Lagarde Says IMF Will Hear Emerging Economies

WASHINGTON—French Finance Minister Christine Lagarde closed out the race to lead the International Monetary Fund with a pledge Thursday to make tough decisions on Europe's fiscal crisis and to help developing economies gain more clout at the institution.
During her three-hour interview with the IMF's executive board, Ms. Lagarde pushed back against complaints from developing-market officials that her candidacy posed a conflict of interest as the IMF helps rescue troubled euro-zone nations. The managing director has an "exclusive duty of loyalty" to the fund, she said.
"I will not shrink from the necessary candor and toughness in my discussions with the European leaders," Ms. Lagarde, who has played in a key role in the euro zone rescues, said in her statement released Thursday night by the IMF. "There is no room for benevolence when tough choices must be made, and there is no option that does not start with difficult but necessary adjustments by the Greek authorities to restore the sustainability of public finances and to rebuild the country's competitiveness."
Ms. Lagarde is expected to win final approval for the IMF's top post next week after maintaining an overwhelming lead throughout the race against Mexican central banker Agustín Carstens.
She won the support of most European nations, which hold about a third of the fund's voting shares, even before the selection process formally started a month ago. She also earned endorsements from a number of developing markets—from Indonesia to several African nations—despite complaints from many world leaders who wanted to end the fund's longtime tradition of installing a European in the managing director job.
Mr. Carstens, meanwhile, has won endorsements from more than a dozen Latin American nations. But his only support on the board comes from a voting bloc that includes Mexico, representing less than 5% of the IMF's voting shares. The fund's 187 member nations, which are represented in Washington through 24 board members, carry voting stakes based on the size of their economies and other factors.
The board, which is scheduled to deliberate Tuesday, plans to announce a winner by June 30.
Ms. Lagarde, following her global tour in which she heard repeated complaints from developing-market leaders, pledged on Thursday to make the institution more open to their concerns.
"I believe that the fund should be more responsive, certainly more effective and more legitimate," Ms. Lagarde told reporters as she left the IMF headquarters Thursday afternoon.
The U.S., with the largest voting stake at almost 17%, hasn't explicitly endorsed either candidate. But with much of the board strongly in Ms. Lagarde's favor, the U.S. will likely only have to sign-off on the consensus when the IMF executive directors gather next week.
Ms. Lagarde met with Treasury Secretary Tim Geithner early Thursday morning to discuss her candidacy and the crisis in the euro zone as European officials scrambled to arrange a new rescue package for Greece.
The Treasury Department said Mr. Geithner considers Ms. Lagarde "an exceptionally talented candidate" for the post. The department used similar language last week when it called Mr. Carstens "an exceptionally capable candidate."
In an arrangement since the IMF's founding after World War II, the U.S. and Europe have always backed a European for the fund's top post while installing an American in the IMF's No. 2 position and as the World Bank's president.