[stop-imf] IMF leadership fight; Summers and Helms

[Robert Weissman]

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(Excerpted) Headlines for Wednesday, March 1, 2000:
                                                                                
 - IMF PLANS CRISIS SHOWDOWN OVER TOP JOB.                                      
 - SUMMERS WARNS ON DEBT RELIEF.                                                


IMF PLANS CRISIS SHOWDOWN OVER TOP JOB.

The IMF executive board will hold a crisis meeting tomorrow to try to
break the deadlock over the appointment of a new leader amid fears that
the escalating row between Europe and the US could unsettle financial
markets, reports the Guardian (UK, p.26).  With analysts drawing parallels
between the dispute over the IMF's vacant managing directorship and the
transatlantic battle over interest rates which triggered the 1987 stock
market crash, the board is due to hold a straw poll of members' views on
the three competing candidates.

Europe formally nominated Koch-Weser yesterday, notes Reuters, setting the
stage for the informal poll of IMF members and a bitter clash between
Europe and the US.  "In light of his high qualifications and broad
experience, the EU member states have unanimously agreed to present the
candidacy of Caio Koch-Weser...for the post of Managing Director of the
IMF," Joao Santos, representing EU president Portugal, said in a brief
statement.

Meanwhile, Koch-Weser said in an interview published on Wednesday the real
dispute is over the IMF's future role, reports Reuters.  "More important
than the person is defining the role of the IMF," Koch-Weser told the
Sueddeutsche Zeitung on Wednesday.  "Yes, there are differences, also with
the United States," he said. "We'll have to fight it out. I see crisis
prevention, precautionary avoidance of financial turbulence, as a very big
task. Just crisis management during emergencies is not enough."

Germany, backed by France and the UK, said yesterday it remained adamant
that its deputy finance minister, Caio Koch-Weser, was the man for the
job.  "His candidacy is certain," German Finance Minister Hans Eichel
said. "It is impossible that the US is trying to tell us who the European
candidate shall be."

"This is no declaration of war," the FT (p.6) quotes Eichel as saying.  
He expressed deep disappointment, however, at US lobbying of developing
countries in particular to block Koch-Weser's candidacy.  "Under fair
play, I understand something different," he said, accusing the US of
"punching below the belt... It hurts the candidate, but also the office."

The US rejection of the EU candidate for the IMF top job was branded by
the coordinator of German-American relations in the German Foreign
Ministry yesterday as an "unfriendly act", reports Agence France-Presse.  
Karsten Voigt is quoted as saying on Hesse region radio: "The behavior of
the USA-after Koch-Weser became the common candidate of the Europeans-is
an unfriendly act not only against Germany but against Europe as a whole."

But the US remained implacable in its opposition to Koch-Weser, the
Guardian continues, although US Treasury Secretary Larry Summers stressed
that the administration was not against another European in the post.  
"The traditions with respect to selection have served us very well,"
Summers is quoted as saying yesterday.  The Financial Times (p.1) and the
Washington Post (p.E3) also report Summers' remarks.

Observers say that neither of the two other candidates-acting IMF chief
Stanley Fischer and former Japanese Vice-Finance Minister for
International Affairs Eisuke Sakakibara-is likely to command enough
support to win the post. This suggests that the row over Koch-Weser will
be resolved either by the Americans or the Germans backing down.  The only
other option would be a formal vote of the IMF's 24-member board, but
choosing a leader in that way would be unprecedented, as the Fund
traditionally takes decisions by consensus.

"I believe there is an understanding among executive directors that if
they go with a straw poll, it will be after the nominations have been
announced and it will be after 48 hours or so," Dow Jones quotes IMF
spokesman Thomas Dawson as saying.  He added that the board faced no
deadline in the process of choosing a managing director.  The board would
make its decision either by consensus or majority vote, Dawson said.

Some insiders say the selection process, already more than three months
old, could drag on for weeks or months, although all hope for an early
resolution of the issue, continues Reuters.  "Regardless of how Fischer
and Sakakibara fare, their nominations have effectively ended the post
World War II arrangement whereby the US picked the head of the World Bank
and the Europeans picked the head of the IMF," the Washington-based Forum
for International Policy said in a statement denouncing the selection
process.  "Even if the Europeans should manage to get their man to
succeed, the contest will be wide open the next time the post comes
around."

Dow Jones adds that even if the Europeans do manage to build the simple
majority needed to get Koch-Weser into the IMF job, he won't be able to
function properly.  His relationship with the US administration would be
abrasive and he wouldn't have the clout to deal with wayward Fund members.  
Just as importantly, Koch-Weser-a 25-year veteran of the World Bank-most
likely wouldn't get the full support of the IMF staff whose relationship
with their Bank colleagues can best be described as competitive rivalry.  
Monetary sources also question whether Koch-Weser, as IMF chief, would be
able to stand up to World Bank President James Wolfensohn, his former
boss.

Meanwhile, Paul Krugman, in a New York Times op-ed (p. 31), says the
managing director of the IMF needs to be not only smart and experienced,
but also diplomatically forceful.  Now the truth is that there are plenty
of qualified Europeans; there are citizens of Britain, Italy, Sweden,
Poland who could do the job.  Still, one wonders: Is it too late for
Stanley Fischer to acquire a German passport, asks Krugman.

Also, a Wall Street Journal (p.A26) editorial dismisses all three
candidates, "find[ing] it hard to offer [the American candidate Stanley]
Fischer much praise, though he would most likely fare better in the job
than the other two candidates." The newspaper mentions bank of France
Governor Jean-Claude Trichet and newly retired Citicorp CEO John Reed as
possible candidates.

Negotiations to select the next IMF managing director are widely reported
by international media.
                                                                                
                                                                                
                                                                                


SUMMERS WARNS ON DEBT RELIEF. US Treasury Secretary Lawrence Summers
warned yesterday that the American-led international debt-relief effort
for poor nations is running low on money because of US penny-pinching, the
Wall Street Journal (p.A2) reports.  Summers said reform-minded developing
nations will be forced to divert funds from education and health programs
to pay foreign debts.

Summers blamed the US Congress's refusal to meet the administration's
funding requests.  If the US doesn't pay its contribution to the
debt-relief effort, Latin American countries will be especially hard hit,
the story says.

Meanwhile, Reuters reports that Summers, facing a hostile Congress, the US
administration yesterday struggled to defend its support for the IMF and
the World Bank as vital for American prosperity and global stability.  
Addressing the powerful Senate Foreign Relations Committee, Treasury
Secretary Lawrence Summers said the world would have been worse off during
the Asian financial crisis of 1997-1999 had it not been for the two
Washington-based lending agencies.  "These institutions help promote a
more stable world," he said. "They can help to promote vital humanitarian
objectives. And, let there be no doubt, they promote changes that are
central to our nation's economic and commercial future."

Many in Congress are vehemently opposed to the IMF, arguing that its
policies have exacerbated crises, or that they neglect workers' rights,
notes the story. The World Bank has also come in for Congressional
criticism, albeit more muted. In response, the administration has stepped
up efforts to promote reforms and greater transparency at the two bodies.  
It has also called for the IMF to be less focused on long-term financial
assistance and more on short-term emergency loans.

But Senator Jesse Helms (Republican-North Carolina), the panel's powerful
chairman, would have none of it, the story says.  "The IMF, as it now
functions, is a destructive institution which usually does more harm than
good to countries it is purporting to help," he is quoted as saying.  
"There is growing sentiment that perhaps the time has come to simply
abolish the IMF."  Only the most radical change could spare it, he said.

The IMF, Helms said, must stop "subsidizing behavior the civilized world
ought just not have to countenance":  helping governments that are
corrupt, violate human rights and use "indiscriminate military force"
against civilians.

Summers replied that IMF programs had helped much of Asia get back on its
feet after a devastating financial crisis. And those countries that had
not swallowed the Fund's often bitter medicine, such as Russia, had seen
less favorable results.

Summers, however, reiterated that the Fund should leave much of long-term
financial assistance that has characterized past IMF programs in the world
of emerging markets to the private sector.  "We believe that the IMF must
increasingly reflect that change, with a greater focus on promoting
financial stability within countries, a stable flow of capital among them
and rapid recoveries following any financial disruptions,"  Dow Jones
reports Summers told the Senate panel.  He added that the IMF, the World
Bank, and other development institutions must also reinvent their
relationships with one another.  "We intend to outline our proposals for
reforming this aspect of the international financial architecture in the
coming weeks in the lead-up to the Spring Meetings of the IMF and the
World Bank," he said.

In a press release, Reuters notes, Representative Jim Saxton
(Republican-New Jersey), the vice-chair of the Joint Economic Committee of
Congress, said he would introduce a bill forcing the IMF to concentrate on
short-term emergency lending at market interest rates.

A report for Congress due next week proposes radical reforms at both the
IMF and the World Bank, notes the story.  The IMF said it was looking at
these proposals along with other suggestions.