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The fall of Dominque Strauss-Kahn raises the question of his successor. Can the European stranglehold on the position be preserved?

Amiel Ungar , | updated: 20:11

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The arrest of Dominique Strauss-Kahn has not only left the French Socialists without a seemingly shoo-in candidate for the French presidency, it has also left the International Monetary Fund without a leader. While some European officials such as Luxembourg Prime Minister Jean-Claude Juncker still hold out hope for Strauss-Kahn's exoneration, he is receiving less support from other European financial leaders and particularly from those who are female. This is a demonstration of how the European elite is no longer a men's club.

Spanish Finance Minister Elena Salgado has called the offenses "extraordinarily serious" and declared that Strauss-Kahn's victim deserved more solidarity than Strauss-Kahn. Austrian Finance Minister Maria Fekter essentially placed the loaded revolver on the table expecting Strauss-Kahn to do the right thing: "Considering the situation - that bail was denied - he has to figure out for himself that he is hurting the institution."

Although Strauss-Kahn has not yet resigned, the succession battle is already heating up and the major question being posed is whether this is a European fiefdom. The unwritten rule is that the World Bank position goes to an American, while the IMF goes to a European and most likely a Frenchman, as France has supplied the head of the organization in 25 out of the last 33 years.

Nobody is about to depose the Americans from the World Bank. The World Bank gives soft loans to developing countries and perhaps given the American experience with unsecured mortgages, they are the world's experts on soft loans.

The arrangement is preserved also because Europeans have 9 directors out of the 24 while the US member holds four votes, giving the US and Europe a majority. This was justified in the past because of the preponderant European and American financial contributions. In today's changed global economy, new and strong players have emerged who are not members of the original club. One can expect calls to assign the post to someone who is neither an American nor a European.

The IMF has helped countries over serious economic crises, such as South Korea during the 1990s. It is currently involved in bailing out Ireland, Greece and Portugal. Germany, which is insisting that the old arrangement continue, argues that only a European candidate can bring the necessary understanding to the position.

Paul Hannon of the Wall Street Journal rejects this line of argument as hypocrisy. The Europeans did not suggest a candidate from Southeast Asia when that continent was in crisis nor was a Latin American the obvious choice during the 1980s Latin American sovereign debt crisis. According to Hannon, precisely because Europe is in a huge mess, the candidate should not be a European who might bend and fudge the rules.

Another question in the IMF succession debate is what type of head? Strauss-Kahn combined economic experience with political clout. Therefore, one would be headhunting a candidate with a similar resume. There are those who would argue for a technocrat because political logic and economic logic are not always the same. Strauss Kahn was adamant against restructuring the debts of the financially insolvent European countries because he was afraid of the political repercussions within the European Union and the loss of investor confidence. It is known that the lower ranks in the IMF believed that restructuring was a better option and that with the best political will in the world if the numbers did not add up it was time to go to Plan B.

 

 





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