Strong division over Georgieva’s situation: the United States and Japan want to move her, but European countries, China and Russia prefer that she continue to lead the IMF

The board of directors of the Monetary Fund being divided on what to do with its managing director, Kristalina Georgieva, the IMF-World Bank Annual Meeting which opens on Monday in Washington will be overshadowed by the controversy surrounding the official questioned, the Financial Times said on Sunday, one of the publications with the greatest access to foreign ministries , ministries of finance and central banks. .. of the most powerful countries in the world, which are in turn those which also have the greatest influence in the decisions of the two multilateral financial entities.

The Board of Directors of the Fund is divided on the situation of Georgieva, accused by a report of a law firm hired by the current management of the World Bank, of having favored China in a report published in 2018, when she was the director of operations of this body.

On the one hand, says the influential English newspaper, the United States and Japan are aligned, wishing the departure of Georgieva. On the other hand, most of the largest European countries (notably Germany, the United Kingdom, France and Italy), to which are added Russia and China, supporters of the Bulgarian economist, who have assumed leadership of the financial entity at the end of 2019, stay ahead of the entity.

The United States and Japan are the two countries with the highest number of votes in the IMF, with 16.5% and 6.14% respectively. The voting power of China, significantly lower than its weight in the world economy, is 6.04% and that of Russia 2.59%, while Germany holds 5.31%, the United Kingdom. United and France 4.03% each and Italy 3.02%. In any case, the question is hardly settled by a simple sum of percentages. The IMF’s executive board generally decides by “consensus” (a more or less large majority) and the most important decisions must gather at least 85% of the votes, which implies that with its 16.5%, the States -United have a right of veto.

The crack

The clash of positions only deepens the suspicions of the parties involved. For the North Americans and the Japanese, that Georgieva be defended by Russia, and especially China, which it would have favored by exerting pressure on certain subordinates to improve Beijing’s position in a world ranking of the investment climate, endorses them in their suspicion that the official is not to be trusted. For China, defending Georgieva is like defending its own reputation as an economic powerhouse and strategic adversary of the United States. And for Europeans, it is a question of defending the prerogative they have had since the foundation of the institution, in 1946, of appointing one of their own to this chair, and also of deciding to leave. Most developing countries in Africa and Latin America support Georgieva’s lawsuit as she spearheaded the recent IMF capital raise, which provided them with a large injection of foreign currency.

The clash of positions around Georgieva only deepens the suspicions of each of the parties

In the specific case of Argentina, which received $ 4,334 million for this concept, without which the BCRA’s reserves would be even more meager than they are, both the government and – above all – the minister. Martin guzman, promote Georgieva’s continuity, due to the relationship they have already established with her – in the case of Guzmán, under the auspices of dad Francisco– and because they consider it less orthodox and more flexible than the rigid tradition of the organization.

Assembly

The point is that tomorrow an impressive parade of finance ministers, central bank and financier presidents, diplomats and influential figures from around the world begins in Washington, in what will be the first Assembly with a strong presence after the Assemblies that have stood in such a distant path in 2019 and 2020 in the wake of the coronavirus pandemic. Leaving the “Georgieva case” open will take attention and energy away from solving other problems. Even if he retains his functions, the institutional crisis which surrounds him will undermine the credibility and the margins of action of Georgieva, which, according to the Financial Times, “leaves few alternatives to his replacement”.

“Divided and at best moderately enthusiastic support from the managing director would undermine the effectiveness of the Fund, both in its role as an economic policy adviser and in the quality of its analysis,” said a former department manager of the Fund. cited by the FT. “Even if she goes through this storm, it will be very difficult for her to remain an effective leader for long. Criticism of it, according to unidentified sources, will cast doubt on the ability of the IMF and the World Bank to maintain firm positions and promote pro-growth reforms in their relations with governments.

Georgieva’s supporters highlight its support for poor and middle-income countries and have included issues such as climate change and gender equality on the Fund’s agenda. EThe Fund’s capital increase, which he also led, was proposed in January by Italy in turn to the rotating presidency of the G20 and received rapid support from the US Treasury and other developed countries.

What do they accuse him of

The heart of the accusation against Georgieva is that he exercised, through another former Bulgarian official, Simeon Djankov, and other department directors of the World Bank, pressure on the team in charge of the annual “Doing Business” report, to improve the qualifications and the position of China in the international ranking. The current IMF director vehemently denied the accusations, but Djankov was accused of creating a “toxic” environment of threats and extortion from World Bank staff.

“Progressive” economists like Joseph stiglitz (Nobel Prize in Economics 2001) and Jeffrey Sachs spoke out in favor of Georgieva, denouncing a “witch hunt” and a climate of cold war fueled by the rivalry between the United States and China, but another laureate, Paul Romer, former chief economist of the World Bank and Nobel laureate in economics 2018, reiterated that he left the World Bank the same year to no longer depend on Georgieva, whose “integrity” he questioned. Already then, Romer had reported manipulations around Chile’s ratings, presumably to favor Sebastián Piñera’s government over that of Michele Bachelet. Following these and other allegations, the World Bank decided a few weeks ago to discontinue the annual “Doing Business” report.

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