Rodrigo Rato: Wagging The Finger, Or Wagging The Dog?

I have already posted on my own blog about what I see as the surreal consequences which might follow from this wish becoming a reality. If what I think happens next to the Spanish economy really does happen - and I have no doubt whatsoever that the housing bubble will crash one or other of these days - then the situation will be a bit like having Menem at the head of an IMFwhich is telling Argentina that they should have thought about the consequences before getting into all that trouble……..

My interest here today, however, is more the European dimension of this process. Firstly, if it is true, as the FT seems to contend, that the European candidature will carry the field, what does this tell us about the IMF? Secondly, maybe focussing on the IMF managing directorship is to miss the point. Maybe the real horse-trading is over future control at the ECB. In other words: will this be a case of wagging the finger, or wagging the dog?

Rodrigo Rato’s position as Europe’s frontrunner to replace Horst Köhler as head of the International Monetary Fund was strengthened on Tuesday at a meeting of European Union finance ministers in Brussels.

British officials signalled support for Mr Rato, the Spanish finance minister, and he also won the endorsement of Luxembourg’s influential prime minister, Jean-Claude Juncker.

With Germany, France and Italy so far failing to put up a strong candidate, many EU diplomats believe Mr Rato, from Spain’s ruling centre-right Popular party, will emerge as Europe’s candidate to become IMF managing director.

The vacancy was discussed briefly at Tuesday’s council of EU finance ministers, but further discussions about a single European candidacy for the vacancy will resume at their next meeting in Ireland on April 2.

Gordon Brown, UK chancellor of the exchequer, has told colleagues he regards Mr Rato as the best man to replace Mr Köhler, who is expected to become German president in May.

Meanwhile Mr Juncker, who is also Luxembourg’s finance minister and tipped as a possible president of the European Commission, said he would “applaud it” if Mr Rato’s name went forward.

No other strong candidate has yet emerged, although a number of other names were circulating at Tuesday’s meeting.

Klaus Regling, the German director-general of the European Commission’s economics department, has been mentioned, but he fell out with Berlin over its budget deficit problems. Pascal Lamy, the French EU trade commissioner, has also been discussed in some quarters, though it is unlikely France would gain a second high-profile international job so soon after Jean-Claude Trichet was appointed president of the European Central Bank.

With Mr Rato the favourite for the IMF job, Spain appears to have fallen behind in the separate battle for the vacant seat on the six-member executive board of the European Central Bank.

Germany, which had originally backed the little-known Spanish candidate José Manuel Gonzáles-Páramo, is now thought to have dropped its support, partly in response to pressure from France.

France is thought to support the candidacy of Peter Praet, director of the Belgian central bank. Mr Trichet is also thought to regard Mr Praet as strongest candidate.

Ireland’s Michael Tutty, vice-president of the European Investment Bank, is the third candidate.

A final decision on the ECB vacancy will be taken at the EU summit in Brussels on March 25-26.
Source: Financial Times
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