Politicking steps up to replace IMF's Strauss-Kahn

Updated: 2011-05-18 13:21


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Politicking steps up to replace IMF's Strauss-Kahn
IMF chief Dominique Strauss-Kahn listens as he stands before judge Melissa Jackson during his arraignment in Manhattan Criminal Court in New York, May 16, 2011. Strauss-Kahn was denied bail on Monday on attempted rape and other criminal charges, and prosecutors said they are investigating whether he may have engaged in similar conduct once before. [Photo/Agencies]

WASHINGTON - The race to succeed Dominique Strauss-Kahn as head of the International Monetary Fund stepped up Tuesday along with pressure on him to resign and avoid undermining the IMF, a key force of global economic stability.

Some diplomats said a European country should no longer be guaranteed stewardship over a global economy increasingly driven by emerging powers in Asia and Latin America. The IMF board could move soon to oust Strauss-Kahn if he insists on remaining in his post while jailed on charges of trying to rape a New York City hotel maid, analysts suggested.

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"He is obviously not in a position to run the IMF," Treasury Secretary Timothy Geithner said Tuesday in New York.

The blunt assessment will likely escalate the pressure on Strauss-Kahn to step down.

Even though Strauss-Kahn is presumed innocent, the IMF will approach this crisis as ruthlessly as a company would, said Robert Bennett, the lawyer who represented President Bill Clinton in the Monica Lewinsky affair and Paul Wolfowitz before he resigned from the World Bank, the IMF's sister institution, in 2007.

"They would say: `We'll lose customers, the media will kill us, the women's movement will go crazy and whatever the claims he might have, we'll look responsible if we get rid of this guy.'"

But Bennett predicted that the board would have to make financial concessions to induce Strauss-Kahn to resign.

Support for Strauss-Kahn, a Frenchman, eroded Tuesday in Europe. In Brussels, Austrian Finance Minister Maria Fekter called on Strauss-Kahn to resign so he wouldn't damage the fund. Her Spanish counterpart, Elena Salgado, spoke of solidarity with the woman Strauss-Kahn is accused of assaulting.

"Considering the situation, that bail was denied, he has to figure out for himself that he is hurting the institution," Fekter said Tuesday as she arrived at a meeting of European finance ministers.

And countries further afield began pressing that any discussions over his successor not be restricted to Europe.

"We shouldn't think about countries or regions," Tovar Nunes, a spokesman for the Brazilian foreign ministry, told The AP.

Strauss-Kahn has said nothing about his future at the IMF. He was denied bail and is in a New York jail after his weekend arrest on charges of trying to rape a maid in a Manhattan hotel. He is due to appear next in court on Friday.

"From a perception standing, his resignation wouldn't be a wise move," said Edward Flaherty, an American lawyer in Geneva who represented a woman who accused former Dutch prime minister and UN refugee chief Ruud Lubbers of sexual harassment in 2004. Lubbers later resigned from his UN post. "Legally, it has no bearing. But perception is very important in criminal cases."

Flaherty argued that the best strategy for Strauss-Kahn now would be to take a leave of absence so he can focus on his legal defense. That might also be the most convenient approach for the IMF because it would be difficult to remove Strauss-Kahn in the absence of a criminal conviction or an acknowledgement of wrongdoing.

Yet a leave of absence would mean the organization would lack steady leadership while it faces a major crisis in Europe.

Among possible replacements for Strauss-Kahn are at least four fellow Europeans: French Finance Minister Christine Lagarde; the former head of the German central bank, Axel Weber; the head of Europe's bailout fund, Klaus Regling; and Peer Steinbrueck, a former German finance minister.

Candidates from elsewhere include Turkey's former finance minister, Kemal Dervis; Singapore's finance chief Tharman Shanmugaratnam; and Indian economist Montek Singh Ahluwalia.

Other possibilities include Trevor Manuel, South Africa's former finance minister; Mexico's central bank governor, Agustin Carstens; former Brazilian central bank president Arminio Fraga; and China's Zhu Min, a special adviser to Strauss-Kahn.

Zhu declined to comment on any scenarios. "I have meetings all day," he told The AP.

The questions over Strauss-Kahn's future are laying bare long-standing complaints over the stewardship of the global agency. Developing countries have griped for years about the voting system of the IMF. In particular, they have chafed over a gentleman's agreement that's ensured a European head of the IMF and an American head of the World Bank since their creation just after World War II.

The IMF focuses on providing emergency loans and ensuring stability in the international financial system. The World Bank funds projects in developing countries.

China, India, Brazil and other emerging economies are increasingly driving worldwide growth. They also emerged as forces of stability after the US financial crisis kicked off a global recession and European debt crises rattled financial markets.

Experts say they think Strauss-Kahn will step down. But if he refuses, the IMF's 24-member executive board could remove him or place him on administrative leave.

"What the board is hoping is that Strauss-Kahn will do the honorable thing and resign," said Eswar Prasad, an economics professor at Cornell and former IMF official. "Support will erode fairly quickly. I see this as a matter of days."

Uri Dadush, a senior associate at the Carnegie Endowment for International Peace and former World Bank official, said: "Once he's indicted, he cannot carry out his functions. How can he possibly represent the IMF under those conditions?"

Even before his Sunday arrest, Strauss-Kahn was widely expected to resign from the IMF later this year to pursue the French presidency in 2012. Still, a clear successor had yet to emerge.

European leaders would resist the notion of giving up their traditional claim to nominate the IMF chief. That's especially true now because solving the debt crises in European countries such as Greece and Portugal has emerged as one of the institution's chief responsibilities. Strauss-Kahn, who was France's finance minister when the euro currency was created in 1999, has been praised for his leadership in handling the 17-nation eurozone's troubles.

Though the IMF's board doesn't want to rush to judgment, it faces rising pressure. Officials acknowledge it will be increasingly difficult for Strauss-Kahn to remain in the job if he is denied a bail a second time Friday. To oust him, the 24-member board could call a vote.

"The longer it drags out, the uglier it gets, the weaker Europe's position is going to be," Prasad said.

On Monday, German Chancellor Angela Merkel sought to dampen speculation that the next IMF leader should come from the developing world. Still, the United States is thought to be open to a non-European IMF leader.

"We retain full confidence in the IMF and its continued capacity to fulfill its role in the global economy during this difficult period," White House spokesman Jay Carney said.

Carney declined to discuss whether Strauss-Kahn should resign or who should succeed him.

Despite Strauss-Kahn's arrest, the IMF says it is operating normally with deputy John Lipsky as the interim director. But Europe's debt crisis is showing little sign of abating. Greece, in particular, is widely expected to need more international aid. The aid package will likely require someone who can match Strauss-Kahn's stature and extensive network of political connections to clinch a deal.


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