French Finance Minister Christine Lagarde is set to be named the IMF's new chief on Tuesday after the United States and leading emerging markets endorsed her, maintaining Europe's grasp on the top job.
The International Monetary Fund's 24-strong board was meeting to go through the formalities of picking a successor to former IMF Managing Director Dominique Strauss-Kahn, who resigned in May to defend himself against charges of sexual assault against a New York hotel maid.
Lagarde, 55, is expected to get the majority of support from IMF member countries guaranteeing her win over Mexico's Central Bank Governor Agustin Carstens and making her the first woman to lead the global institution.
Assuming she gets the official nod, Lagarde will have to immediately deal with an IMF-EU effort to keep debt-stricken Greece afloat and focus on potentially thorny IMF spillover reports that analyze the economic and policy actions of the world's major economies.
Brazil said on Tuesday it would back Lagarde, a surprising decision given most countries in Latin America support Carstens.
With support from major emerging powers Brazil, China and Russia already clear, the United States moved to cement Lagarde's victory with an early morning statement.
Minister Lagarde's exceptional talent and broad experience will provide invaluable leadership for this indispensable institution at a critical time for the global economy, U.S. Treasury Secretary Timothy Geithner said in a statement.
The race has been one of the most hotly contested succession battles in IMF history as emerging market nations expressed displeasure with the 64-year tradition of having a European head the IMF and an American lead its sister institution, the World Bank.
In the end, the lack of backing from major emerging nations sunk Carstens despite his support from Latin America, Canada and Australia.
Geithner nodded to the unhappiness among developing countries at European-U.S. dominance of the two pre-eminent international financial institutions, but noted Lagarde had won broad support. The United States, which holds the most voting power at the IMF, had refused until the final stage of the process to say who it was supporting.
The only reason the outcome didn't match what (developing nations) wanted was because emerging market countries did not grab the opportunity, said Arvind Subramanian, a senior fellow at the Peterson Institute and the Center for Global Development think tanks in Washington.
If China, Brazil, India and some others had thrown their weight behind Carstens, the U.S. would have been in a very difficult situation, he added.
SEARCHING FOR CONSENSUS
IMF board directors, who represent the fund's 187 member countries, want to reach a consensus decision that would let them avoid a formal vote. With Washington and major emerging markets backing Lagarde, a formal vote looked unlikely.
In a convention dating back to the creation of the IMF and World Bank after World War Two, Europe has always held the top IMF job, while the World Bank's top post has always gone to an American.
Developing countries had warned against another U.S.-European stitch-up, but some potential candidates from emerging markets decided not to step up because they did not feel they had a fair chance at the job.
Although a long-shot candidate, Carstens vigorously campaigned on his experience as a former IMF official who had first-hand knowledge of developing world economic crises.
Washington holds close to 17 percent of the vote at the IMF, while votes by Europe and other countries that have declared support for Lagarde stack up close to 50 percent.
Countries such as Egypt, Saudi Arabia, Indonesia, South Korea and French-speaking African nations early on declared their support for Lagarde.
Fears of contagion over an escalating debt crisis in Greece have played in Lagarde's favor over the last several weeks because of her political punch across Europe, IMF board officials said.
A few board directors quietly have expressed concern over an unresolved legal investigation into Lagarde's role in a 2008 arbitration payout to a French business. A top French court has put off a decision on the matter until July 8.
One way of dealing with the issue is not to offer Lagarde an IMF contract until the court has made a final decision, a board source suggested.
Lingering resentment over Europe's hold on the top job will require the new managing director to act quickly to reassure developing nations they have a stake in decision-making at the IMF.
(Additional reporting by Glenn Somerville in Washington and Luciana Lopez in Brasilia)
(Editing by Paul Simao, Jan Paschal and Andrew Hay)