Translated material
French Revolution
Dominique Strauss-Kahn will try to save the IMF
French politician Dominique Strauss-Kahn was officially announced Friday as the new managing director of the International Monetary Fund. In three weeks, when the annual meeting of shareholders of the IMF and the World Bank ends in Washington, Strauss-Kahn will replace the Spaniard Rodrigo de Rato, who retired ahead of schedule. As is known, the only competitor of the Frenchman was the Czech head of the Institute for Financial Stability at the Bank for International Settlements in Basel, nominated by Russia."Victory of French diplomacy"
French President Nicolas Sarkozy, commenting on the election of Strauss-Kahn, called this event “a victory for French diplomacy.” Mr. Sarkozy, who made a lot of efforts for this victory, apparently accidentally let it slip. Strauss-Kahn's campaign was based on the fact that he has vast experience and the necessary qualifications to serve as head of the IMF. But Paris had to put in so much diplomatic effort to win him that Mr Sarkozy's recognition seems entirely appropriate.
Moreover, the French president added: “I want to tell the French, this is what openness means: to offer women and men on behalf of France, not attaching importance to their political past, but taking into account their qualities.” What Nicolas Sarkozy means by “openness” is that, as head of state, he makes no distinction between his political supporters and opponents. At the same time, the French president’s words about the “political past” have a specific meaning. Just a year ago, Dominique Strauss-Kahn, an influential figure in the Socialist Party, was fighting for the right to run for president of the country. In the heat of the election campaign, he pointed out that electing Mr. Sarkozy as head of state would be very “dangerous.” It is noteworthy that Nicolas Sarkozy is now trying to overcome the consequences of the economic reforms that Strauss-Kahn once carried out as Minister of Economy. While working in the socialist government of Lionel Jospin in the 1990s, the newly minted managing director of the IMF secured legislation for the French to have a 35-hour work week. Now, in order to give the economy room to grow, Nicolas Sarkozy is seeking the abolition of this norm.
However, this paradox is far from the main distinguishing feature of the current election of the IMF Managing Director. The nomination of an alternative candidate in the person of Josef Tosovski showed that Russia, as a shareholder of this organization, is capable of taking an active position in it and proposing responsible initiatives. For a foundation experiencing several deep crises at once (legitimacy, self-identification, and, finally, just a difficult financial situation), this initiative turned out to be extremely useful: many things were called by their proper names, and many problems became obvious.
“We are proud of this nomination”
The IMF said in a statement Friday that its board of directors unanimously supported Dominique Strauss-Kahn. These are the features of the procedure: if, when counting the votes cast by countries, one of the candidates has a sufficient majority, the board of directors approves such a candidate by consensus. At the same time, the real voting results may remain a secret.
Finance Minister Alexei Kudrin, who serves as Russia's governor at the IMF, certainly took a bold step by nominating Josef Toszowski. As soon as the Russian Ministry of Finance announced this, Moscow was immediately accused of wanting to split Europe, put pressure on the Czech Republic regarding the deployment of elements of the American missile defense system, and generally create confusion in the world political process. Now that the Russian candidate has been defeated, new questions will probably arise, already within Russia: why was all this done, why “risk the country’s reputation”?
“We ask ourselves a lot of questions about what we do at the IMF. Is Russia really a full-fledged member of the fund, do we have a say here or are we present as a “scenery”? There are also more fundamental questions: should we still take the fund seriously, or can we assume that from the point of view of our interests the fund has no significance and can be ignored? These are questions that not only we, but also many other countries ask ourselves,” says Alexei Mozhin, IMF executive director for Russia, in a conversation with a Vremya Novostei correspondent. He notes that Moscow in no way expected that, having become the managing director of the IMF, Mr. Toshovsky would begin to “push through” some Russian interests in the fund. The answer to all questions about the motivation of the Russian government is simple. “Russia has no interests in the IMF that differ from the interests of other countries. Our interests in the fund are healthy growth of the global economy and a stable international financial system. We know that the Russian economy depends heavily on this, and will depend even more in the future. We live in an era of globalization, and this naturally predetermines a community of interests,” says Mr. Mozhin.
Nevertheless, Moscow did not immediately come to the conclusion that it was necessary to take responsibility for competition in the electoral process. As you know, Dominique Strauss-Kahn's campaign began more than quickly. Less than two weeks after the announcement of Mr. de Rato's resignation at the end of June, the Council of Finance Ministers of the European Union has already approved the Frenchman as a single candidate. Although at that moment the IMF had not yet even announced the election of a new managing director, the winner had already been “appointed.” Since the fund has been talking for several years that the election of the head should be held on a competitive basis, the IMF board of directors finally decided to try to hold such elections. On July 12, the council issued a statement saying that any council member has the right to nominate a candidate from any country, regardless of nationality and on the basis of his professional qualifications. In fact, it was a public invitation to create competition for Dominique Strauss-Kahn.
More than a month later, the Russian Ministry of Finance announced the nomination of Josef Toshovsky, calling him "the right person in the right place at the right time." “It was necessary to find a very strong candidate, preferably an impeccable one,” recalls Alexey Mozhin. - We considered several candidates, although it was not a long list. We came to the conclusion that Mr. Toshovski is just the candidate who has all the necessary qualities. I think that from the point of view of professional experience and professional qualifications, there is simply no other biography like this. For almost 11 years, he led the central bank and faced all the challenges faced by emerging market countries - and these are the fund's main clients. And even those problems that they do not face. Everything went through - price liberalization, division of the country and division of the currency, the establishment of market economy institutions, banking and currency crises, the introduction of convertibility of the national currency... Finally, a political crisis at the end of 1997, when President Havel asked him to head the transitional government. Since 2000, he has headed the Institute for Financial Stability at the Bank for International Settlements for seven years, and this is the highest level of analysis of the development of financial markets, regulation and supervision in this area. We are very proud of this nomination."
Alexei Mozhin explains the motives of the Czech who accepted Russia’s offer to run for the post of head of the IMF as follows: “He sincerely believes in the mission of the fund, in the need to strengthen international cooperation in the field of macroeconomic management and financial policy. Finance Minister Kudrin also believes in this, so it turned out to be quite easy for them to find a common language.”
As is known, the outcome of the vote depended mainly on the position of the United States. Dominique Strauss-Kahn initially had the support of the European Union - more than 33% of the vote. Washington has repeatedly stated that it will support a European candidate, but did not say who exactly. As a result, America had to choose between two Europeans. If the US decided to abstain, the chances of the contenders would be difficult to predict. “Of course, we had no illusions, we imagined the balance of power,” says Alexey Mozhin. “But when I am asked whether Mr. Toshovski had a chance to win, I ask: why can’t a candidate with such a track record and such qualifications have a chance to win?” Isn't that an interesting question?
“In essence, the fund is fighting for survival”
Be that as it may, now Joseph Toshovsky will continue to lead the institute in Basel, and Dominique Strauss-Kahn will have to manage a very troublesome enterprise from Washington. “I am committed to immediately implementing the reforms the IMF needs to ensure that financial stability serves the international community and stimulates growth and jobs,” he said in a special statement on the occasion of his victory.
“Speaking before the board of directors as a candidate, Mr. Strauss-Kahn told us that, as a result of his travels around the world, he was struck by the extent to which the fund was at a crossroads,” says Alexey Mozhin. - He said that there is an urgent question about the relevance and legitimacy of the IMF as the main international institution ensuring financial stability. It is impossible to disagree with this. Essentially, the fund is now fighting for its survival.”
Having been the most popular international institution in the late 1990s, the IMF now turns out to be of little use to anyone. Most likely, he himself is to blame for this, or rather, those who determine his policies. While anti-globalists besieged the IMF, it itself became a victim of globalization. Possessing undoubtedly the best expert and analytical potential in the world, the fund seems to have simply “slept through” the fundamental changes that have occurred in the world in recent years.
“The old model of the IMF functioning, ‘you need our money - we’ll tell you what you should do,’ no longer works,” says Alexey Mozhin. - Today we live in a different world. None of the large emerging market countries need the fund's money. Russia's international reserves amount to 420 billion - this is more than the entire capital of the IMF. The level of reserves in India, Brazil, Mexico, Korea and other countries with emerging markets is very high, not to mention China, where reserves will soon reach one and a half trillion dollars.”
In these conditions, when the IMF’s lending function is clearly not in demand, the organization can survive, according to Mr. Mozhin, “only on the basis of the highest quality of analysis, the full confidence of the international community in this analysis, and also due to the legitimacy of the fund management system, which no one would not be questioned." The Russian director adds: “It is obvious that the fund cannot survive as a purely Western organization. It can only survive as a global organization. But to do this, it must first become such a global organization.”
The primary tasks facing Dominique Strauss-Kahn as the new head of the IMF are to develop a fair system of shareholder quotas (it is already obvious that this will not be possible before Mr. de Rato leaves) and to determine the fund’s policy in relation to the crisis situation in the global financial system. By the way, Nicolas Sarkozy recently called on German Chancellor Angela Merkel, as the current chairwoman of the G8, to pay urgent attention to the situation in the financial markets caused by the crisis in the subprime mortgage sector.
However, in addition to these problems, Dominique Strauss-Kahn has already accumulated a solid “portfolio of orders” during his election tour. In Argentina, they are waiting for him to give the go-ahead for debt restructuring within the Paris Club (the corresponding statement by the chairman of the club was received just before the vote), and in Africa - to facilitate access to the fund's resources.
Dominique Strauss-Kahn has become the tenth managing director of the International Monetary Fund since the organization's creation and the fourth Frenchman to hold this post. The first head of the IMF in 1946 was the Belgian Minister of Finance Camille Gütt, then the fund was led for a long time by the Swedes - Ivar Ruth (1951-1956) and Per Jacobsson (1956-1963). The almost forty-year French era at the IMF that followed was only “diluted” in 1973-1978 by the Dutchman Johannes Witteveen. For the rest of the 20th century, the foundation was led by the French - Pierre-Paul Schweitzer (1963-1973), Jacques de Larosiere (1978-1987) and Michel Camdessus (1987-2000). In the new century, the second managing director of the fund is changing ahead of schedule - the German Horst Köhler left his post in 2004, and the Spaniard Rodrigo de Rato is leaving now.
Dominique Strauss-Kahn, 58, one of the leaders of the Socialist Party, was a member of the National Assembly and also served twice in the government. In 1991-1993 he was Minister of Industry and International Trade, and in 1997-1999 he served as Minister of Economy, Finance and Industry. He holds a doctorate in economics from the University of Paris. During the last presidential campaign in France, Ségolène Royal lost the right to run from the Social Party for the main post in the country.