The sudden departure of Antonio Borges, the top European negotiator at the International Monetary Fund (IMF), is embarrassing. He had been in the job only for 12 months and had blundered badly recently, by hinting that the IMF might scoop up bonds of troubled European states. As the euro crisis worsens, the IMF was wise to appoint a veteran untainted by such screw-ups.
But, no one wants to lose a top general in the heat of the battle. And, the IMF’s director of the European department, once a sleepy backwater at the fund, has become a key member of the multinational lender’s top brass as the continent’s crisis has deepened. The bulk of loan dues for the fund are now from European states and there may be more over the coming year.
Whether or not Borges is leaving for personal reasons, as the IMF says, his departure is probably a blessing. The former Goldman Sachs managing director and Portuguese central banker had a mixed tenure at the fund. Only last month, Borges landed himself in hot water by telling journalists the fund could potentially assist stressed European economies by purchasing their government debt. This would have been a radical departure for the IMF, which, for the entirety of its 60-year history, has solely lent to governments directly. He was forced to backtrack just hours later.
This is exactly the kind of loose talk the IMF can ill afford as the euro crisis escalates. Luckily, Borges’ replacement, Reza Moghadam, looks a safer pair of hands, with more experience and authority. The 20-year IMF veteran is currently its strategy head. And, since he takes over immediately, there will be no awkward hiatus.
Granted, the power of the IMF’s European chief is limited. Much like diplomats, the role has limited room to deviate from the line set by the organisation’s board and its managing director, Christine Lagarde. Still, the IMF is playing a leading role in the European situation. Whoever has the job needs to command the respect of as many parties as possible to exercise any clout. Moghadam starts with a clean slate. Lagarde, herself a newcomer, can’t allow more slips.