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IMF Chief Choice Splits US, Europe

March 1, 2000

WASHINGTON (AP) _ The split between the United States and Europe over the top job at the International Monetary Fund widened Tuesday as Europe pushed ahead with its candidate one day after Clinton administration officials bluntly let it be known that they considered him unacceptable.

German Finance Minister Hans Eichel called the candidacy of Deputy German Finance Minister Caio Koch-Weser ``certain″ and said, ``It is impossible that the United States is trying to tell us who the European candidate should be.″

Germany’s IMF representative in Washington, Bernd Esdar, formally submitted Koch-Weser’s name to the 24-member executive board Tuesday night, saying ``he is the right choice″ for the job based on his years of ``global professional experience.″

But the Clinton administration did not back down either. Treasury Secretary Lawrence Summers told the Senate Foreign Relations Committee that the United States felt it was critical for the IMF’s next leader to be ``somebody who can do what needs to be done″ to institute reforms.

``We want to support a leader of the IMF who has the requisite stature, the requisite expertise, the requisite ability to command global consensus and respect and the commitment to doing what needs to be done,″ Summers told the senators.

The administration had said Monday that it did not believe Koch-Weser met those criteria. He spent 25 years at the World Bank, the IMF’s sister institution that makes loans to developing countries.

Summers was pressed during his testimony to show that the IMF is making progress in meeting a number of reform demands Congress has inserted in legislation providing U.S. financial support to the 182-nation lending agency.

The IMF took the lead in managing the global financial crisis of 1997-98, handing out billions of dollars in loans to countries in crisis from Asia to Russia and South America.

But in the process, the agency was heavily criticized, with liberals complaining the IMF’s programs caused undue suffering and rising unemployment in crisis countries, while conservatives complained the government money was being wasted to bail out investors who had made unwise choices.

``The IMF, as it now functions, is a destructive institution which usually does more harm than good,″ Sen. Jesse Helms, R-N.C. and chairman of the Senate panel, told Summers.

Helms said there was a growing sentiment that ``perhaps the time has come to simply abolish the IMF.″ He said the only way for the IMF to avoid that fate was to dramatically overhaul its procedures. Helms noted that a congressional advisory panel chaired by Alan Meltzer, an economics professor at Carnegie Mellon University in Pittsburgh, would soon issue a report with ``some important reform recommendations.″

Summers put forward a set of administration proposals last December, calling on the IMF to focus on providing short-term, emergency loans to countries in trouble and leave longer-term development loans to its sister lending agency, the World Bank.

Summers told the committee that there had already been a ``sea change″ at the IMF that has made the agency more open and accountable, including a decision last Friday that the IMF will for the first time publish its operational budget, something the United States had sought.

Traditionally, the head of the IMF has been a European while the head of the World Bank has been an American. Michel Camdessus, who led the IMF for 13 years before stepping down earlier this month, was a former head of the Bank of France.

Individual members of the IMF’s 24-member executive board last week put forward two nominations before Europe settled on Koch-Weser. IMF Deputy Managing Director Stanley Fischer, a naturalized American born in what is now Zambia, was put forward by a group of African countries, and Japan nominated Eisuke Sakikibara, a former top official in Japan’s Finance Ministry.

Summers told the Senate committee that the administration still supported the ``existing traditions″ of having a European serve as the head of the IMF.

While there could be an informal poll taken of the IMF’s executive board later this week to gauge the level of support for the three announced candidates, it was likely the leadership issue will take some time to resolve.

If Europe bows to U.S. objections and withdraws Koch-Weser’s name, other Europeans whose names have surfaced as possible candidates include Gordon Brown, Britain’s chancellor of the exchequer; Andrew Crockett, a Briton who currently heads the Bank for International Settlements in Switzerland; Jean-Claude Trichet, the head of the Bank of France, Italian Treasury Minister Giuliano Amato, and Mario Draghi, a senior Italian Treasury official.

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