The New York Police Department's questions for Dominique Strauss-Kahn pose potentially much bigger political and financial ones for the world. Law enforcement officials removed the IMF chief from a flight to Paris on Saturday and took him into custody in connection with an alleged sexual assault of a hotel maid. The sordid affair could derail Strauss-Kahn's possible bid to lead France and alter the course of the IMF at a critical juncture in the global sovereign debt crisis.
Strauss-Kahn was widely seen as the best potential challenger to Nicolas Sarkozy as the 24th president of the French Republic next year. The incumbent's unpopularity, combined with Strauss-Kahn's tenure during the global financial crisis, appeared to give the Socialist Party stalwart a strong shot in the election next year. That is unlikely to be the case if charges are filed over the incident at the Sofitel hotel in Times Square. A police official has told reporters that while the maid was cleaning the room, Strauss-Kahn came out of a bathroomnaked and tried to sexually assault her. She was treated for minor injuries, police said, adding that Strauss-Kahn's cellphone was found in the room where the alleged incident took place.
Even before Saturday's arrest, Strauss-Kahn would have needed to step down from his IMF post had he decided to throw his hat into the ring for the French presidency. But in such a scenario, the fund's normal process for nominating a successor — that is, with liberal French and European political influence — would have been intact. If Strauss-Kahn's exit occurs because of the situation in New York, it's not clear how a replacement would be found.
That could have serious ramifications on global affairs. Indeed, some have argued the IMF has acted too softly in its response to the debt crises afflicting Europe, reflecting a more politically sensitive leadership under Strauss-Kahn given his designs for the Elysee Palace. By extension, an abruptchange in leadership at the IMF could push the agency towards a more confrontational, if traditional, stance with countries like Greece.
{{/usCountry}}That could have serious ramifications on global affairs. Indeed, some have argued the IMF has acted too softly in its response to the debt crises afflicting Europe, reflecting a more politically sensitive leadership under Strauss-Kahn given his designs for the Elysee Palace. By extension, an abruptchange in leadership at the IMF could push the agency towards a more confrontational, if traditional, stance with countries like Greece.
{{/usCountry}}Until more is known about the arrest, of course, these are all hypothetical outcomes to hypothetical questions. But it's fair to say the financial markets will have as much interest in the outcome as New York's tabloids do.