Schroeder feels the heat from IMF errors

By Alastair Macdonald

BERLIN (Reuters): Gerhard Schroeder has lost Germany one IMF chief through carelessness and can ill afford to lose a second if he is to salvage his diplomatic credibility.

Critics put the failure of Caio Koch-Weser's bid to lead the International Monetary Fund (IMF) down to the chancellor's poor judgment of his allies and wondered on Wednesday if he had prepared the ground better for his new nominee, Horst Koehler.

"It was an unparalleled act of diplomatic hara-kiri, sloppily prepared and brought to an end without saving face," thundered the conservative Frankfurter Allgemeine Zeitung after Koch-Weser was forced to withdraw by fierce U.S. opposition.

"Moreover, there is as yet no certainty that things will go any better for Schroeder's second choice, Koehler."

Opposition conservatives, unappeased by the chancellor's decision now to put forward one of their own for the IMF post, accused him of "Rambo"-style tactics that had left close allies smarting with irritation. Foreign diplomats said Schroeder's aides had been "heavy handed" in their campaign for the job.

Despite backing from France, which had undermined Koch-Weser with its grudging support, Koehler's fate -- and Schroeder's -- hung on the still undeclared reaction of the United States, which had ultimately blocked Germany's first candidate.

President Bill Clinton's spokesman declined comment on Wednesday but said he thought there were several EU candidates. And Italian Foreign Minister Lamberto Dini, whose country has potential nominees of its own, said Koehler lacked "authority".

At stake is not just the somewhat questionable benefit of providing the often criticized global lender's managing director but also whether Germany can sway key allies its way in future after clearly rubbing many up the wrong way over the affair.

"This has been a political embarrassment for the chancellor," said Bernhard May, an expert on U.S.-German relations at the German Foreign Policy Society in Berlin.

"Domestically, it has given the opposition something they can exploit and it will weaken him in foreign policy. By irritating partners in Paris and Washington, he will have more problems, although I'm not sure it is major long-term damage."

Schroeder is no stranger to foreign policy controversy.

Having ousted Helmut Kohl 18 months ago, the Social Democrat Schroeder made little secret of his inexperience in diplomacy and his belief that his priorities lay in the domestic economy.

As the first modern German leader too young to remember Adolf Hitler, he alarmed some in Europe, especially Kohl's close allies in Paris, by saying Germany should shrug off the humility imposed by its postwar occupation and division and flex its diplomatic muscles as the world's third biggest economy.

Coinciding with the government's return to reunited Berlin, he dubbed this self-assertive Germany the "Berlin Republic".

Within two months of taking office Schroeder, who until then had led only one of Germany's regions, was using the rotating presidency of the European Union to push hard and publicly for a cut in Germany's contribution to the bloc's budget.

Months of irritable haggling produced a compromise that left Germans still shouldering the lion's share of EU bills.

Schroeder won credit from his allies for keeping Germans behind the NATO alliance as their troops went into combat in Kosovo for the first time since 1945. But his insistence on installing his controversial chief-of-staff, Bodo Hombach, as coordinator of EU aid to the Balkans exasperated some partners.

Analysts questioned why Germany so publicly and so hastily pushed Koch-Weser as soon as the IMF's French managing director, Michel Camdessus, said last autumn that he planned to retire.

There appeared to be support for Germany, which Schroeder notes is under-represented in top international posts, to get the job. But Berlin did little to sound out its allies privately in advance. U.S. officials found Koch-Weser "lightweight".

One handicap was a lack of suitable nominees on the left after 16 years in opposition. Koehler is a former aide to Kohl.

May said Schroeder's advisers, including his foreign policy counsellor Michael Steiner, must bear some responsibility.

"I wouldn't put all the blame on the chancellor," he said.

Oliver Schumacher, writing in the liberal Sueddeutsche Zeitung, also pointed the finger at those around the avowedly stubborn Schroeder and said Germany's standing was now at risk.

"For Germany's international image, it now comes down to whether their new man, Horst Koehler, gets through," Schumacher said. "If Helmut Kohl's former aide is also defeated, the chancellor really would be faced with a total wipe-out."