Europe steps back from Strauss Kahn as IMF jockeying begins

May 17, 2011

, BRUSSELS, May 17 – European powers began Tuesday to distance themselves from Dominique Strauss-Kahn as current French finance minister Christine Lagarde emerged as a favoured replacement as head of the IMF.

With Strauss-Kahn, one of Lagarde\’s predecessors, languishing in New York\’s Rikers Island jail awaiting trial on charges of attempted rape, the European Union has unfinished business with the eurozone debt crisis and the virtual certainty that Greece will eventually need more financial aid.

For that reason, European Commission chief Jose Manuel Barroso told Dutch media that "if a succession is necessary, European Union states should present their candidate."

A diplomat told AFP that Europe feels now is not the time to end the cosy arrangement whereby it holds the job of International Monetary Fund managing director, and the equivalent post at the World Bank by the Americans.

German Chancellor Angela Merkel and Belgian finance minister Didier Reynders fired the starting gun on jockeying Monday, and others went further on Tuesday.

"Given the refusal to grant him bail, (Strauss-Kahn) must reflect himself on the damage this could cause to the institution," said Austria\’s Maria Fekter, even though a source close to the IMF has suggested disciplinary proceedings could be launched soon in Washington.

She was speaking on arrival for a second day of talks among European finance ministers in Brussels, a meeting Strauss-Kahn had been due to attend as the EU grapples with Greek cries for more help.

Likewise Spain\’s Elena Salgado, who while acknowledging that "the decision is up to Mr Strauss-Kahn in the first place," also said that the "extraordinarily serious" accusations meant "my solidarity is with the woman who suffered an attack, if that\’s really what happened."

As potential runners and riders began to emerge, either way "the feeling is it\’s not for Europe to budge," said the diplomat who asked not to be named.

Lagarde is considered "certainly a credible candidate," but EU partners are "waiting to see if (President Nicolas) Sarkozy will put her forward.

"She is waiting to see if Sarkozy will put her forward," he added, of the care with which the Europeans are trying not to appear "indecent."

France has had four of the 11 IMF bosses since the institution was set up in 1946, which may prove Lagarde\’s biggest drawback, but it would appear she can also count on support from London, judging by an appeareance alongside George Osborne last week on the BBC.

When asked about the mid-2012 end of mandate for Strauss-Kahn, Lagarde said on the show that the post had an incumbent. But when pushed Osborne said she would make a good future candidate.

As the convention is that only heads of state or government can nominate candidates, former British Labour prime minister Gordon Brown\’s long-cherished hopes of succeeding Strauss-Kahn may be dead and buried. Conservative successor David Cameron\’s government has already noted "no groundswell of support" for the Scot.

Germany\’s mass-market daily Bild mentioned Josef Ackerman, the chief executive of Germany\’s largest bank, Deutsche Bank, as well as Lagarde, while a compromise candidate who could find favour if emerging economies step up a campaign might be Turkey\’s Kemal Dervis, according to diplomats.

As Turkish finance minister, Dervis used an IMF bailout at the start of the last decade to set Ankara on its path to sharp growth and has also previously headed the UN Development Programme.

Deputy managing director John Lipsky is filling in for Strauss-Kahn for now, but he had announced before the Frenchman\’s dramatic arrest on board an Air France plane that he would leave on August 31 — meaning the Fund faces a challenge replacing its top two officials in a very short period.

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