Manila, Metro Manila, Philippines (AHN) – Philippine Finance Secretary Cesar Purisima warned that the Standard & Poor’s downgrade of the U.S. credit rating would have an impact on the country’s financial markets.

Purisima said the cut would likely result in dampening of overall appetite of fund owners to invest in the U.S., which would still affect developing nations.

The tentativeness of investors may slow down the global economy, he said.

Purisima added that unless Washington addresses the U.S.’s fundamental issues, the international community may have entered a period of less predictable and less stable global financial markets.

He said another impact of the S&P downgrade is on the Philippines’ foreign exchange reserves which are denominated in the American greenback and invested mostly in U.S. Treasuries.

Philippine Central Bank Governor Amando Tetangco Jr. said the one-notch downgrade may not lead to a sell-off of U.S. treasuries because the new rating of AA plus is still investment grade. Tetangco said that while it is a prudent investment strategy to diversify, the greenback and U.S. Treasuries are still the most liquid assets.

In preparation for a nervous opening of the financial markets on Monday after the S&P downgrade, European Central Bank President Jean-Clause Trichet convened a late Sunday afternoon call with the heads of the continent’s national central banks.

New French Finance Minister Francois Baroin questioned the rating cut, citing Washington’s dispute of the judgment because the rating agency allegedly overstated the U.S. federal debt by $2 trillion.

Chiefs of state are also discussing the downgrade, particularly between French President Nicolas Sarkozy and British Prime Minister David Cameron, and Italian Prime Minister Silvio Berluconi and U.S. President Barack Obama, who also discussed the downgrade on Friday with German Chancellor Angela Merkel.

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New York, NY, United States (AHN) – Mexican Central Bank Governor Agustin Carstens has found two powerful allies in his bid to become managing director of the International Monetary Fund. His backers are the industrialized countries of Canada and Australia.

Ottawa and Canberra issued on Friday a joint statement that favored Carstens to head the fund over rival French Finance Minister Christine Lagarde, who is the bet of many European Union nations.

In favoring Carstens, Canada and Australia said by making the Mexican finance official the replacement of former IMF Managing Director Dominique Strauss-Kahn – who resigned over sexual assault charges – Carstens would provide more balance between developed and emerging economies.

Canadian Finance Minister Jim Flaherty and Australian Finance Minister Wayne Swan pointed out that Carstens served as deputy managing director of the fund from 2003 to 2006, which equipped him with a better understanding and ability to address challenges faced by the global economy.

Flaherty and Swan stressed that the selection process for the new IMF chief should be open and transparent, and the candidate should be chosen based on merit, not geography.

Other developing nations are also supporting Carstens’ candidacy to break the 60-year-old gentleman’s agreement that assures the top IMF post would be held by a European, while that of the World Bank would go to an American.

Carstens and Lagarde were interviewed by the IMF board last week. Lagarde is still considered the front runner because she has the support of Europe, which holds seven of the 24 seats in IMF’s executive board.

What could tip the balance in favor of Carstens would be the U.S. vote since the United States holds almost 17 percent of the board vote. Washington has not indicated its choice between the two candidates, although as part of the gentleman’s agreement the U.S. may like protect its interests and favor Lagarde.

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New York, NY, United States (AHN) – The battle to fill the top International Monetary Fund post vacated by the resignation of Managing Director Dominique Strauss-Kahn has apparently been reduced to a war between Europe and developing nations.

Mexico’s Central Bank Governor, Agustin Carstens, took the struggle to a higher level on Tuesday by seeking the vote of developing countries to counter the solid support enjoyed by French Finance Minister Christine Lagarde from European nations.

Even the U.S. is apparently siding with Europe’s choice in a tit-for-tat political arrangement to ensure Washington keeps its grip on the top spot at the World Bank and the number two post in IMF.

Carstens criticized European leaders for imposing Lagarde on the rest of the world. The governor said that if the selection of Strauss-Kahn’s replacement would be treated as “business as usual,” changes would never take place.

Carstens pointed out that although there was no final list of candidates yet for the IMF managing director post, Europe has made up its mind in backing Lagarde. The IMF will close application for the position on Friday.

Lagarde, however, is also courting the vote of developing nations despite being frontrunner of the race. She met with Indian officials as part of her world tour to seek their support for her candidacy. The French minister even promised to represent the needs of emerging economies by partly “becoming an Indian.”

Lagarde will next try to convince Chinese officials to back her up, based on her merit. Carstens is holding his global tour and plans to court the votes of Indian, Chinese and Japanese officials.

Indian Finance Minister Pranab Mukherjee said he agreed with Lagarde that the next IMF managing director should be picked based on merit and not geography. But he declined to indicate if India would support Lagarde or Carstens.

The IMF is expected to name Strauss-Kahn’s successor by the end of June. Another rival of Carstens and Lagarde for the position is South African former Finance Minister Trevor Manuel.

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