EU finance ministers tussle over candidates for IMF and ECB posts

Europe's efforts to agree on who should be the next head of the International Monetary Fund hit a hitch last night as EU finance ministers squared up for a separate row over a post at the European Central Bank.

The Chancellor of the Exchequer, Gordon Brown, and his fellow EU finance ministers will today hold their first discussion on the EU's candidate to succeed the current IMF director, Horst Köhler - a post that traditionally goes to a European.

But speculation that the Spanish economics minister, Rodrigo Rato, is a contender for the IMF post has sown new confusion - because Spain also has a candidate for a post on the executive board of the ECB.

The Irish presidency of the EU, which had wanted to clinch a deal on the ECB post today, now concedes that it may have to postpone the issue.

Already smaller EU members are furious that Germany and several other large states are backing Jose Manuel Gonzalez-Paramo, for the ECB job. The current board member, Eugenio Domingo Solans, who steps down on 31 May, is also Spanish.

The prospect of Spain retaining its ECB executive board position, and winning the top IMF job, is seen as too much for several smaller EU countries.

A presidency source said that speculation about Mr Rato was "potentially a complicating factor" in the ECB decision. Asked if Spain was likely to win both posts, the source added: "Anything in life and the EU is conceivable. The question one has to answer is, 'Is it probable?' and one has to answer, 'It is not probable'."

The two other candidates for the ECB post are the Belgian central banker Peter Praet and Ireland's Michael Tutty, from the European Investment Bank. Portugal had expressed interest in the job but has not yet lined up a candidate. Barring a declaration by Mr Rato that he does not want the IMF post, the Irish presidency may delay a decision until finance ministers meet on the margins of the EU summit in Brussels at the end of the month.

So far there is no consensus even on how to vote on the issue. An agreement in principle to use majority voting, rather than unanimity, was taken before the Spanish candidate for the job emerged.

Several smaller nations are now having second thoughts, worried that big nations will use such a system to perpetuate their grip on top posts.

Meanwhile, Mr Brown will announce today that British-controlled tax havens such as the Cayman Islands have agreed to comply with EU rules on taxation of savings and will impose a withholding tax on EU citizens' bank accounts. The EU is still battling to persuade Switzerland to accept a similar regime.