Talks by European Union finance ministers over a new International Monetary Fund boss may complicate the already difficult process of picking a European Central Bank board member, EU diplomats said on Monday.
At a meeting on Tuesday, the 15 EU finance ministers will take an initial stab at who should replace IMF Managing Director Horst Koehler, who resigned last week to run for president of Germany. But they are not expected to appoint a candidate yet, an Irish senior diplomat said.
On Monday evening ministers from the 12 eurozone countries will also discuss candidates to succeed ECB Executive Board member Eugenio Domingo Solans, whose term expires on May 31.
Spain's candidate, Jose Manuel Gonzalez-Paramo, is expected to get the backing of Germany, France and Italy in a bid to secure permanent ECB board seats for larger EU countries. But this could irk smaller EU states who rely on the rotating system to have an equal say in monetary policy.
"One has to recognise that (the IMF job) is just potentially a complicating factor," the diplomat told reporters ahead of the informal Eurogroup meeting late Monday.
Two of the men mentioned as candidates to replace Koehler - Britain's Chancellor of the Exchequer Gordon Brown and Spanish Economy Minister Rodrigo Rato - will attend the Tuesday talks.
However, a source close to Brown told Reuters at the weekend that he had no intention of seeking the job.
Rato told TeleMadrid television that the Spanish stance on the IMF post was still undecided. "The Spanish government has not yet taken a position on this question, and we probably will not take a decision until we have seen our European colleagues over the next 15 days. So I am not going to speculate on this question," he said.
"I hope that it will be a European who is (head) at the IMF, which is by no means guaranteed."
The job of IMF managing director has gone to a European since the IMF's inception in 1945 and last week a Group of Seven official said the list of candidates should be narrowed by the middle of this week. In addition to Brown and Rato, other possible European successors are France's Jean Lemierre, who succeeded Koehler as chief of the European Bank for Reconstruction and Development, Briton Andrew Crockett, a former head of the Bank for International Settlements head and Italy's Mario Draghi.
German Deputy Finance Minister Caio Koch-Weser has already ruled himself out.
On Monday, ministers will also weigh the economic and foreign exchange situation after a rapid retreat of the euro and last week's ECB decision to keep rates steady amid calls for a cut.
The ministers will also asses how far the EU Commission has gone in negotiating tax deals with Switzerland and four non-EU countries. Agreement is needed before end June if the EU wants to start applying its savings tax directive in January 2005.
Commission spokesman Jonathan Todd told a news briefing he did not envisage an agreement on a proposal to rationalise VAT rates in the region even though Germany had lifted its reservations on lower tax rates for French restaurants.
Ireland, current EU president, is still hoping finance ministers can clinch a deal on the ECB board job on Tuesday. If not, ministers might have another chance to strike a deal on the sidelines of an EU summit later this month, the diplomat said.
Belgium, Ireland and Spain have all put forward candidates to replace Solans, one of the six executive board members charged with running the ECB's daily tasks.
Belgium's candidate is central banker Peter Praet, seen by many as the best qualified contender, while Ireland has put forward Michael Tutty of the European Investment Bank. A deal on Tuesday would allow EU leaders to appoint the new board member at the EU March summit and enable the European Parliament to vet him or her at a hearing scheduled on April 6.
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