with a state-owned bank. Judges will rule on June 10 -- the same date countries must submit candidates for the IMF job -- on whether to launch an inquiry.

The issue has been raised among emerging market officials at the IMF who say they have no tolerance for another scandal.

There is no other immediately obvious backup candidate from Europe.

China's Foreign Ministry said it had no comment on whether Beijing would back Lagarde, a 55-year-old former lawyer.

But conditional support for France would seem plausible after France made a special effort to reach out to Beijing this year on key G20 issues like global monetary reform and speculation in commodity markets. France presides over the G20 group of advanced and emerging nations in 2011.

Last week, the head of China's central bank, Zhou Xiaochuan, said the IMF's leadership should reflect the growing stature of emerging economies, but he stopped short of saying its new boss should be from an emerging economy.

An adviser to the People's Bank of China, Xia Bin, told Reuters a bigger issue than the succession was the United States' dominant voting share at the IMF.

Wu Qing, a researcher with the Development Research Centre government think tank in Beijing, said it seemed logical China would support Lagarde or any other well-qualified European.

"It's not likely that China would back someone from Asia, especially from within China. There still aren't many people within the Chinese system with an extensive international background," he said. "I don't think it matters much to China whether the next IMF head is French or any other European."

The IMF's board has said it will draw up a short list of three candidates and set a June 30 deadline for picking a successor.

HOUSE ARREST

While the debate over succession rages, Strauss-Kahn remains under house arrest on charges he attempted to rape a maid at a luxury New York hotel on May 14. He denies the charges and has vowed to fight to clear his name.

In a development that could strengthen the case against him, a law enforcement source said DNA found on the maid's shirt was a match to Strauss-Kahn. The source also said Strauss-Kahn made advances toward another employee at the same Sofitel hotel a day before the alleged attack.

The accuser is a 32-year-old widow who hails from a tiny village in the rural depths of Guinea with no electricity or running water. The man who says he is the brother of the victim, told Reuters he had not slept or eaten properly for days and wanted to speak to his sister, who he had not heard from in years.

NO ONE EMERGING CANDIDATE

A "gentleman's agreement" has always had a European lead the IMF and an American head the World Bank, but fast-growing emerging nations are seeking a larger role in global organizations and say a backroom deal could undermine the legitimacy of the IMF.

They point to an April 2009 endorsement by the G20 of "an open, transparent and merit-based selection process," for heads of global institutions.

Still, sources in Washington have said the United States would back a European and Canada has said the reality is a European will get the job. The United States and European nations jointly hold more than half of the IMF's votes, giving them enough power to decide who leads it.

U.S. Undersecretary of State Robert Hormats told Reuters Insider TV that Washington was talking to several countries about the IMF succession.

"There are a lot of very qualified candidates," he said.

The fund is currently being run by its No. 2 official, John Lipksy, who has said he wants to step down in August, and it has set a June 30 deadline to pick a permanent head.

South African Finance Minister Trevor Manuel, who sources say could also emerge as a candidate, said on Monday the IMF's tradition of choosing its head from Europe had to change.

"It has to be wrong for multilateral bodies to have recruitment processes where birth right is more important than ability. The old order has to pass."

Mexico's central bank governor, Agustin Carstens, said on Tuesday some countries have expressed support for his candidacy and that he has held talks with U.S. officials.

"I have heard expressions of sympathy, but most countries in a responsible way are waiting to see who the candidates are," Carstens told Bloomberg TV.

Brazil appeared reluctant to back Carstens, with government sources saying he is seen as a long shot for the job.

Meanwhile, Russia has said it would back Kazakhstan's central bank chief, Grigory Marchenko, as a candidate.

(Additional reporting Thierry Chiarello in Paris and Jiang Yan in Beijing; Writing by Catherine Bremer and Louise Egan; Editing by Jan Paschal)

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