Mr Rodrigo Rato, Spain's former finance minister, has become the presumptive managing director of the International Monetary Fund (IMF), after his leading rival dropped out of the race.

France and Germany had been backing Mr Jean Lemierre, president of the European Bank for Reconstruction and Development (EBRD), but yesterday Mr Lemierre said he expected to remain at the EBRD for another four-year term.

"I am committed, very committed, to the EBRD and I am very committed to this mandate that you have given to me," he said at its annual meeting in London.

Last night, Mr Nicolas Sarkozy, the French finance minister, gave his backing to the Spaniard, saying Mr Rato had indicated that he would take account of French priorities.

The Minister For Finance, Mr McCreevy, is expected to announce shortly that Mr Rato has the backing of all EU members. Although the appointment of a managing director is formally made by the IMF's executive board representing all of its members, the post has traditionally been a European fief.

Yesterday, Mr Samuel Bodman, deputy US Treasury secretary, indicated he expected that tradition to continue. The US has not publicly expressed a preference between Mr Rato and Mr Lemierre, but European officials have said that Mr Rato is the favoured US candidate. He is widely seen as having the better political skills, and has much broader support outside Europe, making it more likely that he can become a consensus candidate.

Latin American countries have indicated their support for Mr Rato. But some countries and independent economists have complained about the way in which the appointment appears to have been fixed within the EU.

Mr Rato's appointment is likely to be formally confirmed within weeks - although this weekend's meeting of the IMF and World Bank will probably come too soon to allow for the details to be resolved. One remaining question is whether other candidates will be nominated formally by other countries.