Carstens cites Lagarde conflict of interest at IMF

(WASHINGTON) - Mexico's Agustin Carstens said Monday that his French rival to run the IMF, Christine Lagarde, might have a conflict of interest, because of Europe's high borrowing from the crisis lender.

"I also think there could be a conflict of interest," Carstens said of the French finance minister, the favorite to become International Monetary Fund managing director.

"We'd have a situation where the borrowers dominate a creditor institution. I think that's an issue we should consider," Carstens said.

The Mexican central bank chief, in Washington to lobby for US support for his candidacy for IMF chief, admitted to a lunchtime audience at the Peterson Institute for International Economics that with Europe's solid backing Lagarde had the advantage.

"The chances of Christine Lagarde getting elected are quite high. I'm sure that she will make a good managing director. But it would have been better if she had been elected in a transparent process."

He said that it was time to end the 65-year old deal in which the United States controls the top position and the World Bank while Europe gets its pick to lead the IMF.

The process to choose an IMF managing director "has to be legitimate in the sense that even-handedness among members prevails, there are no regional biases, and country representation is well-balanced," he said.

Lagarde was quickly put forward by a united Europe days after former managing director Dominique Strauss-Kahn was arrested on sexual assault allegations in New York on May 14.

Since then she has picked up endorsements elsewhere, including Egypt and Indonesia.

But some have questioned Lagarde's ability to remain neutral when it comes to the Fund's huge bailout programs for Ireland and Portugal, and especially Greece, where a 110 billion EU-IMF rescue is faltering.

Earlier Carstens, formerly the number three in the IMF, met with US Treasury Secretary Timothy Geithner to press for Washington's endorsement.

Geithner remained uncommitted, but "thinks Governor Carstens has a strong mix of financial talent and political skills, making him an exceptionally capable candidate to head the IMF," said a Treasury spokeswoman.

Besides Lagarde and Carstens, Israel's central bank chief, Israeli-American Stanley Fischer, also joined the race over the weekend.

The IMF has said it hopes to reach a consensus over a pick by the end of June.