The resignation of International Monetary Fund head Dominique Strauss-Kahn promises to set off a succession battle to lead the global lender pitting the developing world against the West.
Mr Strauss-Kahn resigned yesterday as head of the International Monetary Fund, saying he did so with great regret but must focus entirely on clearing his name of sexual assault charges.
“I want to protect this institution which I have served with honour and devotion, and especially I want to devote all my strength, all my time, and all my energy to proving my innocence,” he said.
“I want to say that I deny with the greatest possible firmness all of the allegations that have been made against me.”
His short statement paid tribute to his American-born wife, journalist Anne Sinclair, who he said he loved more than anything, and spoke of his “infinite sadness” at being compelled to leave a job to which he had also been devoted.
Five days after Mr Strauss-Kahn was arrested for allegedly sexually assaulting a maid in a posh New York hotel, the Fund, a crucial player in protecting global economic stability, has given no suggestion of what it will do.
But possible candidates have been mentioned and a fight looms over whether the next chief will come, as tradition has dictated, from Europe, or from one of the rapidly developing economies flexing their muscles on the world stage.
Mr Strauss-Kahn did not give any indication of who he wanted to succeed him.
The IMF itself has said little about the crisis and continued its work under acting director John Lipsky, signing off this week on a €78 billion Portugal bailout, releasing funds for Ireland’s bailout, and putting pressure on Pakistan to improve its fiscal management.
“The Fund will communicate in the near future on the Executive Board’s process of selecting a new Managing Director. Meanwhile, Mr. John Lipsky remains Acting Managing Director,” the IMF said in a short statement accompanying Mr Strauss-Kahn’s resignation letter. Officially, the 24-member executive board votes to fill the top post, with votes weighted based on member countries’ and region’s subscription quotas.
But traditionally it has been negotiated based on a pact that gives the United States a hold on the World Bank’s top job and Europe the IMF position.
Some European leaders have already called for another European to be named, with French finance minister Christine Lagarde and former German central banker Axel Weber mentioned as possible candidates.
In recent years, however, shifts that have given rising economies greater quotas, and dissatisfaction with the IMF’s approach to many crisis-struck countries, have sparked pressure for a broader-based pool of candidates.
The popular shortlist from emerging economies includes Turkish former UN official Kemal Dervis, Indian planner and IMF veteran Montek Singh Ahluwalia, and Mexican central banker Agustin Carstens.
“South Africa calls for a candidate from a developing country to be given the opportunity to be the managing director of the IMF,” the country’s finance minister Pravin Gordhan said on Wednesday.
“The era is over in which it may have been even remotely appropriate to reserve that important post for a European national,” Brazilian Finance Minister Guido Mantega said in a letter to G20 colleagues.
If it comes down to a board vote, the quota system favours the old economic powers: the US has 16.80 per cent of the vote; Japan 6.25 per cent; Germany 5.83 per cent; and Britain and France each have 4.3 per cent.
Meanwhile, Gordon Brown’s prospects of taking over at the IMF suffered another blow yesterday as Business Secretary Vince Cable suggested the top job should go to someone from within the eurozone.
Asked about the vacancy at the crucial body following Mr Strauss-Kahn’s departure, Mr Cable refused to comment directly on whether the former Prime Minister would be a suitable candidate. But the Liberal Democrat said Mr Strauss-Kahn has had a very successful record in economic management.