After approving a shortlist of candidates to succeed Christine Lagarde as head of the International Monetary Fund (IMF), European governments should announce their candidate by the end of this week.
Chief economic adviser Mohamed A. El-Erian at Allianz told Bloomberg that European governments must support a good candidate, whether inside or outside Europe, otherwise, the IMF will lose its credibility while being asked to minimize the damage caused by financial crises and currency wars.
Since the founding of the IMF and the World Bank 75 years ago, members led by the EU and the US headed both international institutions.
It is customary for the US to take over the presidency of the World Bank, and Europe to lead the IMF. This result was operationally reasonable in the wake of the Second World War.
Nevertheless, this system has become unproductive, especially after the global economy has become multi-polarized, and this tradition is losing more credibility. European governments usually prefer a political candidate rather than technical and professional expertise.
The two institutions have been under mounting internal and external pressure with very serious attempts at reform. “I remember being asked back in 2004, along with the highly respected economists and policy experts Andrew Crockett and Stanley Fischer, to allow our names to be put forward as candidates to lead the IMF,” El-Erian added.
“The aim was not to dislodge the European nominee at that time which was impossible but, instead, to encourage the IMF’s executive board to hold interviews for the post. It was hoped that this simple step could help move the two institutions toward a more merit-based, transparent and inclusive system,” he pointed out.
The economic adviser continued that the appointment process lacked job interviews as well as job descriptions.
In addition, It was also said that the candidates’ backgrounds were being examined, nevertheless, it later appeared that some of the selected candidates had queries that were supposed to easily appear in any normal security check-up.
In the case of the IMF, non-European candidates have not seen any point in entering into a process that does not give them any real chance of winning.
The process has already skipped some of the most experienced experts such as Mark Carney, Governor of the Bank of England, Former Indian central banker Raghuram Rajan, as well as Singapore Senior Minister Tharman Shanmugaratnam.
Likewise the World Bank elections, the IMF leadership would be handed over without competition to a European candidate.
It is highly unlikely that Europe will adopt a more credible approach, either through merit-based candidacy or by completely abstaining from the competition and opening an original path for others.
“European governments may lead an initiative during the first 100 days of the new presidency to apply changes to the selection process, reducing the selection of a single party based on nationality in the future,” El-Erian concluded.