Lagarde leads IMF race, competition from Mexico

PARIS/MEXICO CITY Mon May 23, 2011 2:28pm EDT

1 of 11. France's Finance and Economy Minister Christine Lagarde arrives at a G20 Globalisation conference in Paris May 23, 2011.

Credit: Reuters/Bob Edme/Pool

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PARIS/MEXICO CITY (Reuters) - French Finance Minister Christine Lagarde's candidacy for IMF chief gained momentum in Europe on Sunday while Mexico put forward its own candidate, ensuring competition for the top job.

The Mexican Finance Ministry said it would nominate central bank chief Agustin Carstens, placing a prominent emerging market name into the race to lead the global lender.

The International Monetary Fund has promised a merit-based process to replace former leader Dominique Strauss-Kahn of France, who is under house arrest in New York on charges he attempted to rape a hotel maid.

Europeans have held the top IMF job since its creation in 1945 and Lagarde is widely considered the front-runner.

French Interior Minister Claude Gueant, a top advisor to French President Nicolas Sarkozy, said on Sunday Lagarde would make an excellent head of the Washington-based lender.

"And besides, many countries support her," he told Europe 1 radio, becoming the first member of France's cabinet to openly tout her credentials.

Germany and Britain also have signaled they would line up behind Lagarde, who has experience managing the euro-zone debt crisis the IMF is now focused on.

A senior EU official said there was virtual consensus on Lagarde in the 27-nation European Union after telephone consultations among the leaders. Her candidacy is expected to win U.S. backing, which would tip the votes in her favor at the IMF board.

Strauss-Kahn, a leading contender for the French presidency until his May 15 detention on sexual assault charges, spent his second day out on bail under electronic monitoring and armed guard at a temporary apartment in lower Manhattan. He has vowed to fight the charges.

His resignation has started a tug of war between Europe and emerging economies, which argue it is time to end 65 years of European domination of the IMF post.

In Mexico, the Finance Ministry said Carstens "has the abilities and qualifications needed to lead an institution of the relevance of the International Monetary Fund."

He was a deputy IMF managing director before joining Mexican President Felipe Calderon's administration in 2006 and headed the central bank from January 2010.

The finance ministers of Australia and South Africa also said on Sunday that the tradition of the IMF leadership going to Europe was out of date, calling on G-20 nations to honor a pledge they made two years ago for an open selection.

Oxfam spokeswoman Sarah Wynn-Williams said the IMF will undermine its legitimacy if it fails to have a selection process that better reflects the weight of countries in the global economy.

KNOWLEDGE OF EUROPE

European powers have started to close ranks behind Lagarde as their regional pick, stressing it was crucial the next managing director has knowledge of Europe.

On Saturday, British Finance Minister George Osborne said Lagarde, a 55-year-old former lawyer, was an outstanding candidate and German Chancellor Angela Merkel called her an experienced "figure of excellent standing."

With the support of Europe's three largest economies appearing to secure her the region's nomination, Lagarde may only need to secure support from the United States.

Leaders from the G-8 rich nations are expected to discuss a replacement for Strauss-Kahn at a summit this week in the French coastal resort of Deauville but it was not yet clear if they would make any formal announcement.

Lagarde, who worked as a lawyer in the United States for about 20 years and speaks flawless English, was seen to have gained allies in both developing and developed countries over the course of France's G20 presidency this year.

Her odds of getting the IMF job received a boost on Friday when former Turkish economy minister Kemal Dervis -- seen as the leading emerging market candidate -- ruled himself out of the running.

The biggest obstacle to Lagarde's prospects could come from a legal investigation into her decision to settle a dispute between the state and a businessman and friend of Sarkozy, who won a payoff of 285 million euros ($405 million).

A panel of judges is expected to decide by mid-June whether to launch a formal investigation into the case, ahead of the IMF appointment, which is expected by June 30.

Strauss-Kahn's arrest has ignited vivid debate in France, where 70 percent of Socialist supporters polled the day after his arrest said they thought he was the victim of a plot.

But many women said they thought the French media had been insensitive to the plight of the alleged victim.

Several hundred people demonstrated outside Paris' Pompidou Center on Sunday and 13,000 people signed a petition denouncing chauvinism in the portrayal of Strauss-Kahn's situation.

Strauss-Kahn has denied the charges and vowed to fight them. His wife, Anne Sinclair, has stood by him.

She left the New York apartment Sunday morning and returned mid-afternoon in a black SUV, escorted by a security guard. She did not speak to reporters gathered across the street. Three police officers guarded the entrance to the building.

(Additional reporting by Basil Katz and Daniel Flynn; Editing by Laura MacInnis and Bill Trott)

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