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With IMF race heating up, a choice for Mr. Harper

Bank of Canada Governor Mark Carney.

Sean Kilpatrick/Sean Kilpatrick/The Canadian Press

Prime Minister Stephen Harper will come under pressure from his counterparts from Britain, Germany, France and Italy at this week's Group of Eight summit to back their candidate, French Finance Minister Christine Lagarde, for the open position of managing director of the International Monetary Fund.

For Mr. Harper, providing his support would be the diplomatic response. The appointment of Ms. Lagarde would continue a decades-long string of Europeans running the IMF.

But as calls grow for breaking with tradition and injecting fresh leadership at the helm of the global fund, Mr. Harper has another option when G8 talks turn to IMF candidates: Bank of Canada Governor Mark Carney.

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French President Nicolas Sarkozy, who is chairing the G8 meeting in Deauville on Thursday and Friday, and the other Europeans would be miffed by such a suggestion by Mr. Harper. But Mr. Carney is seen by many as a solid prospect, and even though the odds of a Canadian winning the job are long, his candidacy would serve to prevent the most important leadership selection in the IMF's 65-year history from becoming a sham.

Europe is aggressively trying to keep a position that it has held since the fund's inception in 1946, the result of a pact with the U.S. that has seen an American automatically chosen as the No. 2 at the fund and as the president of the World Bank.

On the weekend, Britain's Chancellor of the Exchequer George Osborne added to the cascade of support for Ms. Lagarde, calling his French counterpart an "outstanding candidate," while adding that it would be a "very good thing" to have a woman running the IMF for the first time. Last week, German Chancellor Angela Merkel spoke highly of Ms. Lagarde, and Italy offered an official endorsement.

Four Frenchmen have run the fund, including Dominique Strauss-Kahn, who resigned last week to concentrate on defending New York prosecutor's charges that he attempted to rape a hotel chambermaid.

The era of selecting the leaders of the IMF and the World Bank of geographic designation was supposed to be over. At the G20 summit in 2009 leaders said the "heads and senior leadership of all international institutions should be appointed through an open, transparent and merit-based process."

Europe appears to be taking advantage of its superior organization within the European Union to intimidate other candidates from stepping forward. If the U.S. is worried about this, it is doing nothing to stop it. U.S. Treasury Secretary Timothy Geithner said Friday in a statement that he will back a candidate "with the requisite deep experience and leadership qualities, and who can command broad support among the fund's membership." But Mr. Geithner also emphasized a process that moves quickly, which favours the status quo. And missing from Mr. Geithner's statement was any reference to the need for a merit-based approach.

There are signs that other countries sense they are being steamrolled.

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"For too long, the IMF's legitimacy has been undermined by a convention to appoint its senior management on the basis of their nationality," Australian Finance Minister Wayne Swan and South African Finance Minister Pravin Gordhan, who co-chair a G20 working group on IMF reform, said in a joint statement on Sunday.

Late Friday, the IMF's 24-member executive board did its part in creating the conditions for a legitimate succession by saying that it will take nominations for managing director until June 10, giving potential candidates the better part of three weeks to decide. The board said it will interview its top three applicants, with an aim to deciding on a new managing director by the end of June. The fund's overseers said they hope that decision can be made by consensus, but conceded that it may come down to a majority vote.

But at this stage, there appears to be a risk that the selection of the managing director will turn into one of two things, neither appealing: a coronation for Ms. Lagarde, or a tribal standoff pitting the established G8 powers against the upstart emerging markets.

Mexico's government said Sunday that it will nominate Bank of Mexico Governor Agustin Carstens, a former finance minister who has a doctorate in economics from the University of Chicago. Kazakhstan's central bank chief, the relatively unknown Grigory Marchenko, also reportedly has backing in Eastern Europe for a run at the IMF's top job.

If the G20 wants to protect the next head of the IMF from questions about his or her legitimacy, it must put forward more quality candidates. Canada is in a unique position to show leadership. Unlike many of his counterparts, Mr. Harper is in a position to propose a world-class candidate. The Oxford-trained Mr. Carney is widely respected for not only his work at home, but his contributions to global policy discussions. There would be no accusing Canada of grandstanding. Mr. Carney's economic credentials are as good as anyone's.

It might surprise some Canadians to hear that the reason Mr. Carney isn't taken seriously for the IMF job is that a vote for Canada's central bank governor would be the equivalent of a vote for the United States. By putting forward Mr. Carney, Canada's government could send a message that it does indeed have its own mind. But the most important reason to nominate Mr. Carney is to ensure Ms. Lagarde, Mr. Carstens or whoever else comes forward is forced to earn the title.

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Could Mr. Carney win? It would be difficult. Tradition favours Ms. Lagarde, while Mr. Carstens or another emerging market candidate will be the sentimental favourite. But that's just another reason to put Mr. Carney forward. It's the one way Canada could avoid choosing sides.

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About the Author
Senior fellow at the Centre for International Governance Innovation

Kevin Carmichael is a senior fellow at the Centre for International Governance Innovation, based in Mumbai.Previously, he was Report on Business's correspondent in Washington. He has covered finance and economics for a decade, mostly as a reporter with Bloomberg News in Ottawa and Washington. A native of New Brunswick's Upper St. More

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