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Europeans Race to Nominate Strauss-Kahn Successor

Friday, 20 May 2011 12:42 PM

 

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BRUSSELS/WASHINGTON - European leaders raced Friday to nominate a successor for fallen IMF chief Dominique Strauss-Kahn before a G8 summit next week, with French Economy Minister Christine Lagarde in pole position.

As Europe rallied around Lagarde as their most likely choice for the top job at the International Monetary Fund, which has always gone to a European, the man most widely tipped as a candidate from among emerging economies ruled himself out.

"Speculation about succession at the IMF has included me in the group of persons with relevant experience. But I have not been, and will not be, a candidate," said former Turkish economy minister Kemal Dervis in a statement.

Strauss-Kahn is due to leave jail on bail on Friday and be placed under round-the-clock house arrest after being indicted for the alleged attempted rape of a New York hotel maid last Saturday.

The man once seen as a possible next president of France denies the charges and has vowed to prove his innocence.

German Chancellor Angela Merkel all but endorsed Lagarde, telling a Berlin news conference: "Among the names mentioned for the IMF succession is French Minister Christine Lagarde, whom I rate highly."

But diplomats said some European Union countries questioned whether the highly regarded corporate lawyer, who would be the first woman to head the IMF, could be anointed before a special court decides next month if she should be investigated in a French legal case.

Since Strauss-Kahn resigned Wednesday, EU governments have rushed to find a European replacement before emerging nations, which have long demanded a bigger say in running the Washington-based global lender, can mount a bid for the job.

Asian, Middle Eastern and African diplomats at IMF headquarters said emerging nations were seeking a consensus candidate, a task made harder by Dervis' decision not to run.

Jean-Claude Juncker, who chairs euro zone finance ministers, and Italian Prime Minister Silvio Berlusconi endorsed Lagarde on Thursday.

 

QUICK DECISION?

Diplomats said European Council President Herman van Rompuy, who chairs summits of the 27-nation EU, and European Commission President Jose Manuel Barroso were trying to secure a deal on her name after the three biggest European powers -- Germany, France and Britain -- threw their weight behind her.

"There have been preliminary contacts to check if Christine Lagarde has the support of other countries because she is considered the best candidate in Europe," one diplomat said.

"It has to be a quick decision. It would be best to have consensus before going to the G8," he said.

Leaders of the Group of Eight industrialised nations -- the United States, Russia, Japan, Canada, Germany, France, Britain and Italy, plus the European Union -- meet in the French seaside resort of Deauville on May 26-27.

Strauss-Kahn, a global high-flier, spent the last of four nights at New York's notorious Rikers Island jail on Thursday.

The package of conditions set by a judge to let him leave jail -- $1 million cash bail, a $5 million insurance bond and house arrest at a New York apartment under armed guard and electronic monitoring -- was due to be signed on Friday.

Strauss-Kahn would be taken to an undisclosed location where he would be safely and discreetly handed over to lawyers and possibly members of his family to avoid the media, said a spokeswoman for the New York City Department of Correction.

Once in the apartment, he will have unlimited access to his lawyers to prepare his defence and will be joined by his wife and daughter.

Under his IMF contract, Strauss-Kahn is entitled to a "separation allowance" of 60 percent of his last salary and an annual pension of the same percentage. ABC News calculated that the "golden parachute" was worth $318,000, with the same amount in pension for the rest of his life.

The Europeans argue it is essential to keep global finance's top job while the IMF is so deeply engaged in helping euro zone states such as Greece, Ireland and Portugal with massive debts.

Some officials said the absence of Strauss-Kahn's powers of persuasion contributed to disarray in Europe this week over whether Greece should restructure or "reprofile" its debt.

IMF official Ajai Chopra, following Strauss-Kahn's line, said a more comprehensive approach to the euro zone debt crisis was urgently needed and the EU should do more to help Ireland regain access to debt markets.

While U.S. Treasury Secretary Timothy Geithner called for an "open process that leads to a prompt succession," sources in Washington said the United States, the IMF's biggest financial contributor, would back a European.

The United States and European nations jointly hold more than half of the IMF's votes, giving them enough power to decide who leads it.

The IMF board was due to hold a regular meeting on Friday to approve its part of a 78 billion-euro bailout for Portugal but it was unclear whether it would discuss the process for choosing a new managing director.

 

LAGARDE UNDER SCRUTINY

The case marks a spectacular fall for Strauss-Kahn, who was highly regarded for his part in tackling the global financial crisis of 2007-09 and Europe's debt crisis.

His lawyer, Benjamin Brafman, has said the evidence "will not be consistent with a forcible encounter."

Prosecutor John McConnell said the maid, a 32-year-old from Guinea, told a "compelling and unwavering story."

An arraignment hearing is set for June 6, when Strauss-Kahn will formally answer the charges, but a trial may be six months or more away. If convicted, he could face 25 years in prison.

Lagarde is also under scrutiny.

Chairman of the U.S. law firm Baker & McKenzie in Chicago before she joined the French government in 2005, she is a fluent English speaker and has experience balancing the demands of rich and developing countries.

A public prosecutor has recommended that she be investigated for allegedly abusing her authority to sidestep the justice system and push through a 285 million-euro arbitration settlement with businessman and ex-minister Bernard Tapie, overruling Finance Ministry experts at key stages. She denies wrongdoing and says she is victim of a smear campaign.

The Court of Justice of the Republic, a special jurisdiction created to try ministers for offences committed while in office, will rule in mid-June whether she should face a full inquiry.

Diplomats said Belgium, whose finance minister, Didier Reynders, may harbour his own IMF ambitions, was among smaller countries that had queried whether Lagarde could be nominated before the Tapie case is cleared up.

"We must be absolutely certain that the candidate is able to serve until the end of the mandate this time," one said.

China and Japan called for a transparent process to choose a successor on merit, but a European source said Beijing was privately supportive of Lagarde. She now needed to pick up support in Latin America, the source said.

Russia and other ex-Soviet states backed the Kazakh central bank chief, Grigory Marchenko.

© 2014 Thomson/Reuters. All rights reserved.

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