Will the IMF change its managing director age limit to suit the Europeans?

The maximum age for a candidate to be appointed Managing Director is currently under 65 years old, and currently stipulates that this person cannot hold the position of managing director beyond their 70^th birthday. However, rumours have been circulating as to whether the Fund will scrap this to shoehorn in a favoured European candidate.

Kristalina Georgieva, who is currently the World Bank chief executive and a Bulgarian national, is rumoured to be backed by the French in the leadership race. France plays a particularly powerful role in the selection process as Bruno Le Maire, the French finance minister, is coordinating the European selection process. Georgieva is however 65 years old, meaning that should she be appointed, the IMF would need to change its age limit rule.

It was reported in the Financial Times on July 26 that France had floated the option of changing the age limit, but that did not attract support from the board on Friday . The Financial Times article added that “Nonetheless, people familiar with the matter said the age limit could still be tweaked at a later stage if Ms Georgieva emerged as the board’s choice.”

Just on the same day as the publication of the article – and on the same day that France floated the age limit change – the IMF published an update entitled “Frequently Asked Questions on Managing Director (MD) Selection”. The update had a section at the very bottom of the page entitled “How can the age limit be changed? When can it be changed?”, which noted that: “The Fund’s By-Laws would need to be amended by the Board of Governors by a majority of the votes cast. The age limit could be changed either before or after the nomination period closes. A nominee who is above the age limit could not be appointed Managing Director until the By-Laws were amended to remove or modify the age limit.”

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A fragmented Europe selects three IMF managing director candidates

On Friday 26 July, Europeans identified five candidates for the position of IMF managing director ahead of the nomination deadline on 6 September. The initial list of contenders was whittled down to just three on Monday 29.

Traditionally, leadership selection at the World Bank and IMF is subject to a historic ‘gentleman’s agreement’, which has ensured that the IMF managing director has always been a European and the World Bank president a US national. IMF managing directors have disproportionately been French nationals. Of the 11 managing directors, five have been French, followed by two from Sweden, and one each from Belgium, the Netherlands, Spain and Germany. This time round, French Finance Minister Bruno Le Maire is coordinating the European selection promise.

A fragmented Europe fails to reach consensus

Customarily, Europeans select one candidate and the process of deliberation towards consensus building around that candidate is largely done behind closed doors. This time however, as Europe faces the possibility of growing fragmentation, European governments have struggled to select someone that could win enough support, with reports that the French have sought to widen the pool of candidates, not by looking outside of Europe, but by scrapping the age limit for the job.

Lagarde signs on the dotted line, gears up for first press conference

On the day of her appointment the IMF made public Lagarde’s contract, it’s interesting to examine the differences between hers’ and the one signed by her predecessor DSK…

Most are expected and unremarkable, some changes to language regarding parter/spouse and an updated salary. But papers were quick to pick up on the additional clause committing Lagarde to observe rules regarding her ethical conduct:

As managing director, you are expected to observe the highest standards of ethical conduct, consistent with the values of integrity, impartiality and discretion. You shall strive to avoid even the appearance of impropriety in your conduct.

This includes taking part in the Fund’s ethics training programme. The clause also deals more explicitly with conflicts of interest, both internal and external.

In the performance of your duties as Managing Director, you have an exclusive duty of loyalty to the Fund and shall avoid any conflict of interest or the appearance of such a conflict.

Interestingly, given that it was known by all that DSK intended to run for the French presidency, clause 2 (d) is extended to clarify:

you will not, in your personal capacity, attend political party meetings, assume any leadership role within a political party, or otherwise engage in partisan political activity.

As Alan Beattie comments, it is hard not to see these changes as a response to DSKs indiscretions and political aspirations. On the latter, Beattie mentions a proposal that “IMF MDs should sign a pledge to stay out of elected office for the first five years after they leave the Fund”.

Exit poll: What if we got to vote?

Our poll on who you think the worst candidate nominated for head of the Fund has the favourite bringing up the rear. Lagarde recieved 33.71% of the vote with Carstens on 24.72%. The rest was split between the no-runner and Mr Early Retirement

Though the end result is by now all too clear, the Board will likely keep us waiting until June 30th before putting out an official press release announcing Lagarde as the new IMF boss.

All in all a rather malagrugrous state of affairs. I’d say!

In the news: Lagarde limbers up, Brazil backs Carstens (maybe)

Today Lagarde meets with the IMF board following meetings with IMF officials and US Treasury Secretary Timothy Geithner yesterday. Although still a long-shot, Carstens may be buoyed somewhat by the news that Brazil may back him after all. Paulo Nogueira-Batista, Brazil’s executive director at the Fund was quoted as saying “Brazil may well decide to support Carstens”. More symbolic than anything (their chair commands 2.79% of the vote) it at least shows a willingness to express their grievances at the process with deeds as well as words and saves Carstens the embarrassment of not having the support of leaders from his own region. Nogueira-Batista continues, “this institution has a long way to go in undoing problematic governance structures … this [campaign] process has helped somewhat by highlighting the weaknesses”.

Domenico Lombardi, a former IMF board member pointed to the dilemma faced by many nations in voting for anyone else but Lagarde, saying that “in the end this person is going to be the managing director of the institution. There is really no sense in voting for somebody else when it’s clear who will win”.

Still looming is the French courts’ decision on whether to pursue legal action against Lagarde for accusations of abuse of office over a settlement between businessman Bernard Tapie and the French government. Recent reports suggest that an official under her ministry’s authority is too under investigation.

The IMF board will meet on June 28 to discuss the candidates, announcing the victor by June 30.