Strauss-Kahn resigns, Lagarde heads race to take over

Strauss-Kahn resigns, Lagarde heads race to take over

Washington/Paris: French Finance Minister Christine Lagarde emerged as frontrunner on Thursday to succeed Dominique Strauss-Kahn as head of the IMF after he resigned and vowed to fight charges of sexually assaulting a hotel maid.

His letter of resignation, tendered from a New York prison cell, triggered a political tug-of-war over the leadership of the global lender. Strauss-Kahn arrived at a New York court building on Thursday to apply for release on $1 million bail.

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His arrest on Saturday dashed his prospects of running for the French presidency in 2012 and sparked debate over the 65-year-old tradition that a European heads the IMF.

US treasury secretary Timothy Geithner called for an “open process" to select a successor to Strauss-Kahn, although sources in Washington said the United States, the largest financial contributor to the IMF, would back a European for the post.

“We want to see an open process that leads to a prompt succession for the Fund’s new managing director," Geithner said in a brief statement.

The US push to find a replacement quickly was also likely to favor a European replacement because it would be difficult for developing nations to unify around a rival candidate to challenge Europe’s long hold on the job.

A Reuters poll of economists showed 32 out of 56 think Lagarde is most likely to succeed him, and diplomats in Europe and Washington said she had backing from France, Germany and Britain - the three biggest European economies.

They also said there was an expectation that the United States would back Lagarde, not least because it wants to keep the number two IMF job and the leadership of the World Bank, the IMF’s sister organization that funds developing countries.

German Chancellor Angela Merkel tried to preempt calls from emerging nations for a shot at the post by saying the next managing director should be appointed quickly and should be a European.

Canada, a member of the Group of Eight leading economies, who meet for a summit in France next week, expects a European to get the post, a government source said.

In veiled warnings against another US - European stitch-up, China and Japan both called for an open, transparent process to choose a successor on merit.

Greatest possible firmness

Strauss-Kahn’s resignation letter, released by the IMF and dated 18 May contained his first public comment on the charges of attempted rape, illegal sexual acts and sequestration of a 32-year-old widow from West Africa at a luxury Manhattan hotel.

“I deny with the greatest possible firmness all of the allegations that have been made against me," he wrote. “I want to devote all my strength, all my time, and all my energy to proving my innocence."

A senior source at the IMF said Strauss-Kahn had tendered his resignation of his own accord through lawyers before the Fund’s board had been able to contact him to ask his intentions.

The former finance minister was to make his second request to be released on $1 million cash bail and placed under 24-hour house arrest until his trial, his lawyers said.

He is being held in New York’s Rikers Island jail, charged with attempted rape, sexual abuse, a criminal sexual act, unlawful imprisonment and forcible touching.

The woman Strauss-Kahn allegedly tried to rape testified on Wednesday before a grand jury. The 23-member panel will decide in secret whether there is enough evidence to formally press charges with an indictment.

Any trial could be six months or more away. If convicted, he could face 25 years in prison.

Strauss-Kahn’s attorney, Benjamin Brafman, told his arraignment hearing on Monday that the evidence “will not be consistent with a forcible encounter."

A lawyer for the alleged victim, a Guinean mother of a 15-year-old daughter who has gone into hiding to avoid media attention, told Reuters she opposed bail.

“The idea that the man who did this to her is now on the street, so to speak, and able to do what he wants to do in the world is something which is frightening to her," Attorney Jeffrey Shapiro said.

Mug shot

Strauss-Kahn’s resignation intensified debate over who should lead the Fund and whether it was time to ditch the practice, in place since the IMF was set up in 1945, that a European heads the IMF while an American leads the World Bank.

The vacancy comes at a sensitive time, given the IMF’s dominant role in helping euro zone states such as Greece, Ireland and Portugal deal with massive debt problems.

Europeans argue that the euro zone debt crisis means it makes sense for them to retain the post for now.

Lagarde, 55, declined to answer when asked if she was interested in the post, but told reporters: “Any candidacy, whichever it is, must come from Europeans jointly, all together."

Several European diplomats said she had been quietly canvassing support in the expectation that Strauss-Kahn would stand down within weeks to run for the French presidency.

A fluent English-speaker who headed the US law firm Baker & McKenzie in Chicago before joining the French government in 2005, Lagarde is also under something of a legal cloud herself.

A public prosecutor recommended this month that she be investigated for her conduct in a business-related arbitration case involving businessman and former politician Bernard Tapie.

Judges at a special court for ministers are expected to decide in mid-June whether to order a full-scale inquiry.

Emerging economy officials acknowledge that one problem would be their own difficulty in agreeing on a single candidate, in contrast to the Europeans’ disciplined unity.

One possible figure could be former Turkish Economy Minister Kemal Dervis, 62, an economist with IMF experience, who is from an emerging economy that is a candidate for EU membership.

Turkish finance minister Mehmet Simsek said the practice of Europe appointing the IMF head must change because “the center of the world is moving from west to east."

Japan, China, Mexico, Brazil and South Africa have all suggested a new approach to selection.

John Lipsky, the Fund’s number two whose term expires in August, is acting managing director until the IMF executive board selects a successor to Strauss-Kahn.

A police mug shot of Strauss-Kahn, 62, taken more than 24 hours after he was detained, showed him looking exhausted in a rumpled open-neck shirt, looking down through half-closed eyes.

In a poll released in France on Wednesday, 57% of respondents thought the Socialist politician was definitely or probably the victim of a plot.

But French politics has moved on to the search for a replacement challenger to unpopular conservative President Nicolas Sarkozy next year. Former Socialist leader Francois Hollande is now the centre-left frontrunner, but party leader Martine Aubry is under pressure to enter a Socialist primary.