Rodrigo Rato, the European Union’s candidate to head the International Monetary Fund, told The Banker last year: “I need something more manageable. The IMF job is an impossible one to do well.”
The quote, even taking into account a Spanish penchant for exaggeration, is an understatement. Spain’s former finance minister is facing a series of major risks that will be very different from those his predecessors encountered.
That’s not to say that defaulted Argentina, for example, the IMF’s largest creditor, is not a bubbling volcano which could erupt at any time. Or that the issue of excess US influence in the granting of crisis finance will vanish. Or a host of other well-discussed problems will not take up time.
But Mr Rato, who looks set to be approved, since Europe traditionally nominates the IMF managing director, is facing a road full of pitfalls. It is one where the Chinese authorities are attempting to slow down the economy’s growth in a smooth fashion, with all the implications this has for the local, regional and world economy. Where the soft landing a lower dollar might provide for the US twin deficits is looking unlikely as the currency appreciates and the Bush administration refuses to acknowledge that excess budget deficits are no way to manage an economy. Where, as well as fears about the two main engines of growth for the world, India and Russia are becoming more influential with a consequent rebalancing of the global economy. Where a new agreement for the world trade system is trapped in the intransigence of various parties. Where the world has been free from financial crises of the magnitude of the Asian crisis yet the full extent of the behaviour of credit derivatives and hedge funds in a melt-down has yet to be experienced.
Mr Rato is right. It is an impossible task. But he is as well-qualified as anyone to take it on.
