Many European countries, including Germany and Britain, have offered their backing to a candidacy by Ms. Lagarde to run the IMF, which provides billions in loans to shore up the world economy.
“You could call this my ‘coming out’,” joked French Finance Minister Christine Lagarde announcing her formal candidature for the post of Director General of the International Monetary Fund to succeed her co-citizen Dominique Strauss-Kahn who resigned last week and is now under house arrest in New York on charges of attempted rape.
At a hurriedly called press conference in Paris Ms. Lagarde said she had sent her curriculum vitae and a formal letter of candidature. Although widely expected, this development comes on the eve of the G-8 summit which opens in the French resort town of Deauville and a day after IMF directors for five key emerging economies said on Tuesday it was time to end the tacit understanding that awarded the leadership of the Fund to a European.
Europe has closed ranks over the leadership of the fund and Ms. Lagarde has the full backing of EU heavyweights such as Britain, Germany and Italy. President Nicolas Sarkozy, one of Ms. Lagarde’s most fervent supporters, hopes to get Barak Obama’s approval as well.
The timing of the G-8 summit prompted Ms. Lagarde to declare her candidature earlier than anticipated. The closing date for the list of hopefuls is10 June, the date on which a French court is to decide whether or not to order an enquiry into a private arbitration case that Ms. Lagarde ordered in her capacity as finance minister. The arbitration awarded 285 million Euros to businessman Bernard Tapie for “moral prejudice” suffered in an earlier dispute between him and the French bank Credit Lyonnais. That the taxpayer should pay out millions to Mr. Tapie despite having won an earlier case against him, and that too at a time when the state is cutting back on social benefits has outraged the French.
The Europeans and Americans clearly have no intention of allowing the IMF to slip into the hands of the world’s emerging economies and they will do everything in their power to maintain the status quo. At time when the Strauss-Kahn episode continues to generate indignation and anti-French feeling in the U.S., Ms. Lagarde has the double advantage of being a woman and of being perfectly bilingual. She has proved her worth and efficiency as finance minister and the fact that she once headed the famous Chicago law firm of Baker and McKenzie make her acceptable to the U.S.. Another plus point for a Lagarde candidature is that it also has the support of China.
In her candidature letter to the Fund Ms. Lagarde says "the Fund should not only play its role in Europe, but it should also respond to demands for assistance from countries from North Africa and the Middle East". She also says that if appointed, she will work for greater "cooperation between the Fund and regional financial institutions", adding that the Fund must continue to evolve according to the "economic weight" of its members. Ms. Lagarde also pleads for an audit in order to strengthen the Fund’s "legitimacy" which, she feels, "has yet to be achieved".
However, the Bernard Tapie affair could still damage her chances. The French Republic’s court of Justice, the only tribunal that can judge ministers is to name a rapporteur on June 10 who will enquire into the role played by Ms. Lagarde in a dispute opposing Mr. Tapie to Credit Lyonnais over the 1993 sale of Adidas, the sportswear giant which Mr. Tapie then owned. The rapporteur will decide within the space of one month whether or not the state should enquire into Ms. Lagarde’s alleged “abuse of authority”.
Given the close links that exist between the French presidency and the justice system which is firmly under its thumb, it is quite likely that the rapporteur’s decision will be delayed to after the IMF has chosen its new leader.