Europe, U.S. in battle over IMF chief

By Andrew McCathie

BERLIN (DPA): Europe's decision to press on with Caio Koch- Weser as its candidate for the top job at the International Monetary Fund (IMF) has set the stage for a fierce power struggle with Washington over the appointment for the new IMF chief.

Less than 24 hours after Washington firmly ruled out Koch- Weser, Germany's deputy finance minister, from taking over from Michel Camdessus at the IMF, both Berlin and the European Union (EU) reaffirmed the German official as their candidate for the IMF post.

Apart from underscoring the current economic tensions between the United States and its European allies, Washington's rejection of Koch-Weser again opens the way for other candidates to be nominated for the job.

Japan already came forward last week to names its own candidate for the IMF job, while African nations launched an initiative to promote U.S. national Stanley Fischer.

With the United States controlling a large chunk of the IMF's voting shares, Washington could try to hammer out a compromise with Europe over the IMF job, which is traditionally held by a European.

But the possibility of a new European candidate emerging also largely depends on France, which was also initially reluctant to support Koch-Weser's nomination.

While Portugal, which currently holds the EU presidency, called on EU states to remain united behind Koch-Weser's candidacy, German Finance Minister Hans Eichel insisted Tuesday that Berlin remained committed to Koch-Weser.

Eichel said Koch-Weser was "a very good candidate" and he went on to reject Washington's reaction to the German official's nomination as being "unfair", adding that the United States could not say who the European candidate should be.

Eichel's comments were backed up by Portuguese Finance Minister Joaquim Pina Moura, who said Tuesday: "We will use all the influence of the European Union to support his candidacy."

For its part, Washington has questioned Koch-Weser's credentials. A former World Bank official, Koch-Weser only rose to national prominence in Germany last year after the resignation of Oskar Lafontaine as finance minister. Lafontaine's successor Eichel appointed Koch-Weser to his current post in Berlin.

With the role of Germany's once powerful central bank, the Bundesbank, having largely been taking over by the European Central Bank, Berlin is keen to maintain its influence in international affairs by having a German at the top position at the IMF.

Now, Washington's rejection of Koch-Weser, conveyed to Chancellor Gerhard Schroeder in a weekend telephone call from U.S. President Bill Clinton, represents a considerable political blow to Schroeder and his promotion of Germany on the world's political stage.

As the months of wrangling over the new chief of the World Trade Organization showed, appointments to top global jobs are often the source of considerable disagreement in the international community.

This time, however, the attempt to fill the vacancy at the IMF left by the departure of Camdessus is being held to the backdrop of growing signs of friction between the United States and Europe over global economic growth.

Specifically, at last month's Group of Seven meeting in Tokyo, Washington complained that the United States had become the sole engine for world economic growth and that Europe should do more to help underpin the international economy.

Indeed, one of the more prominent victims of the United States' continuing robust economic performance has been Europe's common currency, the euro, which has been caught between the strength of the U.S. economy and more modest economic numbers emerging out of Europe.

Even more to the point, the euro has failed to live up to European leaders' pronouncements made at its 1999 launch that the common currency would soon represent a challenge to the dollar's supremacy on global markets.

While European-American ties have often been dogged by trade tensions, a criticism often raised in both the German and European political and economic circles is that America's current economic strength had given Washington too much international political clout.

Nevertheless, Paris, which is Germany's key European ally has, like Washington, misgivings about the 55-year-old Koch-Weser's candidacy. The head of France's central bank, Jean-Claude Trichet, is often mentioned as a possible European nomination for the job.

A Trichet candidacy for the IMF could also resolve another problem for the Europeans concerning Wim Duisenberg's term as president of the European Central Bank (ECB).

Under the EU compromise deal naming Duisenberg to head the ECB, the Dutchman is supposed to step down early from his six- year term and hand the post to Trichet. A Trichet appointment to the IMF would make it possible for Duisenberg to complete his full term at the ECB.