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June 12, 2011

Fischer's Entry Adds Twist To IMF Race - WSJ.com

Fischer's Entry Adds Twist To IMF Race

Israeli central banker Stanley Fischer announced a formal bid to head the International Monetary Fund, positioning himself as a dark-horse candidate as the race enters its final stages.

Mr. Fischer, a widely respected economist and a former No. 2 at the IMF, faces long odds in a contest that already has two candidates conducting high-profile global campaigns: French Finance Minister Christine Lagarde and Mexican central banker Agustín Carstens. Mr. Fischer's last-minute entry, as the IMF's nominations period closed Friday night, added a new twist in the race for the IMF's top spot, and came as the IMF was investigating a cyberattack on its network.

Ms. Lagarde, the leading candidate, has already locked down support from Europe, which holds about a third of IMF votes. She won the backing of some African nations on Friday, marking new support from developing nations. And on Sunday she won a key emerging-market endorsement when Indonesian Finance Minister Agus Martowardojo said he "personally" supports Ms. Lagarde's bid and called her the "right figure to lead the IMF." In addition, the United Arab Emirates came out in her support Sunday.

Mr. Carstens, meanwhile, has won endorsements from Latin American nations in his effort to become the first IMF chief from an emerging market and break Europe's six-decade lock on the top post. But his only backing on the IMF board so far comes from his home country.

The race for the top IMF post follows Dominique Strauss-Kahn's resignation last month after he was charged with sexual assault in New York. He denies the charges. The IMF plans to make a decision on his successor by June 30.

Mr. Fischer, who was born in what is now Zambia and is a U.S. and Israeli citizen, could draw from both advanced and developing nations. During his seven years as the IMF's deputy managing director in the 1990s, he earned widespread respect within the fund as it responded to financial crises around the world. But because he is seen as an American he's unlikely to draw support from European nations that back Ms. Lagarde or emerging-market nations that want one of their own in the top spot.

The U.S., which has about 17% of IMF votes, is widely expected to back Ms. Lagarde because of a longstanding arrangement in which a European runs the IMF and Americans take the IMF's No. 2 spot–one that Mr. Fischer once held— and the top job at the World Bank.

Amid complaints from emerging-market nations, however, the Obama administration has avoided endorsing any candidate. Officials say the U.S. will support a candidate who draws broad support, suggesting Ms. Lagarde would need some backing from emerging markets—which she's starting to gain—to win the seat. Mr. Fischer sought the top spot in 2000, with support from some developing nations, but the U.S. declined to back him.

Ms. Lagarde, speaking in Cairo Sunday, said she had "very affirmative support" from the Egyptian government for her candidacy.

She said she'd focus on continued reform of the IMF according to the "universal principles" of diversity and institutional legitimacy. "One of the priorities of the bank will be to develop the Middle East and North Africa," she said. "In applying the principles of diversity that I've been discussing, this means taking account of the particularities and the circumstances of each country."

In a statement released by the Bank of Israel Saturday evening, Mr. Fischer said he informed Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz of his "unplanned'' candidacy, a decision made after "great indecision.'' Mr. Fischer said he plans to run on his IMF experience, which would enable him "to contribute to the global economy in the post-crisis era.''

Eswar Prasad, a Cornell University economist and former IMF official, said Mr. Fischer's entry into the race means Ms. Lagarde "will have to work harder to win the job." "If she does end up clinching the job, a three-way tussle will work to her long-term benefit as it will garner her more legitimacy for having won the job in a fair fight against two well-respected opponents," he said.

Mr. Fischer would need the IMF board to waive its rules because his age, 67, is two years beyond the maximum set by the organization's bylaws for managing director. Even if he passes that hurdle, his position as Israel's central bank governor could make it tough to win the support of Arab nations and other emerging market countries.

If neither Mr. Carstens nor Ms. Lagarde can show significant strength beyond their region, Mr. Fischer has figured IMF officials, who know him well, might turn to him as a compromise pick, an official familiar with his thinking said last month.

The official said Mr. Fischer has had indications of support from nations apart from Israel. Despite the expected opposition from Arab nations, Mr. Fischer has good ties with top officials in the Palestinian banking system. George Abed, a former head of the Palestine Monetary Authority, called him "the most qualified candidate I have seen mentioned in the media so far.''

Mr. Fischer is midway through his second term at the helm of Israel's central bank. He described the IMF job opening possibly a one-time opportunity. The website of the Haaretz newspaper said Mr. Steinitz said Mr. Fischer's election would be an "certificate of honor'' for Israel.

—Bob Davis in Beijing and Linda Silaen in Jakarta contributed to this article.

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Fischer's Entry Adds Twist To IMF Race - WSJ.com

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