IMF board blocks Fischer candidacy

Stanley Fischer, the Israeli central bank governor, voiced dismay at a decision by the International Monetary Fund board of directors to exclude him from the race to become the body’s new managing director, insisting he would have been a “natural” candidate for the job.

In a move that thwarted the economist’s already thin hopes, the board decided on Monday night to leave in place a regulation that sets an age limit of 65 for a new managing director. Mr Fischer is 67.

The decision leaves only two candidates still in contention: Christine Lagarde, the French finance minister and clear frontrunner, and Agustín Carstens, the Mexican central bank governor.

“The age restriction, which was set in the past at 65, is not relevant today,” Mr Fischer said. “I was hoping that the IMF board of directors would change its regulations, not only for the sake of my candidacy, but also for the sake of future candidates.”

He added: “I have no regrets for having submitted my candidacy. I do regret the fact that I was not given the opportunity to demonstrate my capabilities and my experience to the IMF board of directors.”

Monday’s decision by the 24-member board ended a campaign that had barely begun.

Mr Fischer, a former second-in-command at the IMF and a highly respected academic economist, formally announced his candidacy only on Saturday, leaving less than two days to make his case.

In contrast with the two remaining contenders, who have campaigned for the post vigorously in recent weeks, Mr Fischer seemed reluctant to bolster his bid either in public or in private.

He never formally presented a programme or set out detailed ideas for running the IMF.

Unlike Ms Lagarde and Mr Carstens, Mr Fischer apparently also failed to secure open or tacit backing from any government outside Israel. Officials said even Benjamin Netanyahu, the Israeli prime minister and a long-standing admirer of Mr Fischer’s work, was told about the bid only a few days before the deadline.

Officials and analysts in Israel suggested that Mr Fischer, who repeatedly made clear his enthusiasm for the IMF post, was aware that his bid had only a low chance of success.

“From his point of view, it is understandable,” said Leonardo Leiderman, chief economist at Israel’s Bank Hapoalim and a professor at Tel Aviv University. “For Stanley Fischer, this was an opportunity to serve in a post that he himself and many other economists thought he was extremely talented for. So of course he would rather try than rule himself out from the outset and wait on the sidelines.”

Mr Fischer’s last-minute candidacy had triggered intense speculation. Several Israeli observers said the governor would not have put forward his name without having secured the support of at least some heavyweight backers.

Others suggested that Mr Fischer had wanted to position himself in case Ms Lagarde, who may yet face a judicial inquiry in France, should drop out of the race as a result of future legal woes.

Yet the virtually instant collapse of Mr Fischer’s bid is likely to raise questions over his approach. Looking back on the past weeks, Mr Fischer may well conclude that he relied too much on his credentials as a leading international economist and central banker, neglecting the need to garner political support for his application.

Anne Krueger, who succeeded Mr Fischer as second-in-command at the IMF, defended his record in both the Asian crisis and Argentina – two episodes for which the fund is often criticised.

“He is clearly highly competent and experienced in the IMF,” she said. “With hindsight you could always have done things differently, but at the time you were dealing with probabilities, and the judgments the fund made were entirely defensible given the information available at the time.”

Simon Johnson, former chief economist of the IMF, praised Mr Fischer’s professionalism and judgment and said he would have been able to take a more dispassionate and rigorous view of the western European crises than Ms Lagarde, the favourite for the post.

The board of the International Monetary Fund has blocked the application of Stanley Fischer, governor of the Bank of Israel, to head the organisation, leaving only two candidates in contention.

The candidacy of Mr Fischer, 67, who announced his decision to run for the position of managing director on Saturday, would have required IMF members to waive a requirement that applicants be younger than 65.

The board decided not to accept that request, with some of the rich economies arguing that his candidature would confuse and delay the process. European countries have been strongly backing Christine Lagarde, the French finance minister, and are unlikely to want a candidate who might draw votes away.

The decision leaves the competition as a race between Ms Lagarde and Agustín Carstens, the Mexican central bank governor. Mr Carstens told the FT over the weekend that he faced an uphill struggle to challenge Ms Lagarde, who has the solid backing of European governments and has picked up endorsements from some big emerging market countries.

Domenico Lombardi, a former IMF board member now at the Brookings Institution, said: “A significant group in the membership is already set on appointing Ms Lagarde, and permitting Stan Fischer as a candidate might have complicated that.”

Mr Lombardi said that “there would have had to be a compelling case” to rewrite the rules, and in Mr Fischer’s case, that was missing.

Mr Fischer said he had “no regrets” over his candidacy, but voiced criticism of the board’s decision not to allow to run.

“I think that the age restriction, which was set in the past at 65, is not relevant today. I was hoping that the IMF board of directors would change its regulations, not only for the sake of my candidacy, but also for the sake of future candidates for the position of managing director,” he said in a statement released on Tuesday.

Mr Fischer, who said he would now “happily” continue to serve as governor of Israel’s central bank, added: “I have no regrets for having submitted my candidacy. I do regret the fact that I was not given the opportunity to demonstrate my capabilities and my experience to the IMF board of directors.”

Mr Fischer’s candidacy took many governments by surprise. Most observers considered him a long-shot for the position, as he was closely associated with the US and still controversial in Asia for his role in the Asian financial crisis of 1997-98 when he was second-in-command at the IMF.

The IMF board said it would aim to complete the selection process and appoint a new managing director by the end of June.

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