IMF should say yes to Lagarde

IN the debate about the leadership of the International Monetary Fund (IMF), an old adage comes to mind: "If it ain't broke, why fix it?" This reflection no doubt influenced George Osborne, UK Chancellor of the Exchequer, who publicly backed Christine Lagarde, IMF managing director (whose five-year term ends in July 2016), at the IMF and World Bank annual meetings last weekend. A background reason for Mr Osborne's endorsement was his action in backing Ms Lagarde for the job in 2011 after Dominique Strauss-Kahn, the previous incumbent, was forced to step down on account of excessive extra-curricular zeal in the pursuit of his duties.

There are three reasons why the world should favour Ms Lagarde's renewal. First, she is fearless in her views. Some have criticised her for engaging head-on in Federal Reserve policy battles. Her well-publicised warnings against an early rise in US interest rates have, some would say, contributed to a nervous groundswell that in the end may have tilted Fed policymakers against necessary "lift-off" and stored up inflationary problems. But her outspokenness has been healthy and her assessment correct. In a similar way she has made her views clear about the need for a Greek debt restructuring, where German, Dutch and other European creditors will have to forego debt repayments for many years. All these are positive signs of a person who knows her mind. In future crises she will stand her ground in a way that will benefit the world economy and the monetary system.

Second, she is a seasoned politician with exemplary diplomatic skills. Some commentators have criticised the practice over the past 15 years of appointing mainstream politicians as managing director. In a letter to the Financial Times, Meghnad Desai, chairman of the OMFIF advisory board, and others say the next head may need to be technocratically orientated rather than a politician, harking back to the alleged glory days of the last full-blooded technocrat, Michel Camdessus, who left in 2000.