Carstens in Brazil, Lagarde heads for China
June 2, 2011 Leave a comment
Angela Merkel continues to bat back question on the leadership battle. She feels that in the long-run, of course it does not make sense for the US to automatically head the World Bank and the Euro-zone the Fund. How long is a piece of string?*
Former IMF chief economist Simon Johnson continues to stir things up. After giving Ms Lagarde a less than favourable review last week, he shares some thoughts on why exactly it is so important for Europe to hold onto the IMF. Curious given that a few years ago the EU attitude risked pushing the IMF into insignificance.
Away from the press cameras and microphones, what did Ms Lagarde and Brazilian Finance Minister Guido Mantega talk about? Rumour is that Mantega is willing to back her in exchange for “a strategic position” at the Fund, perhaps that of deputy managing director, traditionally held by the US…
Carstens hit Brazil, minus the fanfare and fireworks. Responding to the lack of unified BRIC support for his candidacy he admitted that emerging markets “don’t have a co-ordination mechanism” but that also it is “more a surprise that some other countries have [already] made up their mind than that the Brics and other emerging markets are not [yet] making up their own mid”.
It’s worth looking again at how the final vote works, namely how the voting shares of the board are distributed. This post gives you an idea but perhaps we’ll do some more analysis later. The key thing to remember is that it’s the 24 countries on the Board rather than the 187 member states that vote.
Essentially, the US, with almost 17% of the voting share will be casting the deciding vote. They’re still yet to declare their support.
This reminds us that the Funds needs to reform much more than the selection process. The emerging nations need to be sufficiently represented on the board and in terms of voting shares so as to better reflect their growing financial and economic status.
*Double the length from one side to the middle!