BRICs call for end of European dominance at IMF

PARIS/WASHINGTON (Reuters) - Developing countries said on Tuesday it was time to end the “obsolete” tradition of the International Monetary Fund always being led by a European, though France’s finance minister appeared to strengthen her lead in the race to replace Dominique Strauss-Kahn.

China, India, Brazil, Russia and South Africa, known as the BRICs, jointly criticized European officials for suggesting the next IMF head should automatically be a European.

They said the selection should be based on competence, not nationality, and in a joint statement called for “abandoning the obsolete unwritten convention that requires that the head of the IMF be necessarily from Europe.”

French Finance Minister Christine Lagarde plans to announce her candidacy on Wednesday after the European Union reached a consensus to back her, diplomatic sources told Reuters.

The French government said China would back Lagarde as the successor to Strauss-Kahn, who quit to fight sexual assault charges.

But a rift has opened with emerging nations that say it is time for Europe’s 65-year grip on the IMF to be loosened.

Mexico’s top central banker was quoted as saying some countries are warming to his candidacy, while South Africa

and Kazakhstan may put forward their own candidates.

After Strauss-Kahn quit last week, Europe wants to stay in charge of the multilateral lender, especially at a time when it is helping to bail out Greece, Ireland and Portugal.

“It’s a European consensus,” Francois Baroin, France’s budget minister and government spokesman, told Europe 1 radio.

“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

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

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 Center government think tank in Beijing, said it was plausible that China would support Lagarde, as there weren’t many qualified candidates from China or Asia in general.

“I don’t think it matters much to China whether the next IMF head is French or any other European.”

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

One growing concern about Lagarde is a possible legal probe of her role in a 2008 payout to a prominent French businessman to settle a dispute with a state-owned bank.

Judges are due to rule on June 10 -- the deadline for when countries must submit candidates for the IMF job -- whether to launch an inquiry.

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

One European diplomatic source said some countries were lukewarm to Lagarde but that there were no obvious alternative candidates from the region.

“Some countries (in the EU) are less positive than others but, as there are no alternative candidacies, Mrs Lagarde’s is obvious,” the source said.

HOUSE ARREST

Strauss-Kahn is under house arrest on charges he tried to rape a maid at a New York hotel on May 14. He denies the charges.

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 rural Guinea. A man who says he is her brother spoke of a quiet woman who left the village after her husband died.

“(She) never created any problems for this family,” he told Reuters. “She was the quiet one. That’s how she was brought up.”

The maid’s lawyer in New York, Jeff Shapiro, told Reuters the woman was scared and her primary concern had been whether she was going to lose her job.

“It’s easy for people to say, ‘Big deal, stand up.’ Meanwhile, if you need a paycheck in order to pay your rent and support your daughter, it’s not so easy to do that. Does your employer really want to have all these problems?” he said.

NO ONE EMERGING CANDIDATE

Emerging economies say another backroom deal under which Europe maintains its grip on the IMF and an American heads the World Bank could undermine the legitimacy of the institutions.

They point to an April 2009 endorsement by the Group of 20 leading economies of “an open, transparent and merit-based selection process” for heads of the global institutions.

Still, sources in Washington have said the United States would back a European. The United States and European nations jointly have power at the IMF to decide who leads it.

Mexico’s Carstens said some countries were “sympathetic” to 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 seemed reluctant to back Carstens, with government sources saying he is seen as a long shot for the job.

South African Finance Minister Trevor Manuel may be a candidate to run the IMF. Russia has said it would back Kazakhstan’s central bank chief, Grigory Marchenko.