Stanley Fischer Faces Uphill Battle in Race to Become Next IMF Chief

Fischer's main opponent Christine Lagarde poses fierce competition despite his proven suitability for position; Egypt and United Arab Emirates have already endorsed Lagarde.

As a world renowned economist who has helped arrange bailouts to emerging markets, Stanley Fischer certainly has the credentials to lead the IMF but internal politics and his age make him a long shot.

A former World Bank chief economist and ex-vice chairman of Citigroup, the Bank of Israel governor who announced his bid on Saturday, has an uphill battle since France's Christine Lagarde has already embarked on a world tour to woo countries' support.

"He is clearly well-suited for the job," said HSBC economist Jonathan Katz. "He is in constant contact with heads of central banks. So, even though he is in Israel now, he is influential in all global schemes and strategy."

However, at 67, Fischer is above the age limit of 65 for the job. 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.

"The chances are not great, there are obstacles along the road ... first there is the age obstacle. (Secondly) the choice is very much political. Were it purely professional one would be hard pressed to find a better person than Fischer," Israeli Finance Minister Yuval Steinitz said.

Moreover, French Finance Minister Christine Lagarde has been on a world tour to drum up support among emerging market economies, and she has increasingly been receiving the backing of Arab states. She said on Sunday she had received "very affirmative" support from the Egyptian government for her bid to become the next head of the International Monetary Fund.

Moreover, United Arab Emirates finance minister has also said that his country supports Lagarde's candidacy to lead the IMF.

But Fischer is no stranger to the campaign, having fought an unsuccessful battle more than a decade ago for the job that ultimately went to Germany's Horst Kohler.

And his experience working with emerging markets -- he was described by former U.S. Treasury Secretary Robert Rubin as the "unsung hero" of the world financial crises of the 1990s -- may win him backers this time round.

Lagarde, France's finance minister, has already received backing of the European Union and Indonesia. But the United States has yet to weigh in and some emerging market countries such as India, China, Brazil, Russia and South Africa have called for an end to Europe's grip at the international lender.

Fischer's policies are relatively known. He was deputy International Monetary Fund managing director from 1994 to 2001 and acted as the body's head in 2000. He was a key figure in the IMF's Mexican bailout after the peso crashed in the mid 1990s.

A few years later, Fischer -- born in what is now Zambia and proponent of fiscal restraint as well as globalization -- helped to arrange huge loan packages to South Korea, Thailand and Indonesia and Russia.

In a 2001 speech, Kohler said Fischer was known outside the IMF as the fund's "crisis manager" but his "real legacy is the relentless search for ways to improve the functioning of the international monetary system and prevent crises".

More recently in 2010, Fischer supported the European rescue plans to stabilize markets. In February 2011, Fischer said he still supported the Federal Reserve's quantitative easing 2, where the Fed bought U.S. government bonds to lower bond yields.

"If I had to choose between a situation in which the dollar is strong and the U.S. economy stagnates and one in which we'd have to contend with dollar depreciation but the American economy is growing, I would prefer the latter. Faster U.S. growth is crucial for the resumption of growth in the entire global economy," he said.

Fischer, who believes the center of the global economy is shifting to emerging markets, said some countries use exchange rates as a major part of economic policy. He singled out China, which has held its currency at a below-equilibrium level.

"It is very important for the IMF to develop a new framework that will regulate individual countries' intervention in setting their exchange rates and to establish norms that will define how far intervention may go," Fischer said on Feb. 8.

Fischer, who also holds Israeli citizenship, just started his second year of a second five-year term as Israel's central bank chief, and is credited with helping Israel's economy weather the global financial crisis with minimal damage.

"It's hard to imagine anyone who can fill his shoes totally," Katz said.

fischer - Haaretz - May 30 2011