Yesterday, the BRIC countries — which now includes South Africa — officially wrote a letter saying they were not inclined to just go along with the anointing of France’s Christine Lagarde as the next head of the IMF, saying, among other things, that a promise had been made that the next IMF chief would NOT be European.
You can read the whole letter here.
This is a huge deal, due to the ongoing Euro crisis, and the fact that the IMF’s main job right now is helping out over-indebted Western nations.
We’ll rerun some commentary from CLSA’s Chris Wood, who called the idea of a Lagarde victory an “extraordinary” conflict of interest.
The issue at its most basic is very simple. That is if Germany wants to maintain the more than 50 year old Euroland experiment, it is going to have to pay for it by moving towards fiscal integration as well as monetary integration. Meanwhile, this week’s extraordinary goings on in Manhattan should accelerate the time when the International Monetary Fund (IMF) is headed by a representative of the so-called “BRICs”. GREED & fear has to admit that Dominique Strauss- Kahn has proved extraordinary successful in re-inventing the IMF by using the recent financial crisis in the West to re-invent the role of the IMF, an institution which had outlived its raison d’être. Still recent events have reminded GREED & fear of the equally extraordinary conflict of interest posed by a leading French presidential candidate heading the IMF at a time when the institution has been so heavily involved in negotiating politically sensitive bailouts in the European periphery. The reality is that for the foreseeable future IMF bailouts are likely to be taking place primarily in the debt-infested West. For that reason alone it makes sense for the head of the institution to hail from the “emerging” world.
When you consider that the official line among almost every European leader is that any kind of Greek restructuring would be a catastrophe for banks around the continent, the smooth maintenance of the status quo, from an IMF perspective, is a huge deal.