By Catherine Bremer
PARIS (Reuters) - South Africa's Trevor Manuel ruled himself out of the race for the IMF's top job on Friday, making French finance minister Christine Lagarde an even firmer favorite, although the threat of a judicial inquiry remains.
Emerging market powers like Russia, India and China say they want an end to Europe's grip on the top job at the international lender, calling time on a pact that puts the IMF in European hands while the World Bank is run by an American.
Yet the only realistic rival to Lagarde as the window for nominations draws to a close on Friday is Mexican Central Bank chief Agustin Carstens, whose policy views are seen as too conservative by many of his emerging market peers.
Lagarde is backed by the European Union and a handful of smaller countries from Georgia to Mauritius. Paris is hopeful that Washington and Beijing will also stand behind her.
Brazil, Latin America's biggest economy, is leaning toward supporting Lagarde but has not yet made up its mind, officials said.
Manuel, a respected former South African finance minister, opted not to stand but said it would be "most unfortunate if we end up with a European who is bound by the EU."
"It is important to understand that decisions take place in the context of world politics. Against that backdrop, I have decided not to avail myself," Manuel told a news conference.
The United States and Europe hold 48 percent of votes at the International Monetary Fund compared with just 12 percent for emerging nations.
Manuel, who handled Africa's biggest economy deftly for a decade, had been seen as a strong developing-world candidate. Many had thought he would win more support than Carstens, despite the Mexican's impressive academic profile.
In New Delhi to drum up support for his candidacy, Carstens said Mexico and India agreed emerging market countries needed greater representation at the IMF. He also said emerging nations needed to have flexibility on capital controls.
Brazil was split between the two candidates and was waiting to see how much support they had from other emerging economies before declaring its support for either, the finance ministry's point person on the issue said on Friday.
But three other government officials, speaking off the record, said Brazil was leaning toward Lagarde although the support of other Latin American countries, including Colombia, for Carstens' candidacy has complicated Brazil's decision.
LEGAL INQUIRY STILL LOOMS
One potential pitfall for Lagarde is a legal investigation into her role in a 2008 arbitration payout.
A top French court on Friday put off until July 8 its decision on whether to open a formal inquiry into allegations brought by opposition left-wing deputies that she abused her authority in approving a 285 million-euro payout to a businessman friend of President Nicolas Sarkozy.
A French finance ministry official said the legal process was proceeding normally and Lagarde earlier told reporters that she was confident about the outcome.
"No, I am not concerned at all about this particular inquiry, and I reaffirm as I did when I put my candidacy and threw my hat in the ring, that there is absolutely no grounds to that inquiry," she told reporters.
Lagarde has recently flown to Brazil, India and China and carries on her tour to Saudi Arabia and Egypt this weekend.
Lagarde, an adept negotiator with hands-on experience of the euro zone's debt crisis, met African officials in Lisbon.
The African Union, whose representatives Lagarde met on Friday, has said it wants to see a non-European in the job but emerging market powers have failed to coalesce behind one candidate to challenge Europe's hold on the job.
"Lagarde is still the favorite," said Jacques Reland of the Global Policy Institute. "The BRICS are still quite divided."
The Fund -- shaken up by the shock departure of Frenchman Dominique Strauss-Kahn last month over charges that he tried to rape a New York hotel maid -- will name its new managing director by June 30.
A Reuters report that Secretary of State Hillary Clinton has been in talks about leaving her job next year to head the World Bank suggested it was even more likely Lagarde will get the IMF job by reaffirming the transatlantic hold over the two institutions.
Clinton on Friday said she was not in discussions over the top job at the World Bank and that she was not pursuing the post. "I have had no discussions with anyone, I have evidenced no interest to anyone and I am not pursuing that position," Clinton told reporters while on a visit to Lusaka, Zambia.
Four of the IMF's 10 managing directors since 1946 have been French. Lagarde, 55, would be the first woman in the job.
A medal-winning former synchronized swimmer and high-flying corporate lawyer, she has played a key role in Europe's battle to recover from economic crisis and is France's Group of 20 negotiator on economic issues as it holds the G20 presidency.
Carstens has an economics PhD from the University of Chicago, a haven for proponents of deregulation and laissez-faire economics.
(Additional reporting by Thierry Leveque in Paris and Lisbon and Johannesburg bureaux, editing by Mike Peacock)