Lagarde, Carstens on IMF shortlist

WASHINGTON, June 13, 2011 (AFP) - France's Christine Lagarde and Mexico's Agustin Carstens are on the shortlist to lead the IMF, while Israel's central bank chief, a last-minute entry, was ruled out on age grounds.

The determined backing of crisis-mired Europe made Lagarde the odds-on favorite to become International Monetary Fund managing director after her countryman Dominique Strauss-Kahn resigned on May 18 to fight sexual assault charges in New York.

Carstens, the Mexican central bank chief who has tried to break the 65-year European lock on the position, acknowledged as much to a Washington audience.

"The chances of Christine Lagarde getting elected are quite high. I'm sure that she will make a good managing director," he said at the Peterson Institute for International Economics.

The two were the only ones named late Monday when the IMF released the short list after nominations closed Friday.

The IMF did not explain why Israel's Stanley Fischer, who only declared himself at the last minute, was not on the list.

But by the Fund's bylaws, his age at 67 put him two years over the official limit for a new managing director, and obtaining a change or variance to the rules would have been a difficult process, while the executive board has given itself two weeks to reach a consensus on a new head.

The Israeli central bank governor expressed "regret" about his disqualification, saying the age restrictions were "not relevant today."

"I was hoping that the IMF board of directors would change its regulations, not only for the sake of my candidacy, but also for the sake of future candidates for the position of managing director," he added.

Two other potential candidates, a South African minister and Kazakhstan's central bank head, dropped out Friday, both saying Lagarde was certain to be chosen in an arrangement that has always favored the Europeans.

The board said it would meet with the pair in a bid to make a choice by June 30.

Lagarde, France's finance minister, and Carstens, who spent three years as IMF second deputy managing director from 2003-2006, have crisscrossed the globe seeking endorsements from the major economies whose weight is strongest in the IMF process.

Both have strong credentials, but only Lagarde, 55, has picked up major support, foremost from the powerful European bloc, where she has been deeply involved in dealing with fiscal crises.

She gained momentum in recent days with official support from Egypt, Indonesia, and a number of African countries.

Carstens has only garnered the express support of a dozen Latin American countries, which, notably, do not including Brazil or Argentina.

But the United States and Japan have yet to name their favorite; nor have the increasingly crucial BRICs emerging economies, Brazil, Russia, India and China.

Carstens, 53, lobbied US Treasury Secretary Timothy Geithner in Washington for his backing.

Geithner remained uncommitted but thinks that Carstens "has a strong mix of financial talent and political skills, making him an exceptionally capable candidate to head the IMF," said a Treasury spokeswoman.

Carstens, an orthodox, University of Chicago-trained economist, suggested Lagarde could be too deeply involved in Europe's fiscal problems to be the unbiased, unsentimental leader the IMF requires.

With Greece's debt situation and a 110-billion-euro (160-billion-dollar) IMF-European Union rescue on the rocks, critics say the IMF needs someone who is not so wedded to the eurozone.

"There could be a conflict of interest," Carstens told the Peterson Institute audience.

"We'd have a situation where the borrowers dominate a creditor institution. I think that's an issue we should consider."

Lagarde has stressed her independence and ability to serve the Fund's entire membership in trying to woo supporters.

The BRICs haven't shown their hands, but "in private they have already conceded that they are mostly likely to back Lagarde," said Brookings Institution analyst Domenico Lombardi.

They see her "as an important backstop to the European crisis," he added.

Lagarde's candidacy nevertheless faced a potential problem.

On Friday, a French court postponed a decision on whether to investigate her role in an alleged abuse-of-power scandal until July 8 -- after the target date for deciding the next IMF head.

"Lagarde's legal entanglements could throw her candidacy off track, opening up the race," said Eswar Shanker Prasad, a Cornell University professor and former IMF researcher.

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