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Yet another European for senior post at IMF

Italian takes position as chair of IMFC

5 October 2007

In early October Italian Economy Minister Tommaso Padoa-Schioppa was selected to be the next chair of the powerful International Monetary and Finance Committee (IMFC), marking the second European in a week to be chosen for an important position at the IMF. Critics of the institution contend that it simply demonstrates yet again that the Fund is dominated by Europeans who are unwilling to give up their power.

The IMFC is the committee of finance ministers that sets the strategic direction for the IMF. The post had been held by Gordon Brown, the UK’s chancellor of the exchequer, since its creation in 1999. When he became UK prime minister over the summer, the UK place at the IMFC passed to the new chancellor Alistair Darling, but the position of chair was left to be decided. There was no formal selection process, and the IMF has said that the IMFC members themselves determined the process used. However, no official information was forthcoming on the exact steps for the selection. It is understood that IMF executive directors were responsible for the selection, which would then be confirmed by the ministers sitting on the IMFC.

After the months of discussion and wrangling, three candidates eventually came forward: Indian finance minister Palaniappan Chidambaram, Canadian finance minister Jim Flaherty, and Padoa-Schioppa. Given that Frenchman Dominique Strauss-Kahn was selected to be the managing director of the Fund only the previous week, it was widely expected that the Europeans would stand aside and support a developing country candidate to take the post. However there was vigorous campaigning by all the candidates to attract the votes of other countries right up through the end of the process. In an unexpected twist, inside sources said that in the first straw poll of the executive director, held the same day as Strauss-Kahn’s formal selection, the vote tally was eight for each candidate. Several days later press reports indicated that the the anglophone African constituency, represented at the IMFC by the Nigerian finance minister and at the board by Kenyan Peter Gakunu, switched its vote from Chidambaram to Padoa-Schioppa, forcing the Indian to bow out of the race. On 3 October, Flaherty was defeated in the final secret poll of executive directors, but this only became public because the Italian prime minister congratulated Padoa-Schioppa in a public speech in Rome that evening.

Fund watchers were surprised that the Europeans would continue to assert their dominance at the institution so closely on the heals of the acrimonious debate about the leadership selection process. Rumours also swirled that the Italians used promises of aid to entice the Africans to switch their allegiance. Celine Tan of Third World Network commented: “The IMF is already facing a credibility crisis and is losing its relevance and legitimacy as an international financial institution. If these reports on arm-twisting and jockeying for power are true, it can only aggravate the marginalisation of developing countries at the Fund and reinforce the perception that it is a club run by Europeans. This is ironic given that the new MD Dominique Strauss-Kahn won his position on a campaign ticket that pledged greater voice and representation to developing country constituencies.”