A New Leader for the IMF 'Convinced European' Christine Lagarde Takes Over
French President Nicolas Sarkozy has called it "a victory for France." But Christine Lagarde, appointed to replace the disgraced Dominique Strauss-Kahn as head of the International Monetary Fund, insists she is independent. Despite a looming inquiry into past indiscretions, Lagarde has widespread backing.
In the end, she succeeded without being put to a vote. Once the United States offered its approval, French Finance and Economics Minister Christine Lagarde, 55, was appointed to become the next leader of the International Monetary Fund -- by consensus. On Tuesday, Lagarde was appointed to lead the IMF by the 24-member executive board just weeks after her fellow Frenchman Dominique Strauss-Kahn resigned after being arrested in New York on charges of sexual assault.
The appointment marks a new high point in Lagarde's already remarkably successful career. But it is also a victory for Paris, which succeeded in hanging on to the top spot at the IMF despite the embarrassing Strauss-Kahn affair. Her selection was preceded by several backroom agreements and deft deal-making.
It is an appointment that comes at the detriment of the developing world. At the 2010 G-20 summit in Seoul, world leaders promised to change the way in which the top positions at the IMF and the World Bank were chosen. Thus far, the World Bank has always been led by an American and the IMF by a European. But transparency was to be introduced to the process and the positions were to be opened up to candidates from around the world.
After the shock of Strauss-Kahn's arrest -- an event which shook the financial world and sent the French media into weeks of frenzy, particularly given that Strauss-Kahn was seen as a favorite to beat French President Nicolas Sarkozy in elections in 2012 -- it initially looked as though contenders from outside of Europe were under consideration.
The influential French newsmagazine Marianne noted that there was "no shortage of qualified candidates" outside of Europe for the job, including ex-Turkish Finance Minister Kemal Dervis, whose name had been dropped widely for the top position. Having spent 20 years at the World Bank, Dervis is considered an expert in the world of finance. An additional candidate was Nemat Shafik, deputy head of the IMF. In addition to her reputation for being a highly competent manager, she also holds three passports -- from Egypt, Great Britain and the US. Agustin Carstens, governor of Mexico's central bank, the Bank of Mexico, was also seen as a top candidate.
Despite the promised transparency, closed-door agreements once again characterized the process -- one which paid little attention to doubts raised in France over Lagarde's competence and independence. Much of the criticism has been focused on her background. Lagarde is a trained lawyer and made her mark early in the fields of anti-trust and labor law. Though now a member of Sarkozy's conservative Union for a Popular Movement (UMP) party, she has said that she voted for Francois Mitterand of the Socialist Party in the 1981 presidential elections. After completing her studies, she worked for Baker & McKenzie in the US before returning for a position as state secretary for foreign trade.
She quickly proved adaptable to the needs of the state. Her market liberalism did not prove to be much of a hurdle in doing everything possible to defend the domestic economy, and she became a major ally of French farmers. It is a form of French protectionism known as "Economic Patriotism," and one promoted by President Sarkozy himself. Lagarde has even been known to criticize her German neighbors, particularly when it comes to Germany's reliance on exports and, as Lagarde has said, insufficient consumption.
When necessary, Lagarde has shown little compunction about rubber-stamping deals arranged by the Élysée -- as during the so-called "Tapie Affair." The case, which is still under investigation, involves a 285 million payment in 2008 to businessman and politician Bernard Tapie relating to a bungled sale of the shoe and sports clothing company Adidas. A French court will decide on July 8 whether to open a formal inquiry into Lagarde's role in authorizing the payment.
'A Victory for France'
Despite such instances, Lagarde is known as someone who is not afraid to speak her mind when necessary. In 2005, at the very beginning of her political career, she blasted France's labor laws -- considered untouchable up until that point -- as a "brake on job creation." While such comments have been treated as mini-scandals in France, Lagarde's international reputation has risen steadily in recent years. In 2009, the Financial Times ranked her as the European Union's best finance minister.
It remains to be seen how Lagarde, who has called herself a "convinced European," will manage an institution like the IMF, with its 1,000 highly qualified financial experts. But she has the support of the US, in the form of high praise from Treasury Secretary Timothy Geithner. In a statement released last Thursday, Geithner called Lagarde "exceptionally talented" and praised her "strong leadership skills and experience."
Lagarde herself said that under her leadership, the IMF -- faced as it is with helping to solve the ongoing euro-zone debt crisis -- will be "more reactive, more effective and more legitimate." Following her appointment, she said: "I will make it a priority that our institution continues to serve all its members with the same attention and in the same spirit." In a Twitter posting, she said the appointment was a great honor.
Paris is likewise pleased with the posting given that a close ally of Sakozy's -- despite Lagarde's protestations of independence -- has now been ensconced at the head of one of the most important financial institutions on the globe. Sarkozy called the appointment "a victory for France."
With information from wire reports