lagarde - AP - June 13 2011
Christine LaGarde is the leading candidate, for now. Photo by AP
Text size
AP
Bank of Israel Governor Stanley Fischer. Photo by AP

Bank of Israel Governor Stanley Fischer was awake late Friday night; but this time, he was not worried about the shekel exchange rate or a global financial crisis. Instead, Fischer was busy preparing his application for the position of head of the International Monetary Fund. The deadline was midnight in Washington - or 7 A.M. Saturday morning in Israel.

The other two candidates for the job are French Finance Minister Christine Lagarde and Mexico's chief central banker, Augustin Carstens. The 187 nations that are members of the IMF will make the decision by June 30.

Fischer, a cautious person by nature, would not have presented his candidacy at the last minute had he not received a strong hint from a senior American official that he had a chance to win the race, even if he may not be the favorite.

This was Fischer's dream job and was a once-in-a-lifetime opportunity, said a number of officials at the Bank of Israel yesterday. Fischer's family and friends all live in the United States, said the officials.

In addition, they said, Fischer's present salary as governor was NIS 37,000 a month, compared to the $420,000 annual salary - excluding various other benefits such as expenses and pension - of the IMF director-general.

Fischer also garnered unexpected support from a surprising advocate: the Palestinian prime minister. Salam Fayyad says Stanley Fischer would make a "great managing director" for the world financial body and is a "superb human being."

The Palestinian Authority does not participate in the selection process, but Fayyad said if he had a vote, he would cast it for Fischer.

Fayyad, a U.S.-trained economist and former senior IMF official, said yesterday that he has known Fischer for two decades, since the two worked together at the IMF.

Problems: Age and politics

Meanwhile, Finance Minister Yuval Steinitz told Army Radio yesterday that Fisher had little chance of winning the race to head the IMF, even though the day before Steinitz had said that "the position fits Fischer like a glove."

Steinitz and Prime Minister Benjamin Netanyahu have also not begun looking for a replacement for Fischer. Steinitz said nevertheless that he would support and aid Fischer's candidacy.

"The chances are not great, there are obstacles along the road... First, there is the age obstacle. [Second], the choice is very much political. Were it purely professional, one would be hard pressed to find a better person than Fischer," Steinitz said.

A big problem would be his age. Fischer is 67 and the IMF would have to change its rules that no one over the age of 65 be appointed to the post or hold the five-year post beyond the age of 70.

And, of course, there are the political problems involved. Fischer was born in what is now Zambia but holds Israeli citizenship, which could pose a problem for Arab countries. He is also a U.S. citizen, which could prove an obstacle as the United States traditionally claims the top job at the World Bank, while a European has always run the IMF.

Also, Fischer might not be so popular in Asia, where he remains associated with some of the harsh IMF-backed, free-market policies to fight the region's financial crisis in the late 1990s.

A Reuters poll of economists around the world in May found that 32 of 56 respondents saw Lagarde as the favorite, although Fischer won the most votes as "best suited" for the job.

Fischer officially announced on Saturday that he was running for the job vacated by Frenchman Dominique Strauss-Kahn, who resigned after his arrest on May 14 on charges of attempting to rape a New York hotel maid.

Lagarde hits the campaign trail hard

Lagarde has been on a world tour to drum up support for her bid among emerging market economies. This included a visit on Saturday to the Middle East's economic powerhouse, Saudi Arabia. "I have the honor of having been presented by Bahrain and having the support of other countries [in this region] that have expressed themselves," she said.

After meeting Egypt's finance and foreign ministers, as well as the governor of the Egyptian central bank, she told a news conference the Egyptian government had been "very affirmative" in support of her candidacy.

Lagarde is backed by the European Union and a handful of smaller countries from Georgia to Mauritius. Paris is hopeful that Washington and Beijing will also stand behind her.

"If I am elected as director-general of the institution, I would have at heart serving all member states, taking account of the diversity of economic development," Lagarde said in Cairo. "I consider myself not to be the candidate of Europe but I hope to be the candidate of a big consensus of members of the institution."

Asked about any possible restructuring of Greek debt, she said: "The goal that must guide us is stability, not something that provokes disturbance and big volatility."

Fischer, who just started his second year of a second five-year term as Israel's central bank chief, is credited with helping Israel's economy weather the global financial crisis by starting to lower Israeli interest rates sharply in 2008. He has since raised rates 10 times to contain inflation. Fischer has held top jobs at the World Bank and at Citigroup Corp.

Professionals rallyaround Stanley

Economist Nouriel Roubini said Fischer was qualified to run the IMF but would not be able to knock Lagarde off course. "Stan Fischer would make an excellent IMF managing director. But, at this late stage, he does not have enough support to succeed," Roubini said.

Mohamed El-Erian, co-chief investment officer at the world's largest bond fund company, PIMCO, said Fischer would be a popular choice at the fund, having served as its No. 2. "He is extremely well liked by the staff of the IMF, well known and genuinely respected by the member countries of the institution," El-Erian said.

One potential pitfall for Ms. Lagarde is an investigation into her role in a 2008 arbitration payout to a French businessman. A top French court Friday put off until July 8 its decision on whether to open a formal inquiry into allegations she abused her authority in approving a 285 million euro payout to a businessman friend of French President Nicolas Sarkozy.