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U.S. Stiffens Its Opposition to European

I.M.F. Choice

 

 

         By JOSEPH KAHN

Feb 29, NY- Times-WASHINGTON, Feb. 28 -- President Clinton has vowed to block the man Europe wants to head the International Monetary Fund, setting off a possibly protracted contest for control of the financial institution and most likely casting the United States in the role of kingmaker.

 

Mr. Clinton's rejection of the candidate, Caio Koch-Weser, a German finance ministry official, makes the succession at the I.M.F. the biggest battle for leadership of a major international institution since the United States fought to oust United Nations Secretary General Boutros Boutros-Ghali and replace him with Kofi Annan in 1996.

 

The Clinton administration says that in an era when financial crises can spread at Internet speed from country to country, the German candidate does not have what it takes to be the world's chief financial firefighter.

 

The decision, relayed by Mr. Clinton in a phone call to Chancellor Gerhard Schröder of Germany on Saturday and made public today, challenges the automatic European prerogative to choose the leader of the I.M.F., a tradition that began when the fund was created just after World War II.

 

But the Clinton administration has so far declined to rub it in by backing the sole American contender for the job, leaving open the possibility that Europe could still hold onto the position by putting forth another candidate of greater stature to succeed Michel Camdessus as managing director of the fund.

 

The American, Stanley Fischer, the No. 2 official at the fund, was nominated by an unusual coalition of African and Arab countries and has demonstrated the skill to head the fund, backers say. But the Clinton administration seems likely to withhold support from him, at least initially, fearing that Europe might cripple the fund rather than see leadership pass to an American.

 

So far, Europe is standing by Mr. Koch-Weser, who has benefited from an aggressive German lobbying campaign over the last three months.  Though Mr. Clinton told Mr. Schröder of firm United States opposition on Saturday, European finance ministers, meeting in Brussels today, announced the formal backing for Mr. Koch-Weser. Some officials there indicated that the common cause of preventing an American takeover helped them to unite behind Mr. Koch-Weser, overcoming France's reluctance to back him. And some European officials think his candidacy could succeed despite United States objections.

 

The dance over I.M.F. succession shows how complex it is to select leaders for world institutions at a time when globalization is racing ahead -- and when resistance to the spread of American-style capitalism and Western ideas appears to be mounting in tandem. 

 

Since the monetary fund intervened in many of the largest developing countries in the late 1990's to help them grapple with the spread of financial panic that began in Asia, its power to influence how nations manage their economies and their currencies is by some measures at a record high.

 

Yet the process of selecting a leader for the fund is stuck in a global mindset of a half-century ago, when Europe and the United States controlled nearly every important international position and, in the case of the I.M.F. and the World Bank, simply divided the posts between them like members of a gentleman's club.

 

The Clinton administration's rejection of Mr. Koch-Weser and its decision not to throw support behind Mr. Fischer -- a combination one observer called a "half-pregnant" assertion of American power – shook that tradition but did not shatter it.

 

The United States has signaled that it wants Europe to select someone more senior and experienced than Mr. Koch-Weser but has made clear to European officials that it does not intend to deny them the right to choose.

 

"On the one hand America is saying that we should find a better candidate," says C. Fred Bergsten, who heads the Institute of International Economics and has studied ways of changing the I.M.F. "On the other hand, we are passing up a golden opportunity to end this anachronism and really open up the process."

 

The American position leaves the selection process in limbo, raising the prospect that none of the three candidates nominated for the job will ultimately get it. The Japanese have nominated Eisuke Sakakibara, a former high-level Finance Ministry official known by the nickname Mr. Yen for his role in signaling Japan's position on managing its currency.

 

I.M.F. board members may begin informal voting later this week, taking a straw poll to determine whether any of the three candidates have strong support. It is still possible that one of the candidates could gather enough support to force a formal vote. Supporters of both Mr. Fischer and Mr. Koch-Weser are working to line up support from developing countries and generate momentum.

 

Voting power at the I.M.F. is determined primarily by the amount of money donor nations contribute. The United States has a 19 percent share, more than any other single nation. The European Union has 37 percent of the votes if the 15 nations that make up that bloc vote together. In practice, I.M.F. leaders have been chosen more by general acclamation than by a simple majority of the votes.

 

Mr. Koch-Weser, a 25-year veteran of the World Bank and an expert in development policies, still vows to win the post. With Europe's firm backing now in hand, he said he intended to recruit support from developing countries. He counts China and Brazil among his early backers.  

 

"The endorsement from all the ministers came late, but it was encouraging," Mr. Koch-Weser said in a telephone interview. "Now we have to go out and mobilize support from the member governments, and I am quite confident that we can do that."

 

Supporters of Mr. Fischer, the deputy managing director, argue that he has a good shot as well.

 

Though he is Jewish and American, his candidacy was first broached by Angola and backed by nearly two dozen developing countries, including Iraq and Syria. Because the fund focuses on helping poor countries cope with capitalism, support from a diverse array of developing nations is seen as vital.

 

Mr. Fischer, a soft-spoken technocrat who ran the fund day to day under Mr. Camdessus, also has had a long and close relationship with Treasury Secretary Lawrence H. Summers. Mr. Fischer once taught Mr. Summers at the Massachusetts Institute of Technology. Some Europeans think that the United States secretly supports Mr. Fischer, a view Clinton  administration officials dismiss as a conspiracy theory with no grounding in reality.

 

Some administration officials do seem partial to Mr. Fischer but fear that the I.M.F. would become a political football if they sought to install an American in the top post. European nations put up most of the money for the fund, meaning that they could hobble its activities if they felt it had become an American protectorate. The Clinton administration also feels it does not lack for influence at the fund as things stand.

 

With the United States withholding its imprimatur on any of the current candidates, the most likely outcome is for the first round of jockeying to end in stalemate. Clinton administration officials say that they hope that that will prompt Europe to withdraw Mr. Koch-Weser from contention and produce a new candidate.

 

Publicly, there are no other European contenders for the job. But were European officials to withdraw Mr. Koch-Weser's nominaton, the speculation is that they would be inclined to nominate someone of significantly higher political stature, in part to save German face.

 

Among the long list of possible replacement candidates are Gordon Brown, Britain's current chancellor of the exchequer; Giuliano Amato, the Italian treasury secretary; Mario Draghi, the Italian treasury director; and Andrew Crockett, who heads the Bank for International Settlements in Basel, Switzerland.