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WASHINGTON — The arrest of International Monetary Fund boss Dominique Strauss-Kahn came just as the highly regarded guru of international finance was engineering a global effort to prevent a fiscal calamity in Greece that threatened Europe’s already fragile economy.
Strauss-Kahn has used his charisma and economic know-how to push an activist approach to bail out battered governments in Greece and Portugal, in an effort to stave off wider carnage in the financial markets.
But his arrest on charges of sexually assaulting a hotel maid leave a massive vacuum at the IMF at a critical moment — and likely derails his own political future in France, where he was considered a leading candidate for president.
“It’s like losing an experienced ship’s captain, while navigating particularly difficult, uncharted waters,” said Jan Randolph, head sovereign risk analyst at IHS Global Insight.
At the IMF — a prestigious and powerful if little understood global lending institution — employees were told not to discuss the scandal that has become the talk of Washington, New York and European capitals.
The 24 members of the IMF board met yesterday to try to sort through the mess and figure out a way forward without their powerful chief.
In contrast to his sleazeball personal image, Strauss-Kahn is considered to be a top-notch economist and steady hand at the institution, with personal connections with European heads of state and a deft understanding of the delicate role the IMF must play when interacting with foreign governments who are in debt.
The IMF is now being headed on an acting basis by his top deputy, John Lipsky.
Strauss-Kahn had been expected to quit his job later this year to seek the French presidency.
But the socialists’ chances of toppling French President Nicolas Sarkozy have tanked as a result of Strauss-Kahn’s latest scandal, experts say.
“If Strauss-Kahn isn’t in the presidential election, it’s hard to think of another person who is powerful enough to defeat Sarkozy,” said Dr. Jennifer Fredette, a French politics expert at Rockefeller College in Albany.
Strauss-Kahn’s reputation as a skirt-chaser wasn’t enough to keep him from being the top contender in opinion polls to take on Sarkozy, whose popularity has been plummeting.
“In France, they wouldn’t care about [infidelity] — there’s that sort of general understanding that a man’s private life is his private life. If you have a man in power, of course he’s a womanizer,” Fredette said.
But now that he is accused of a violent attack on a woman, Strauss-Kahn can say au revoir to his political career.
Strauss-Kahn “will never be president of the Republic of France,” said Jean Quatremer, who has written critically about Strauss-Kahn, in an interview with French paper Liberation.
As for leadership at the IMF, Strauss-Khan’s legal troubles could open the way for an end to the traditional role of a European at the helm.
Emerging countries such as China, which is bankrolling much of the IMF’s lending to troubled countries, are pushing to get a crack at a leadership role, while German Chancellor Angela Merkel is pushing for it to stay in European hands.
“We know that in the medium term, emerging countries certainly have a claim to the post of IMF chief as well as the post of head of the World Bank,” Merkel said in Berlin.