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Last Updated: Wednesday, 28 April, 2004, 09:05 GMT 10:05 UK
Rodrigo Rato: Tough new IMF boss
By Steve Schifferes
BBC News Online economics reporter

Rodrigo Rato
Previously Europe had failed to find a single candidate for the IMF top job
Rodrigo Rato, Spain's former finance minister, is shortly to become the International Monetary Fund's new head, after receiving the backing of the EU and seeing his most serious rivals for the job withdraw.

Under an unwritten convention, Europe nominates the IMF boss, while the US appoints the head of the World Bank.

Mr Rato is an orthodox former finance minister who presided over Spain's economic boom while reducing inflation.

He succeeded in winning the post against another European rival, Frenchman Jean Lemierre, who is head of the European Bank for Reconstruction and Development (EBRD).

Power play

Mr Lemierre, who was backed by Germany and France, was instead given a second four-year term at the EBRD because of concerns that Paris would have too much influence within international organizations if he moved to the IMF.

Mr Rato had earlier risked alienating France and Germany when he called on the European Commission to fine them after their budget deficits broke EU spending limits for yet another year.

He became available for the post when the Spanish Conservatives unexpectedly lost the general election after the Madrid bombings.

He had been passed over as the successor to lead the political party of Mr Jose Maria Aznar, who resigned after eight years as Spain's Prime Minister.

Mr Rato has the backing not only of the EU, but also the United States and Latin America, ensuring that he has enough votes to be selected.

But some critics of the IMF's lack of transparency in selecting its leader, like former World Bank economist and Nobel Prize winner Joseph Stiglitz, said that the IMF should have selected a finance minister from a developing country.

However, Fred Bergsten, director of the Institute for International Economics in Washington, said that "a Spaniard, backed by a large part of the developing world, is at least a step in the right direction".

Argentina crisis

Funded by 184 member countries, the IMF gives advice and lends money to bring about economic reform.

Mr Rato played an important role as an intermediary in the IMF's most difficult case in the last few years, the default of Argentina in 2001.

He helped secure an IMF loan for Argentina after it devalued its currency, which had been linked to the US dollar, and defaulted on $141bn of private sector debts - the largest such default in IMF history.

Mr Rato has urged the IMF to improve its early warning systems so that it gets wind of future crises in good time.

"I think the process of anticipation... has to be one of the basic goals of the coming years," Mr Rato told a Spanish news agency.

The matador economy

Under Mr Rato, the Spanish economy put in a strong performance in the last eight years.

The economy grew by more than 4% annually, while unemployment fell from 25% to 11%, and the gaping hole in the public finances was closed.

Many public sector companies were privatised, and the telecoms and energy sectors were deregulated.

However, the pace of economic reform slowed after 2000, when a general strike forced the government to reconsider radical reform of labour and pension laws.


Mr Rato will be familiar with Washington, having worked and studied in the United States in the l970s, when he acquired an MBA at the University of California, Berkeley, and, reportedly, a taste for the Rolling Stones.

He was a lawyer and businessman before becoming a politician.

Mr Rato was considered "un poco chulo" - a little too arrogant - for the Spanish political scene.

That may have cost him the chance of succeeding Mr Aznar.

But it might not be such a handicap in the rough and tumble world of international finance.

IMF 'not always to blame'
30 Dec 03  |  Business
Frenchman to head EBRD
22 May 00  |  Europe

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