Critical juncture for IMF
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China Daily, June 30, 2011
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[By Jiao Haiyang/China.org.cn] |
Competing expectations of the International Monetary Fund (IMF) leave little time for Christine Lagarde, the French finance minister, to celebrate her victory in the contest to lead the agency.
To revive this global institution's legitimacy, she must be ready to break with conventional wisdom, which has proved largely inadequate in adapting the Fund to the new global economic reality.
And it is definitely wise for Lagarde, the first woman to head the IMF since its creation in 1944, to make it her first priority to unify the IMF's staff of 2,500 employees and 800 economists and restore their confidence in the organization.
Being a European, Lagarde's success will, to a greater or lesser extent, disappoint emerging market nations which overtly expressed displeasure with the 67-year tradition of having a European head the IMF and an American lead its sister institution, the World Bank.
Though Lagarde was appointed, as is traditional, by consensus by the Fund's 24-member board, European leaders' strong support from the start contributed hugely to her victory, which maintained Europe's dominance at the top of the international financial institution.
How will the new IMF chief respond to emerging economies' justified call for more voting power in the fund matters a lot, and will be closely watched by the international community.
Admittedly, the IMF has accelerated efforts to address under-representation of developing countries in recent years. But although its current speed of reform might be remarkable compared to most of its previous adjustments, it is no match for the phenomenal shift in the global economy from debt-laden rich countries to emerging economies.
It is hoped that the new IMF head can grasp this reality and take bold measures to restore and strengthen the agency's credibility and relevance in global governance.
Even before starting her five-year term as managing director on July 5, Lagarde will find herself deeply immersed in efforts by the IMF and the European Union to head off a Greek default that could touch off an international crisis.
The complexity and severity of the European debt crisis will pose the first test of Lagarde's leadership. She will have to tread a fine line between trying to save Europe from a possible Greek debt default and exposing the international lender too much to the huge European bailout plans.
The IMF used to be much discredited for being too harsh on developing countries in previous crises. Now, it cannot afford to be blamed again for being too lenient in dealing with the debt crisis in Europe, especially when it is kept in the hands of a European.
Hence, Lagarde shoulders the duty to prove that the IMF is a competent firefighter, not only of Europe's problems but also the world's.
