It’s looking increasingly as though the proximate cause of the next big global crisis is going to be a liquidity crunch at French banks, rather than a European sovereign default. This is not the kind of stock chart that any leveraged institution likes to see:
For me the interesting thing about Christine Lagarde becoming the new managing director of the IMF is not the news itself. I said she’d get the job as long ago as May 15, and I’ve considered her a lock since May 20. Rather, the interesting thing for me is the timing: everybody expected the announcement on Thursday, the 30th, but instead it came today, the 28th. Why push things up?
Stan Fischer’s quixotic decision to throw his hat into the ring as a candidate for managing director of the IMF has been lauded by Mohamed El-Erian, who reckons that “he would likely prevail in an open, transparent and merit-based selection process.” Insofar as this is true, it’s a bit depressing.
Christine Lagarde’s international campaign to become the next head of the IMF is an attempt to maximize her credentials as the choice not only of Europe but of the rest of the world as well. The job is hers, at this point: once the US falls in behind Lagarde there’s no question that Lagarde will get the job, and with Hillary Clinton now waxing enthusiastic about how “we welcome women who are well qualified and experienced to head major organizations such as the IMF”, it’s going to be hard for the US to support anybody else. So Lagarde’s latest world tour should be seen as maneuvering to make her life as easy as possible when it comes to dealing with increasingly-powerful shareholders such as China and Brazil, after she starts in her new role.
To get an idea of the job facing the new head of the IMF, check out Patrick Wintour’s interview with Vince Cable, a UK cabinet minister who, perfectly sensibly, says that Greece is going to have to restructure its debts. Cable puts a positive spin on the idea: a “soft restructuring”, he says, with Greece staying in the euro zone, could lead to a closer political union.
Would Mohamed El-Erian have moved from Harvard to Pimco in 2007 if he was only offered the job for less than 18 months, at which point he would have to reapply for his job under a different system? Because that’s the offer that El-Erian thinks the IMF should make to Christine Lagarde:
Christine Lagarde is going to be the next managing director of the IMF. European consensus is clearly coalescing around her: she has been endorsed by Germany, France, Italy, and the UK, not to mention Jean-Claude Juncker, who chairs the euro zone finance ministers. And the only other front-runner for the job, Kemal Dervis, has now ruled himself out after the NYT published an article about an extramarital affair he had many years ago. (The woman, I understand, still works at the IMF.)
The IMF has released a one-page factsheet on the selection process for its top job, which is not very easy to understand. But the main message is reasonably clear: we have a process for choosing the managing director which we’ve followed in the past, and we’re not going to make any indication that the process will be any different this time around.