Strauss-Kahn arrest throws IMF into disarray
WASHINGTON — The arrest on sexual assault charges of the head of the International Monetary Fund has embarrassed an elite institution often resented for dictating fiscal chastity to developing countries.
IMF managing director Dominique Strauss-Kahn's arrest by New York police for allegedly attempting to rape a hotel chambermaid opens a gaping hole at the institution as it wrestles with a complex financial crisis across Europe.
With the institution's leader locked up in the city's Rikers Island prison and its number two slated to leave in August, pressure was quickly building on the global last-chance sovereign lender to come up with fresh leadership.
The IMF executive board met late Monday to discuss Strauss-Kahn's situation, but made no public decision on his fate, saying only that it "will continue to monitor developments."
Meanwhile the Fund continued with regular business. It signed off on a 78-billion-euro ($111 billion) EU-IMF bailout for Portugal, and approved 1.58 billion euros in new assistance to debt-laden Ireland.
Strauss-Kahn was arrested Saturday at New York's JFK airport -- where he was headed to Europe for Greek crisis talks with German chancellor Angela Merkel -- after the hotel maid said he tried to rape her and forced her to have oral sex.
Lawyers for the 62-year-old French politician told a court early Monday he was innocent, and he was jailed after a judge denied him bail.
Deputy managing director John Lipsky is filling in, but last week he announced he would leave on August 31, so the Fund still faces a challenge replacing its top two officials in a very short period.
And few expect Strauss-Kahn -- who was at any rate considering a run for the French Presidency -- to stay on while he fights the severe charges facing him.
"Even if he were acquitted, the trial would take a while. And they are not going to wait in order to replace him," Mark Weisbrot, co-director of the Center for Economic and Policy Research, told AFP.
A source close to the IMF said the judge's decision shocked senior officials and that they may launch disciplinary action by the end of this week.
The IMF helps debt-laden governments restructure their finances, often by dictating extremely tough reforms and fomenting resentment in the process.
Strauss-Kahn, who became managing director in November 2007, gave the Fund a more flexible and sympathetic face while leading its efforts to address the worldwide financial crisis.
He led a tripling of Fund financial resources, and carved a crucial role for it in Europe's crisis, where it has joined bailouts of Greece, Ireland and, as of Monday, Portugal.
Strauss-Kahn also helped set a new ideological tone at the Fund.
In April he said it was no longer rigidly opposed to countries using capital controls defensively -- a position that in the 1990s had angered a number of developing countries, which accused the IMF of favoring advanced economies.
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