Who in the world is Christine Lagarde, and why is she in the lead to become the next Managing Director of the International Monetary Fund (IMF)?
Unless you’ve been sailing the high seas with Captain Jack Sparrow for the past couple of weeks, you should know that Dominique Strauss-Kahn, now former Managing Director of the IMF, recently resigned from his post when he was accused of sexually harassing a hotel maid in New York. Today, French Finance Minister (Ministress?) Christine Lagarde is rocking the airwaves with her candidacy as Strauss-Kahn’s replacement.
So who exactly is Christine Lagarde? Well, I found out that since 2005, she has been France’s Minister of Foreign Trade, Minister of Agriculture and Fisheries, and the first woman among the G7 economies to become the Finance and Economy Minister. Oh, and have I mentioned that she’s also a mother of two sons and a former member of the French national synchronized swimming team? Talk about being well-rounded!
Lagarde’s experience and her ability to juggle tons of responsibilities is probably the reason why many euro zone nations have given the thumbs up on her bid to become IMF chief. Heck, European Commission (EC) President Jose Manuel Barroso even specifically stated that he “fully supports” Lagarde’s candidacy!
Another reason why countries like the U.K., Germany, Russia, and Sweden have given their “yes” votes is that many predict that the IMF will be dealing with a lot more problems from the euro zone in the near future. With PIIGS still in hot water and more issues still boiling to the surface, they argue that there is a need for a European to be at the helm.
The last and probably the least significant reason for Lagarde’s advantage in getting the job is tradition. Apparently, a European has always held the top spot in the IMF, and the French have controlled the top spot for the better part of the past three decades.
The problem with this setup is that the old system doesn’t sit well with the new kids on the block. Emerging nations, more specifically the Brazil, Russia, India and China (BRIC) block, are pushing for a change in the process. They claim that the selection of the IMF top gun spot should be based on merit and NOT on tradition.
But while Brazilian Finance Minister Guido Mantega himself said that nationality shouldn’t be the basis of qualification, emerging nations can’t agree on whose bandwagon to jump in. Some are pushing for Mexican Central Bank Governor Agustin Carstens, while others are hollering for Singaporean Tharman Shanmugaratnam to take over the spotlight.
In addition, the emerging nations’ indecisiveness in supporting a single candidate becomes magnified when you take into account the veto power that the U.S. and euro zone have in the IMF. Currently, the European Union (31%) and U.S. (17%) account for a greater combined share of votes than developing countries (42%) get.
With a majority of Europe and even U.S. Treasury Secretary Tim Geithner giving Lagarde their votes of confidence, it certainly looks like she is in the pole position to win this IMF Managing Director race.
Assuming that Lagarde does win, it’ll be interesting to see how she handles her position.
On one hand, there are high expectations from her to give struggling European nations a voice and to influence other IMF members to dole out more bailout money. On the other hand, she cannot ignore the growing influence that emerging nations have on the global economy and must keep their interests in mind as well.
In any case, watch out later this month when the IMF announces who will be next Fund Director! For the meantime, time to get ready some popcorn and see how this all plays out!