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POLITICAL ECONOMY
Lagarde 'very positive' after talks in China: AFP interview
by Staff Writers
Beijing (AFP) June 9, 2011

Lagarde urges Greek politicians to work together
Beijing (AFP) June 9, 2011 - French finance minister Christine Lagarde on Thursday urged Greek politicians to follow the lead of Portuguese lawmakers and work together to overcome the country's deepening debt crisis. "One great strength of Portugal, which I hope Greece will be able to emulate, is (that of) the Portuguese political parties and authorities to join forces and form an alliance," said Lagarde, a top contender to lead the IMF. "That was critical, critical in building and restoring confidence and it shows in the numbers," Lagarde told a news conference on the final day of her visit to China to drum up support for her International Monetary Fund bid. Portugal in April became the third country in the eurozone to seek international assistance -- a 78-billion-euro ($114 billion) bailout from the EU and IMF -- to meet its debt payments after Greece and Ireland last year.

All three of Portugal's main political parties -- the centre-right Social Democrats, who won Sunday's general election, the conservative CDS-PP and the Socialists -- signed the bailout deal. Greece -- which received a 110-billion-euro loan in May 2010 from the IMF, EU and European Central Bank -- has been plagued by political infighting and is likely to need more cash soon despite a titanic adjustment effort. Greek Prime Minister George Papandreou has failed to win support from political parties for cutbacks, and the IMF envoy to Athens noted this week that the country's recovery programme had "lost momentum". "If you take Greece, Ireland and Portugal together, they represent six percent of the eurozone GDP," said Lagarde. "Each country is important and matters. They have different categories of problems and issues to address."

France's Christine Lagarde, the frontrunner to lead the IMF, told AFP Thursday that she felt "very positive" after talks in Beijing and backed China's right to fill a top job at the global lender.

The French finance minister, seeking to be the International Monetary Fund's first female managing-director, undertook a marathon day of talks on Wednesday in Beijing, after spending the day before in New Delhi with Indian leaders.

China, India and other emerging nations have baulked at Europe's traditional lock on the leadership of the Washington-based IMF, calling the arrangement outdated, and so far have been non-committal in public about her bid.

"I am very satisfied with the meetings I've had in China," Lagarde said in an interview on the final day of her trip to the Chinese capital.

"I have a very positive feeling following these talks, but it's up to them to convey their decision. It's not up to me," she said.

"Some countries and some governments have decided to go public early. My sense is that it's too early to count the chickens," she later told reporters.

Lagarde, a 55-year-old former international lawyer, met Foreign Minister Yang Jiechi, central bank governor Zhou Xiaochuan, Finance Minister Xie Xuren and Vice Premier Wang Qishan -- China's top official on financial affairs.

On Wednesday, Yang said the race to lead the IMF was "open", echoing the lukewarm response offered by Indian Finance Minister Pranab Mukherjee after his own talks with Lagarde in New Delhi.

"We had a good discussion. She explained to me the purpose of her candidacy. I listened very carefully," Yang told reporters after his meeting with Lagarde.

"It's an open field now. There are quite a few people campaigning," he said in English. "China of course gives serious thought to this very important issue."

Lagarde is seen as the favourite to replace Dominique Strauss-Kahn, who resigned last month after his arrest on sexual assault charges. He pleaded not guilty in a New York court on Monday to the attempted rape of a hotel maid.

Two weeks ago, France's chief government spokesman Francois Baroin said China -- the world's second-largest economy -- was "favourable to the candidacy of Christine Lagarde", but did not offer any evidence to back up his statement.

China's foreign ministry subsequently said the choice of a new IMF chief should be based on "openness, transparency and merit", and better represent emerging markets and changes to the world economy.

Lagarde -- who has already visited Brazil, another major emerging economy -- has pledged to reform the IMF to give developing countries more power.

"The IMF does not belong to anybody. It belongs to the 187 members of the Fund, and the management of the Fund does not belong to any particular nation or region," she said.

"We can't effectively represent the world's economic balance of power if certain economies are under-represented," she said.

She also told AFP that it would be "very legitimate for Chinese representatives to be included at the highest level of the Fund's leadership" after Beijing expressed a wish for "better representation".

She specifically mentioned China's Zhu Min, a special advisor to the IMF chief, praising his "abilities" and saying it would be "fully appropriate if he played an important role in the management of the Fund".

But she added: "You cannot be punished because of your nationality."

Lagarde also praised Beijing's efforts to allow its currency, the yuan, to appreciate as a "positive movement" and said she hoped it would continue.

On what it would mean to be the first female IMF chief, Lagarde said it would be a "symbol of diversity", adding she hoped it would "give other women the confidence and courage to achieve what they want to achieve".

The French candidate heads on Friday to Lisbon, where African finance ministers and central bankers will be meeting for the African Development Bank's annual gathering. She then will travel to Saudi Arabia and Egypt.

The only other serious IMF contender, Mexico's central bank chief Agustin Carstens, visited Canada on Tuesday and was to head to India on Friday on a tour that has already seen him stop off in Brazil and Argentina.

The deadline for IMF nominations is on Friday, leaving little time for anyone else to emerge.




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IMF chief's selection to be based on merit: Lipsky
Beijing (AFP) June 9, 2011 - Acting IMF managing director John Lipsky said Thursday he was confident selection of the fund's next chief would be based on merit, as French finance minister Christine Lagarde made her case in China.

The goal of the selection process is "to be open -- open means open to everyone -- transparent, and merit-based. We are confident that that will be the result of this process," Lipsky told a news conference.

Lipsky, in Beijing for the International Monetary Fund's annual policy talks on the Chinese economy, also said it was "a complete coincidence" that his visit was at the same time as Lagarde, a frontrunner to lead the global lender.

Lagarde, in the Chinese capital to drum up support for her IMF bid, told AFP Thursday that she felt "very positive" about her talks in Beijing, and backed China's right to fill a top job at the Washington-based fund.

Lipsky said he was "highly confident that our membership will choose a leader who is talented, experienced, energetic and effective".

On China's economy, Lipsky said the country continued to be a "bright spot" for global growth and the IMF maintained its forecast for the world's second-largest economy to grow around 9.5 percent this year and next.

He also expects inflation, which has been hovering above five percent, to ease to around four percent by the end of 2011.

But Lipsky warned China faced financial risks from a massive credit binge in recent years, increased off-balance sheet lending -- apparently referring to a surge in local government debt -- and soaring property prices.

A rebalancing of China's export-dependent economy was critical for the stability and growth of the world economy, and a stronger and more flexible yuan was "absolutely part of that", he said.

Lipsky added that the yuan needed to become more freely convertible and more widely used for it to be included in the basket of currencies that determine the value of the IMF's Special Drawing Rights, an international reserve asset.

"It is certainly agreed that over time, the yuan is likely to become a candidate for inclusion in the SDR basket," he said.





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