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Strauss-Kahn looses European support as succession debates start

European powers began today to distance themselves from Dominique Strauss-Kahn, as current French finance minister Christine Lagarde emerged as their favoured replacement to head the IMF.

world Updated: May 17, 2011 20:02 IST

European powers began on Tuesday to distance themselves from Dominique Strauss-Kahn, as current French finance minister Christine Lagarde emerged as their favoured replacement to head the IMF.

With Strauss-Kahn, one of Lagarde's predecessors, languishing in New York's Rikers Island jail awaiting trial on charges of attempted rape, the European Union has unfinished business with the eurozone debt crisis and the virtual certainty that Greece will need further financial aid.

For that reason, European Commission chief Jose Manuel Barroso told Dutch media that "if a succession is necessary, European Union states should present their candidate."

But emerging powers believe it is time for Europe, the IMF's biggest capital contributor, and the United States, its home, to reconsider arrangements, dating back to World War II, which share leadership at the IMF and World Bank between the two.

Stepping into the fray, Chinese foreign ministry spokeswoman Jiang Yu told Dow Jones Newswires on Tuesday that nominations for the International Monetary Fund (IMF) should be fair and transparent.

Booming China and many other major developing countries feel it is long overdue that they get the senior jobs at the IMF and World Bank so that their interests get a better hearing.

Strauss-Kahn, who before his arrest was front-runner for the French presidential polls in 2012, was seen as having brought special connections and understanding to the eurozone debt crisis.

Even before he appeared before a US judge Monday, German Chancellor Angela Merkel and Belgian finance minister Didier Reynders fired the starting gun on the succession issue.

As potential runners and riders began to emerge, either way "the feeling is it's not for Europe to budge," said a diplomat who asked not to be named. Lagarde is considered "certainly a credible candidate," the diplomat said, but EU partners are "waiting to see if (French President Nicolas) Sarkozy will put her forward.

"She is waiting to see if Sarkozy will put her forward," the diplomat said, noting that the Europeans are trying not to appear in any "indecent" haste to decide the issue.

Lagarde also has her own judicial woes in France, where a prosecutor has asked for an investigation into whether she exceeded her authority when ordering a special panel of judges to arbitrate in a banking scandal involving tycoon Bernard Tapie.

France has had four of the 11 IMF bosses since the institution was set up in 1946, which may prove Lagarde's biggest drawback, but it would appear she can also count on support from London, judging by an appearance alongside George Osborne last week on the BBC.

When asked about who would replace Strauss-Kahn when he stepped down in 2012, Osborne said Lagarde would make a good future candidate.

As convention is that only heads of state or government can nominate candidates, former British Labour Prime Minister Gordon Brown's long cherished hopes of succeeding Strauss-Kahn may be dead and buried.

His Conservative successor David Cameron's government has already noted "no groundswell of support" for the Scot.

Germany's mass market daily Bild mentioned Josef Ackerman, chief executive of Germany's largest bank, Deutsche Bank, as well as Lagarde, while a compromise candidate who could find favour if emerging economies step up a campaign might be Turkey's Kemal Dervis, according to diplomats.

As Turkish finance minister, Dervis used an IMF bailout to set Ankara on its path to sharp growth and has also previously headed the UN Development Programme.

IMF deputy managing director John Lipsky is filling in for Strauss-Kahn for now but he had announced before the Frenchman's dramatic arrest on board an Air France plane that he would leave on August 31 -- meaning the IMF faces a challenge replacing its top two officials in a very short period.

First Published: May 17, 2011 19:59 IST