Paul Blustein, the author of two books about the IMF, is a nonresident fellow in the Global Economy and Development Program at the Brookings Institution and senior visiting fellow at the Centre for International Governance Innovation.
Ever since International Monetary Fund managing director Dominique Strauss-Kahn's arrest last weekend, eye-popping developments have come fast and furious — most memorably the "perp walk" the Frenchman took to face prosecutors' accusations that he sexually assaulted a hotel maid.
Now comes a spectacle that is appalling in a different way: A power grab by officials of the European Union who are insisting that they must retain their prerogative to name one of their own as Strauss-Kahn's successor at the IMF.
The Europeans will probably get their way. If so, that will be a travesty.
The chorus began to emanate from continental capitals even before the IMF chief had a chance to acquaint himself with the unpleasantries of Rikers Island. According to top policymakers in Brussels, Berlin, and elsewhere in Europe, it is necessary to continue — at least for a while longer — the "understanding" about the management of the Fund that has existed ever since its creation in the 1940s, namely that its head will be a European.
After all, they say, the eurozone is in turmoil, and the IMF is playing a central role in the rescue of several countries that belong to the currency bloc. European Commission President José Manuel Barroso, German Chancellor Angela Merkel, Belgian Finance Minister Didier Reynders, and many of their colleagues have made clear that this is no time to be handing over the Fund's reins to someone from another part of the world. "We are in a very difficult European situation, and it's quite natural that we would have a strong European influence in the IMF," Anders Borg, the Swedish finance minister, told reporters.
Talk about the shoe being on the other foot.
A logic of sorts used to pertain to the mutual-backscratching deal that gave the Europeans the managing directorship of the IMF while the presidency of the World Bank was reserved for an American. As a rookie economics reporter more than 20 years ago, I heard the following explanation from an IMF spokesman: The United States and Europe are the biggest contributors to the Fund and the Bank, while developing countries are most likely to be borrowing the institutions' money. Thus, rich countries have a legitimate claim on a majority of the votes on the institutions' boards, and they could hardly be expected to hand over control of the management to the borrowers.
This arrangement, which bestows Western powers with extra clout in global affairs, has increasingly become an affront to good international governance. Even though middle-income nations such as Brazil, China, India, South Africa, and Turkey have grown in economic size and importance — and their governments are complaining anew that some of their leading policymakers deserve consideration — the Americans and Europeans have the votes to block them. And thus the de facto IMF/World Bank leadership arrangement undermines the credibility of these vitally important institutions by making them look like tools of Washington, Paris, Berlin, and London.
But it's not just unjust and unwise; now it borders on the unethical. The crisis in the eurozone doesn't fortify the argument for keeping the top IMF post in European hands; on the contrary, it makes the opposing case more compelling than ever.
As the region most desperately in need of IMF loans — and IMF-guided discipline — Europe shouldn't get to choose the person with the greatest influence over the terms. The blatancy of that conflict of interest ought to prick the conscience of even the most hard-boiled believer in realpolitik. And the handling of the eurozone crisis to date has already aroused widespread misgivings that Europe's most powerful governments are using their sway over IMF policy to obtain deals that suit their political interests.
In rescuing Greece, Ireland and Portugal, European leaders vehemently resisted any solution that smacked of default by a eurozone country. Dismissing concerns that the crisis-stricken countries need relief from debts that are unsustainably large, Europe's high command has favored programs requiring that the debtors accept severe austerity policies in exchange for huge loans — and the IMF has gone along.