Sarkozy backs Lagarde for IMF, China urges open race

DEAUVILLE/BEIJING Thu May 26, 2011 1:55pm EDT

France's Finance Minister Christine Lagarde announces her candidacy to head the IMF during a press conference in Paris, May 25, 2011. REUTERS/Jacky Naegelen

France's Finance Minister Christine Lagarde announces her candidacy to head the IMF during a press conference in Paris, May 25, 2011.

Credit: Reuters/Jacky Naegelen

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DEAUVILLE/BEIJING (Reuters) - Beijing dug its heels in against Western domination of the International Monetary Fund on Thursday as French frontrunner Christine Lagarde prepared to build on her headstart in the race for the top IMF job.

French President Nicolas Sarkozy, hosting talks with leaders from the G8 industrialized powers, said his country's candidate was "a woman of very great qualities" and regarded by many as a good person to run the world's primary rescue lender.

"We think it would be appropriate that the director of the IMF be a European," he said. "Everybody thinks that Christine Lagarde is a woman of very great qualities," he said.

Officials in Paris said French finance minister Lagarde was planning a support-seeking tour that would take in some of the new, more reticent, powers such as Brazil and China, following her Wednesday announcement that she was officially in the running for the post.

China joined other increasingly powerful but less developed nations to challenge an understanding in the recruitment process that has kept the top job in European hands ever since the IMF was created after World War Two.

The post of IMF managing director is up for grabs since Frenchman Dominique Strauss-Kahn, arrested on May 14 on charges of attempting to rape a New York hotel maid, quit. He denies the charges and has vowed to fight to clear his name.

Before securing the post in 2007, Strauss-Kahn toured the world in an attempt to build on the backing of Washington and Europe for a candidacy that ran into similar flak at the time.

China and other giants may be looking for a commitment that their turn will come soon, even if the 55-year-old Lagarde manages to land the post this time round.

In a statement distributed by the Chinese foreign ministry's press office, Beijing made it clear that it wanted a more open selection process.

"There is a consensus among the leaders in the G20 group that selection of the management of international financial institutions, including the International Monetary Fund, should abide by the principles of openness, transparency and being merit-based," said the faxed statement.

"China has noted that countries concerned have proposed candidates for the executive directorship of the IMF. We hope that the decision will be made through democratic consultation on the basis of these above principles."

"OUTDATED CONVENTION"

India, another one of the big developing powers that are most commonly described as the BRICS (Brazil, China, Russia, India and South Africa), was quick to defend their corner too, saying it had heard nothing of China backing Lagarde.

"There is no such communication to us from the Chinese ED (executive director) on these lines," Arvind Virmani, India's executive director at the IMF told Reuters in an interview.

In a statement on Tuesday, the eve of the announcement that Lagarde was running for the job, the top IMF representatives from Brazil, Russia, India, China and South Africa proposed "abandoning the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe."

Under the convention, Europe and Washington the top IMF post goes to a European and the top corresponding position at the World Bank on the other side of the street in Washington goes to an American.

As Lagarde plans her campaigning tour, the IMF vacancy was at most expected to come up for discussion on the sidelines of the meeting of world leaders at a G8 summit on Thursday and Friday, in the town of Deauville on France's northern coast.

Sarkozy said it was not the place for such decisions, though many African leaders have been invited to Deauville too, which could provide him with further opportunity to argue in favor of his finance minister, a fluent English-speaker who spent much of her life leading a law firm in Chicago.

While there was no comment in Deauville from Barack Obama, Washington, via U.S. Secretary of State Hillary Clinton, gave its strongest public hint so far of likely backing.

"As you know, the time frame for candidates to be put forward has a few more weeks to run, so officially the United States will be assessing and then eventually announcing its position," she told a news conference in Paris.

"Unofficially, let me say we welcome women who are well qualified and experienced to head major organizations such as the IMF," she said.

The only other declared candidate is Mexican central bank chief Agustin Carstens. While big emerging nations are demanding the job should no longer automatically go to a European they have not so far rallied behind Carstens or any other candidate.

One option floated by Brazilian Finance Minister on Wednesday was that whoever is next just finish Strauss-Kahn's uncompleted five-year term, which was to run until November 2012.

(Additional reporting by G8 summit staff in Deauville, Arshad Mohammed in Paris and Rajesh Kumar Singh in New Delhi; Writing by Brian Love; Editing by Jon Boyle)

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