IMF's toughest challenges yet await Lagarde
Christine Lagarde’s determination as a negotiator and experience working on the eurozone debt crisis are likely to ensure she settles smoothly into leadership of the International Monetary Fund, as the global lender faces some of the toughest economic challenges in its history.
Her charisma and the expertise in international relations which she built up as France’s finance minister will carry weight with governments around the world as she replaces the disgraced fellow Frenchman Dominique Strauss-Kahn, who resigned abruptly on May 18 after being arrested in New York in connection with the sexual assault of a hotel worker.
Supporters say Lagarde, the first woman to head the IMF, will have the political muscle to press indebted eurozone states into delivering on promised budget reforms.
Yet her lack of the highbrow academic credentials as an economist that Strauss-Kahn brought to the fund, and the likelihood that she will continue the same conservative policies which have so far failed to resolve the eurozone’s crisis, are a concern to some.
She has a reputation for sealing deals under pressure—during talks among the G20 nations in February she brought China into a compromise deal on ways to measure economic imbalances. She proved her negotiating stamina a decade ago as the first female chairperson of US law firm Baker & McKenzie.
Her easy charm and fluent English mean she is often rated in media polls as one of the world’s most influential women, and is one of the most popular political figures in France.
Among her key challenges will be pushing world leaders to do more to reduce trade deficits and other imbalances in the global economy. She has said that as IMF chief, she will enhance the fund’s responsiveness to the needs of poor countries and step up its surveillance of economies to try and ward off future crises.
While she has vowed to give China and other emerging powers a larger role at the IMF, Lagarde may find herself caught between emerging nations demanding greater voting rights and European governments reluctant to give them more weight.
Her chief rival for the job, Mexican Central Bank Governor Agustin Carstens, could not only boast more economic expertise and experience of working at the IMF, but he answered the concern of emerging nations over Europe’s refusal to relinquish its dominance in voting rights and its grip on the top IMF job.
Candid and tough
Lagarde has said that as IMF chief, she will be candid and tough in her discussions with European leaders on the eurozone crisis.
“There is no room for benevolence when tough choices must be made, and there is no option that does not start with difficult but necessary adjustments by the Greek authorities to restore the sustainability of public finances and to rebuild the country’s competitiveness,” she said.
She played a key role in crafting Europe’s response to the global credit crisis in 2009 and in putting together last year’s €110-billion bailout of Greece by the European Union and the IMF.
To critics, though, the strategy of the EU and the IMF in keeping Athens afloat with emergency loans, will refraining from more radical action such as a restructuring of Greek debt, has merely prolonged the country’s debt crisis and pushed Greece deeper into recession.
As IMF head, Lagarde will need to represent the fund’s shareholders around the world in approaching the eurozone crisis, and it is not clear how long all of them will be content with channelling more money to Greece. It is also not yet clear how neutral she can be as a Frenchwoman in a crisis to which French banks and the French government are heavily exposed.
Lagarde (55) joined Baker & McKenzie in Paris aged 25 after completing a masters degree in English and labour law, and quickly rose to the top of the Chicago-based firm.
French finance minister since 2007, she oversaw a softening of the 35-hour working week introduced by the Left by removing taxes on overtime. She attracted criticism early in her tenure by suggesting that the French had become work-shy and that navel-gazing hindered reform.
A former synchronised swimmer who practises yoga and drinks British tea but never coffee or alcohol, Lagarde mixes energy and serenity, people who know her say.
Born in Paris as Christine Lallouette and raised in the northern port city of Le Havre, Lagarde is a vocal proponent of women as senior executives, once noting dryly that if Lehman Brothers had been Lehman Sisters, it might have survived.
Divorced with two sons in their twenties, she spends some of her rare free time scuba diving off France’s Mediterranean coast with her businessman companion Xavier Giocanti.
Easily spotted among the grey suits of international finance, with her cropped silver hair, Chanel jackets and monogrammed Hermes work bag, Lagarde told Paris Match magazine she had barely considered a future bid for the IMF post when Strauss-Kahn’s shock resignation in May forced her to act.
“I have three weeks to put together a campaign. DSK had three months,” she said at the start of June, before embarking on a world tour to drum up support for her bid.—Reuters