[stop-imf] US Rejects European choice to head IMF

[Robert Weissman]

U.S., Europe at Odds Over IMF Chief


              Feb 29, 2000
	      By The Associated Press

              WASHINGTON (AP) -- The Clinton administration told Congress
today that the
              International Monetary Fund, which was heavily criticized
for its handling of the Asian
              financial crisis, has begun to implement significant
reforms. 

              Treasury Secretary Lawrence Summers testified before the
Senate Foreign Relations
              Committee one day after the Clinton administration said it
would not support Europe's
              candidate to head the IMF, Caio Koch-Weser, a top official
in the German Finance Ministry. 

              In his testimony, Summers stressed that the administration
was actively pursuing a reform
              agenda at the 182-nation IMF. 

              ``As a result of the United States' urging, IMF staff are
now working with outside experts to
              develop new tools for strengthening their safeguards against
misuse of IMF funds and to
              support higher quality auditing and information practices in
member countries,'' Summers
              said. 

              Summers said the Asian crisis in 1997 and 1998 highlighted
the need for the IMF to pay
              closer attention to problems before they explode into a
full-blown crisis. 

              ``The IMF needs to focus much more attention on financial
vulnerabilities such as those that
              played such a role in causing the crises in Asia,'' Summers
said. ``This will mean, in
              particular, a greater focus on the strength of national
balance sheets.'' 

              Summers last December put forward a package of U.S.
proposals to make broad changes in
              IMF operations that the administration hopes the agency will
adopt as a way to meet heavy
              criticism in Congress about its operations. Summers sought
to narrow the IMF's focus to
              making short-term emergency loans to countries in trouble. 

              ``Our plans for reforming the IMF start from a single
framing new reality of the global
              financial system today, that the private sector is the
overwhelming source of capital for
              growth,'' Summers said, adding that private capital and not
government money from the
              IMF should play the leading role in financing developing
countries. 

              ``We believe the IMF must increasingly reflect that change
(to larger flows of private
              financing) with a great focus on promoting financial
stability within countries, a stable flow
              of capital among them and rapid recoveries following any
financial disruptions,'' Summers
              said. 

              Summers' appearance before Congress comes at a time when the
IMF, the lead player in
              dealing with global financial problems, is in the midst of a
major struggle over who will head
              the agency. The United States believes that it is critical
for the IMF to have a strong leader
              who will be able to implement the kinds of reforms the
agency needs. 

              The White House announced Monday that the United States will
not back Europe's
              candidate, Koch-Wesser. In a weekend phone call, President
Clinton informed German
              Chancellor Gerhard Schroeder that Schroeder's deputy finance
minister was not acceptable to
              the United States, which controls 18 percent of the votes in
the institution, the largest share
              for any country. 

              White House spokesman Joe Lockhart said Clinton told
Schroeder he does not believe
              Koch-Weser meets criteria the IMF post requires: ``a strong
candidate of maximum stature''
              who would enjoy broad support from other countries. 

              ``Our objective remains to work with Europe to find a strong
European candidate who is able
              to command strong support, including from emerging market
countries,'' Lockhart told
              reporters. 

              Despite the phone call, the 15-nation European Union
unanimously endorsed Koch-Weser's
              candidacy Monday. ``Koch-Weser is a strong candidate for the
role, and we ... support
              him,'' said Gordon Brown, Britain's chancellor of the
Exchequer. 

              The endorsement followed weeks of wrangling to resolve
British and French reservations
              about the German. 

              The IMF said there would be another meeting of the agency's
24-member executive board on
              the leadership race later today and it was expected that
European officials would formally
              nominate Koch-Wesser at that time. The IMF job, last held by
Michel Camdessus of France,
              who retired two weeks ago, traditionally is filled by a
European. American Stanley Fischer,
              Camdessus' deputy, is acting director until a replacement
can be agreed. An American
              typically heads the IMF's sister institution, the World
Bank.