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World: Analysis From Washington -- A Shifting International Balance Sheet

Washington, 2 March 2000 (RFE/RL) -- A stand-off between Europe and the United States over the appointment of a new managing director for the International Monetary Fund reflects three far more important underlying shifts in the nature of the international system.

First, it highlights the growing importance of international financial institutions in world politics.

Second, it reflects the increasing politicization of economic questions.

And third, it highlights the ever greater willingness of Europeans and others to challenge American economic power.

Both individually and collectively, these changes point to a far more turbulent future not only in decision making about economic issues but also in the political relationship of Europe, the United States and the rest of the world.

Earlier this week, the United States government indicated that it would not approve the candidacy of Caio Koch-Weser as managing director of the IMF even though he had the backing of European countries.

White House spokesman Joe Lockhart said that "we don't believe that he meets the criteria for a strong candidate of maximum stature who would be able to command broad support around the world."

Washington's decision to block Koch-Weser violates an informal arrangement dating to the founding of the IMF in 1946. Under its terms, the managing director of the IMF is to be a European, but the United States as the largest shareholder in the fund must approve the choice of the European countries. Until this week, the U.S. always has.

Most of the commentary on this stand-off between Europe and Washington has focused on Koch-Weser's background and on Washington's specific concerns about him. But the actual reasons for it appear to be much deeper, especially since the Europeans proposed him even after Washington indicated that it opposed his selection.

First of all, this disagreement highlights the growing importance of international financial institutions in the conduct of foreign policy. On the one hand, economic issues have come to dominate international relations in the post-Cold War environment.

And on the other, various governments, and that of the United States in particular, have come to rely on such institutions to perform functions that earlier had been the province of national governments. Thus, assistance to former Communist countries largely has been handled through the IMF and World Bank rather than through aid from particular countries.

Second, as the issues that the international financial institutions deal with have become more important to more countries, they have become more politicized -- and of greater concern to a greater number of governments.

As a result, the appointments of officials which few would have contested only a decade ago have become the subjects of acute political struggle. Indeed, the outcome of the current dispute will have an impact on both sides. Moreover, it is certain to be read by all as an indication of the current relative power of those involved.

And third, just as was the case with Europe's decision to create the basis for a more independent military arm, so too Europe's decision to propose someone governments there knew the United States opposes reflects the European Union's ever greater weight in financial affairs.

But more than that, it also reflects the judgment of European leaders that many countries around the world will support their challenge to what has been an American-dominated institution. Like some in Europe, many leaders elsewhere oppose what they describe as American-style capitalism and the role of the IMF in promoting its strictures.

Thus, the Europeans are by this action making a move to assume a larger leadership role not only at the IMF but in the international system as a whole.

Whether they will be successful remains to be seen. But their effort to date clearly suggests that there has been a shift both economically and politically in the international balance sheet.