[stop-imf] European power games behind battle over IMF job (fwd)

[Robert Weissman]

European Voice=20
24 February 2000
ANALYSIS =3D Power games behind battle over IMF job

Frustration over the EU's foot-dragging in deciding who it should nominate
to head the International Monetary Fund boiled over this week, with two
non-Europeans entering the race. The move came just days before Union
finance ministers are expected to choose their candidate for the post. Tim
Jones reports on the internal battle which has delayed a decision for so
long

ON THE face of it, the row over Caio Koch-Weser's bid to head the
International Monetary Fund is just another in a depressingly long history
of meaningless spats over which business-suited bottom should rest on
which global agency hot-seat. But, for once, there is much more to it.
This simmering dispute - which is likely to be settled by EU finance
ministers at a meeting next Monday (28 February) after three months of
back-stairs wheeler-dealing - has revealed a significant shift in the
internal Union balance of power. It has also bolstered the case for a
change in the EU's rules to allow nominations for such top jobs to be
decided by qualified majority vote, after frustration with Union
foot-dragging prompted two non-Europeans to throw their hats into the ring
this week. The 'take-no-prisoners' style of German Chancellor Gerhard
Schr=F6der's campaign to make his most senior finance-ministry official
managing director of the world's top financial agency has taken even
experienced officials by surprise.

When Frenchman Michel Camdessus announced his premature resignation in
November after 12 years as IMF chief, Schr=F6der was the first internationa=
l
leader to pounce. The Americans, who traditionally hold the World Bank
presidency while the Europeans (aka the French) run the IMF, stayed out of
the fray for as long as they could. Paris was hamstrung since its obvious
candidate, Bank of France Governor Jean-Claude Trichet, is supposedly due
to take over at the European Central Bank in 2002 and would not therefore
be available for a full IMF term.

Schr=F6der lost no time in nominating Koch-Weser, an obscure World Bank
official he had only appointed to the finance ministry last April to
replace Oscar Lafontaine's lieutenant Heiner Flassbeck. The chancellor
then raised his favourite's candidacy at every gathering; at bilateral
summits with French and British leaders and repeatedly with the Americans,
most notably with President Bill Clinton at last month's Davos World
Economic Forum. In mid-January, his chief foreign-policy aide Michael
Steiner took the extraordinary step of summoning ambassadors from 40 IMF
member countries to the chancellery to plead Koch-Weser's case and
Schr=F6der followed this up with a letter and phone-call blitz to the 24
members of the fund's executive board.

"In my experience, I have never seen the Germans do anything on this scale
before - at least not for a job," said one highly experienced Union
economic-policy official who has seen some of this lobbying at first hand.
"They have acted like the French =85 I suppose that is the whole point."
Schr=F6der's high-pressure lobbying comes hard on the heels of stepped-up
German demands for a permanent seat on the United Nations' Security
Council, protectionist resistance to mobile-phone giant Vodafone
AirTouch's take-over of domestic engineering and communications firm
Mannesmann and boycotts of EU meetings where German translation has not
been provided.

French diplomats despaired in the early days of the Schr=F6der government
that the new man and his coterie in the chancellery had no comprehension
of the importance of the Franco-German axis. To Paris, it is the political
equivalent of the Clinton marriage: constantly tested to destruction but
unbreakable and mutually supportive. Since the allegations emerged that
former French President Fran=E7ois Mitterrand skimmed 15 million euro from =
a
state-backed refinery purchase in the east to pump into former Chancellor
Helmut Kohl's election campaign coffers, the EU has had a glimpse of how
far previous leaders may have gone to protect the axis.

Schr=F6der has been told many times, by French ministers and some of his
longer-standing diplomats, how important it is, and he does pay lip
service to it. But, unlike Bill and Hillary, the four-times-married
Schr=F6der appeared to consider the relationship disposable. To him, say
officials, Germany under Helmut Kohl was too supine for too long, allowing
the French in particular but also the Benelux countries to walk all over
it. When French President Jacques Chirac held out into the small hours in
May 1998 against allowing Wim Duisenberg a full eight-year term as
president of the European Central Bank, there was a lot of talk of the
political capital he had blown.

But it is only now becoming apparent just how much. Schr=F6der, watching ho=
w
his predecessor was humiliated on television back in his home state, is
said to have vowed never to let that happen to him. The no-holds-barred
way in which he imposed his man - chancellery aide Bodo Hombach - as head
of the Balkans Stability Pact last summer shocked representatives from
small countries.

"The chancellor is utterly convinced that Germany has suffered from an
unwillingness to throw its weight around," said one veteran diplomat,
arguing that this had prevented Berlin from commanding the number and
quality of top global jobs its sheer presence in the world economy
warrants.

The problem for Schr=F6der has been twofold: his candidate's inexperience a=
t
the economic top table, and - as so often seems to be the case - an
election year in the US. A new and irascible American treasury secretary
has been getting his feet under the table, and Camdessus had become a
bogeyman to Congressional Republicans, who regarded him as a 'French
Socialist' whose largesse in Asia and Russia had encouraged immorality by
rewarding the corrupt.

Treasury Secretary Larry Summers had been collared repeatedly by
Republicans during his confirmation hearings, and he responded by calling
for a new-style, pre-emptive IMF at a speech to the London School of
Economics before Christmas. The criticism of Camdessus was implicit and
also unfair, given that Summers had been intimately involved - not to say
instrumental - in bailing out Mexico and Indonesia.

The failure of the Europeans to unite behind a candidate gave Summers the
opportunity to break with tradition and promote his own candidate: the
highly- respected number two at the IMF, Stanley Fischer, who has now been
formally nominated for the post by a group of African countries. Even the
normally reticent Japanese emerged with a candidate of their own in the
shape of former Finance Minister Eisuke Sakakibara, who also became an
official contender this week.

This in turn allowed the French government to argue that Koch-Weser's
inexperience would effectively downgrade the status of one of the
supranational jobs of which it is so fond, since his predecessors
Camdessus and Jacques De Larosi=E8re had both been Bank of France governors
before they took the plane to Washington.

Paris' claim, which French officials relayed to their counterparts in
Berlin, was that the Americans just would not wear Koch-Weser - a notion
that tickles their EU partners. "The idea that the French were standing up
for American interests just makes you want to laugh out loud," said one
diplomat who heard the arguments presented.

However, the French were not alone. The British had a similar problem with
Koch-Weser. Since Gordon Brown became UK finance minister in spring 1997
and the Asian crisis struck, the UK treasury has taken a closer interest
in the workings of the IMF and how it could be made more pre-emptive in
dealing with financial meltdowns.

Brown never had the slightest intention of swapping British politics for
Washington, despite stories to the contrary in some newspapers. He did,
however, favour putting a real heavy-hitter into the job: a
pre-Kohl-crisis Theo Waigel, former UK Finance Minister Kenneth Clarke or
even ex-Commissioner Sir Leon Brittan. But he would not have said no to
Andrew Crockett, a former British treasury official who had since taken
over as chief of the Bank for International Settlements in Basle.

Officials say Paris would not accept the appointment of another Briton to
such a top post, following the elevation of George Robertson to head NATO
and the perception that the European Commission has been turned over to
euro-pinching British shopkeepers who know the cost of everything and the
value of nothing.

The EU's smaller countries are hoping that a proposal from the Portuguese
presidency that the Intergovernmental Conference on EU treaty reform
should consider abolishing national vetoes for these decisions will take
flight.

But grey-haired small-state officials are sceptical. "Even if that was
agreed, don't try to tell me that a German, French or British-backed
candidate will not be a lot more equal than all the others put together,"
said one.