An unprecedented scandal involving the former head of the International Monetary Fund has left the organization’s top post vacant.
No time should be wasted in selecting a new IMF chief to ensure the organization will be able to regain its international credibility, which has been diminished by the scandal.
Former IMF managing director Dominique Strauss-Kahn, who was arrested and indicted on charges of a sexual assault on a New York hotel maid, resigned as head of the IMF.
Although he denied the charges, it was clear he was no longer in a position to direct the IMF, a world organization tasked with such important duties as overseeing economic policies of member countries. His resignation should be considered inevitable.
Hailing from France, Strauss-Kahn assumed the post of IMF managing director in 2007 after serving in such positions as French finance minister.
In the global financial crisis that followed the collapse of Lehman Brothers in the autumn of 2008, he had a major hand in leading policy coordination among the Group of 20 major countries and regions, including Japan, Europe and the United States.
In dealing with Europe’s financial crisis, Strauss-Kahn delivered good results in speedily working out bailout packages in collaboration with the European Union for such faltering economies as Greece and Ireland.
Although some have recently questioned the necessity of the IMF, Strauss-Kahn’s ability to take effective action can safely be said to have enhanced the presence of the organization.
The world’s financial markets have recovered a degree of stability, and global business activities are improving. However, many challenges remain, such as instability in the Middle East and soaring crude oil prices, in addition to the still smoldering fiscal problems in Europe. The impact the Great East Japan Earthquake may have on the world economy must also be watched.
The IMF’s role in ensuring stability of the global economy remains very important. It should continue to expedite reform of financial regulations to prevent global financial crises and rectify imbalances among world economies.
Given these key issues, the absence of a chief must not be allowed to impede the IMF’s role. The question is, who is the right person to succeed Strauss-Kahn?
There has long been a tacit agreement about the top posts of the IMF and the World Bank, both of which were established after the end of World War II: The successive heads of the IMF should be Europeans, while the presidents of the World Bank should be American.
In Europe, French Finance Minister Christine Lagarde is among the names cited as possible candidates to replace Strauss-Kahn.
However, it should be noted that the landscape of the world economy has changed drastically in recent years.
After the financial crisis that followed the Lehman Brothers’ bankruptcy, such emerging economies as Brazil, China and India have conspicuously gained strength, increasing their quota subscriptions to the IMF and therefore their say over IMF policies.
Considering that the IMF was founded about 65 years ago, the practice of reserving its top post for Europe seems to be no longer considered a matter of course. This practice should end, and candidates for the IMF’s top post from Asia and Central and South America should be considered.
It appears the United States, which holds the world’s largest quota subscription to the IMF, will have a decisive say in the selection of a new IMF head. Whether a successor to Strauss-Kahn is selected through a highly transparent process will serve as a touchstone for gauging the prospects for IMF reform.
