U.S.-German War of Words Over IMF Ends in a Draw

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Germany, the world's number three economy, flexed its muscles. The United States, the number one, rippled its pecs. And in the end they both got what they wanted. Sort of. What was recently slated as an international economic incident, the quest to name a new chief of the International Monetary Fund, has ended with an appointment both sides can live with.

The war of words started a couple of weeks ago when the Clinton administration put the kibosh on Caio Koch-Weser, the handpicked candidate of German chancellor Gerhard Schroeder, complaining that Koch-Weser, a deputy finance minister, was a lightweight. Germany, in turn, hinted that the U.S. was trying to get its own man, interim chief Stanley Fischer, appointed to the post. That would have threatened the balance of power in global governing bodies — an American traditionally heads the World Bank while a European is given the reins of the IMF — as well as destroying Schroeder's wish to have a stronger German international presence to match its economic power. It was all sorted out Monday when Schroeder's new candidate, Horst Koehler, got a somewhat reluctant nod from the U.S. and Germany's European partners. In return for Clinton's support, Schroeder promised that his candidate would keep Fischer as second-in-command.

"This worked out as everybody had hoped," says TIME international affairs correspondent William Dowell. "Everyone wanted consistency, which means that Fischer stays aboard, but with a European at the helm." Still, Germany's not pleased at being globally embarrassed in its attempt to have the first German IMF chief. On Monday, top Schroeder political adviser Michael Steiner was less than diplomatic: "We have discovered that the superpower sees its global role not only in the military area," he said, "but also in setting the rules of globalization through the IMF." Says Dowell: "What this episode demonstrates is that the U.S. needs to be on board earlier before anything is worked out. In the future the E.U. will make more of an effort to consult the U.S. early in this process."