The former Dutch finance minister Jeroen Dijsselbloem is one of the front runners for the top IMF job. Photo / Getty Images
The former Dutch finance minister Jeroen Dijsselbloem is one of the front runners for the top IMF job. Photo / Getty Images
COMMENT:
Once again the EU is insisting on a European candidate for the job of managing director of the IMF. Last time, in 2011, I supported such a candidate, Christine Lagarde, who got the job. She has just resigned to take over from Mario Draghi as president of the EuropeanCentral Bank in November. The IMF is now looking to replace her.
Eight years ago, I argued that Lagarde was best placed to handle the single biggest job the IMF faced this decade: to ensure that the eurozone had some professional support during its crisis years, and to prevent spillovers to the rest of the global economy.
It is one thing for the EU to insist on its own candidate when they have a good one, as they did in 2011. It is quite another when they do not. Last week European officials were considering a shortlist of candidates. Near the top was Jeroen Dijsselbloem, the former Dutch finance minister and head of the eurogroup of his eurozone counterparts.
He and some of the other candidates on the list have a lot to answer for. They pushed austerity during the eurozone crisis. Dijsselbloem once famously accused the crisis countries of spending their money on "booze and women".
EU finance ministers appear to favour him over Mark Carney, the outgoing governor of the Bank of England. Dijsselbloem is more like them. He is a national of a eurozone country. On paper, so is Carney, who is Canadian-born but holds two EU passports — from Ireland and the UK. But EU ministers do not consider him quite European enough for the job. They might as well tell him he should go back to where he came from.
Another spurious argument in favour of Dijsselbloem is that he is a socialist. The socialists did not get quite as much as they hoped for in the recent EU top jobs bazaar that led to the choice of Lagarde among others. So they need to be compensated. The IMF job is the perfect consolation prize.
At the time of writing, the EU had not made a decision about the candidate it plans to back. If the eurozone nominates Dijsselbloem or someone else who served as a prominent operative during their crisis, I would advise the other member states of the IMF to nominate their own candidate. In addition to Carney, there is Agustín Carstens, the Mexican economist who serves as general manager of the Bank of International Settlements.
If Boris Johnson becomes UK prime minister this week, as looks likely, he should co-opt Donald Trump, the US president, into supporting a joint US/UK candidate. There is strong public interest in stopping the eurozone from exporting its most toxic policymakers — and policies — to the rest of the world.
Christine Lagarde. Photo / AP
To my mind, the problem with many top EU policymakers is deep-seated economic illiteracy. Austerity was one of the great policy tragedies of our time. It is what is behind the rise of the populist League in Italy. Matteo Salvini's party is on the verge of an unprecedented power grasp.
Ursula von der Leyen, the president-elect of the European Commission, gave us an almost comic rendition of economic illiteracy during one of her hearings, when she was asked by a Green parliamentarian about Germany's current account surplus. The literal German translation is "performance surplus". Von der Leyen's incoherent response revealed that she, like Trump, views current account surpluses as a positive performance metric.
That is the level at which we are discussing economic policy in the eurozone. Such a mindset brought us the fiscal compact, a set of rules to force countries to meet a specific numeric target for the debt relative to their gross domestic product. It brought us the German debt brake, a constitutional balanced budget rule that has ended up producing persistent fiscal surpluses. And it brought Dijsselbloem into the shortlist.
There is not much the rest of the world can do about poor eurozone policy choices. But it can, and should, refuse to reward the policymakers with plum international finance jobs.
The skills needed by the next IMF managing director will be different from those required eight years ago. The successful candidate will have to deal with trade and currency wars, blurred boundaries between fiscal and monetary policies, new types of financial crises, and digital currencies.
The next decade could see deep changes in the international monetary system. It is revealing that eurozone finance ministers did not prioritise those issues in their discussions about top jobs. For them, it is all about whether someone is from the eurozone or not, from the left or the right, the north or the south.
The world needs a first-rate person to run the IMF. It should not allow Europe to treat the fund as a dumping ground for washed-up officials.
