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IMF in disarray after Kahn fiasco

business Updated: May 18, 2011 11:27 IST

The arrest of International Monetary Fund managing director Dominique Strauss-Kahn on sexual assault charges has embarrassed an elite institution often resented for dictating fiscal chastity to developing countries.

Strauss-Kahn’s arrest 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 Deputy managing director John Lipsky slated to leave in August, pressure is building on the global last-chance sovereign lender to come up with fresh leadership.

And with much of its focus on the European crisis, there is pressure to replace Strauss-Kahn with another European.

The IMF executive board met late Monday, but made no public decision on Strauss-Kahn’s fate, saying that it “will continue to monitor developments.”

Meanwhile, the Fund 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 on Saturday at New York’s JFK airport — where he was headed to Europe for Greek crisis talks with German chancellor Angela Merkel.

“Even if he (Strauss-Kahn) were acquitted, the trial would take a while. And they are not going to wait in order to replace him,” said Mark Weisbrot, co-director, Center for Economic and Policy Research.

HQ staff is stoic and silent

With a downward gaze and a brisk walk past the line of camera crews, IMF staff stoically reported for work on Tuesday. The Fund told workers in a mass e-mail on Sunday to avoid talking to the media about Strauss-Kahn’s arrest.

Fund can still play role: US
The US remains confident that the International Monetary Fund can fulfill its role in the wake of the arrest of Strauss-Kahn, a senior US Treasury department official said in a television broadcast on Monday.

Choice must be on merit: China
China’s foreign ministry spokeswoman Jiang Yu said on Tuesday that the selection for leadership of the IMF should be based on “fairness, transparency and merit”, but declined comment on the charges against Strauss-Kahn.