Theres nothing like a good sex scandal to make you forget economic and financial vicissitudes. In todays media, youll find oceans of ink or bytes regarding how the IMFs Dominique Strauss-Kahn allegedly succumbed in Manhattan to those irrepressible springtime impulses. You could even say that he touched bottom on his addiction.
But wait. What if the whole thing is a plot? Hypothetically, the French government of Nicolas Sarkozy could have induced a sassy-looking chambermaid at the Sofitel to awaken the 62-year-olds impulses. This is not a macho theory, but a political one.
After all, Strauss-Kahn was ahead of Sarkozy in every major poll in France for next years presidential elections. Despite the fact that the IMF boss had a number of major meetings in Europe this week regarding the Greek debt crisis, the Portuguese debt crisis and a few others, it is a widely acknowledged fact that he was just weeks away from tendering his resignation so he could go all in on the presidential contest.
Until the Manhattan life-changing incident, the former French finance minister was then broad favorite for the opposition Socialist Partys presidential nomination ahead of 2012 elections in which the unpopular incumbent, Sarkozy, faces reelection.
According to the French press, Martine Aubry, leader of the Socialist Party, said in Paris she was totally stupefied by the news and asked Socialists to remain united and responsible . Strauss-Kahns wife, Anne Sinclair, the independently wealthy broadcast journalist, said she did not believe the allegations for a single second .
Beyond his nearly defunct presidential dreams, its a fact that his personal relationships with European leaders and ability to push through IMF support made him a crucial figure in arranging bail-outs for Greece, Ireland and Portugal.
Perhaps its a good thing that no crucial negotiations on the eurozone are currently under way. The terms of a US$110 billion joint EU-IMF bail-out for Portugal have already been ironed out, and it is likely to be weeks before officials must decide whether or not to adjust the Greek loan terms.
Three years ago, Strauss-Kahn was reprimanded by the IMFs executive board for a serious error of judgment after he had an affair with a colleague. Thus, regardless of the outcome of the Manhattan incident, he will not stay on at the helm, and its unclear if the interim chief, John Lipsky, will be ratified.
This sordid episode no matter how it ultimately plays out will spell the end of Strauss-Kahn as an effective leader of the IMF even if he retains his position, which is highly unlikely, said Eswar Shanker Prasad, an international economics professor at Cornell University. With Strauss-Kahns departure, the IMF can no longer be counted on to watch Europes back as it becomes increasingly clear that the EU-IMF program in Greece is not working.
Prasad added, Additional uncertainty is the last thing that Europe needs right now, but that will be the reality as the IMF absorbs this body blow and reorients itself to a post-Strauss-Kahn era.
As a member of the Socialist Party, Strauss-Kahn has been criticized by the Sarkozy government and elsewhere in France for enjoying a lavish lifestyle of expensive cars and clothing, which he has denied. Since the Manhattan incident took place in a US$3,000 a night suite, there was no denying that he liked upscale living.
At the IMF helm, Strauss-Kahn achieved tremendous advances in transforming a staid, bureaucratic organization after the financial crisis. He sought to be able to probe financial firms around the world and demand more data. And he insisted that the IMF develop better indicators for when a country might be going off track economically.
Some, like The Financial Times, speculate that this might be the right time to discontinue the long-standing practice of choosing the IMF head from among European figures, in exchange for the World Bank having a U.S. boss. Why not, speculates the Times, have someone from the developing world such as Mexicos central banker Agustín Carstens, who was the number two man at the IMF until 2006.