The arrest over the weekend for sexual assault in New York of Dominique Strauss-Kahn, head of the International Monetary Fund (IMF), is having repercussions far beyond those to his alleged victim, a hotel maid at the Times Square Sofitel.
According to Reuters, Strauss-Kahn was taken from an Air France flight just moments before takeoff and arrested on charges that included attempted rape. He was on his way to a meeting with German Chancellor Angela Merkel on Sunday to discuss the debt crisis, then would have headed on to a euro zone finance ministers meeting on Monday.
Strauss-Kahn’s arrest complicates matters for Greece, which was believed to be on the verge of receiving another bailout package. It also throws a wrench into the succession at the IMF, where John Lipsky, the second in command, had announced just Thursday his plans to step down from his post in August, but who The New York Times says has now been named acting managing director. It also puts into turmoil France’s 2012 presidential race. Strauss-Kahn was widely expected to be the country’s Socialist Party candidate to run against Nicolas Sarkozy next April.
Speculation has already begun about who will run the IMF long term in Strauss-Kahn’s absence. Lipsky, a former chief economist at JPMorgan Chase and Salomon Brothers in New York, has also represented the IMF in Chile. However, with news of his plans to leave the IMF having already been made public, Eswar Prasad, a professor of international economics at Cornell University, a senior fellow at the Brookings Institution in Washington and a former IMF official, said that the timing could result in an “awkward period.”
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Prasad, who worked with Lipsky as division chief of the IMF’s financial studies division, said in a Bloomberg report, “He can carry the ball effectively for the next few months, but I wouldn’t count on anything more from him.” Considering that Lipsky planned to depart the IMF within months, Prasad added, it was not likely that he would launch “major initiatives.” Felix Salmon wrote in a Reuters blog late Sunday that Christine Lagarde of France will most likely get the nod, despite a host of other likely candidates he named in the piece.
But more critical is what will happen with Greece, Portugal, and the ongoing European debt crisis. According to an Associated Press report, Nemat Shafik, a deputy managing director at the IMF, was sent in place of Strauss-Kahn to the Monday euro zone meeting.
An unidentified Greek official said in the report, "This might definitely cause some delays in the short term." Prasad said in the report, "The leadership vacuum at the IMF comes at a highly inopportune time for Europe, which is teetering on the brink of a full-blown debt crisis."