Strauss-Kahn's IMF future hinges on bail hearing

By David Mchugh

Associated Press

Published: Wednesday, May 18 2011 3:50 p.m. MDT

FILE - In this May 15, 2011 file photo, Dominique Strauss-Kahn, head of the International Monetary Fund, is lead from a police station in New York where he was being held. While American authorities have condoned, or at least tolerated, such “perp walks” for more than a century, in France it’s been illegal to show images of suspects in handcuffs since 2000. French politicians and citizens alike are upset by the images, which they say make Strauss-Kahn, accused of sexual abuse, appear guilty.

Craig Ruttle, File, Associated Press

Enlarge photo»

WASHINGTON — Dominique Strauss-Kahn's bail hearing Friday could spell the end of his leadership of the International Monetary Fund.

If a New York judge denies bail for Strauss-Kahn or imposes highly restrictive conditions on his freedom, the IMF's executive board would expect him to resign, two senior IMF officials said Wednesday. If he didn't, the board could remove him on the grounds that he couldn't lead the IMF from a jail cell or far from its Washington headquarters.

The two officials spoke on condition of anonymity because of the highly sensitive situation. Strauss-Kahn is jailed in New York City on charges of sexually assaulting a hotel maid.

No action is foreseen before Friday's court hearing. Attempts to reach Strauss-Kahn's lawyers were unsuccessful. The Frenchman hasn't said whether he'll yield to rising international pressure for his resignation.

One of the IMF officials said the fund had yet to speak with its managing director since his weekend arrest. The IMF has appointed an interim chief, but there are no procedures for suspending or placing its leader on extended leave.

As a result, any prolonged legal troubles would mean that Strauss-Kahn would have to resign to avoid being ousted by the 24-member board. The board can meet whenever it wants to decide on Strauss-Kahn's future, the official said.

The other IMF official said the board will insist on a meeting Friday after the court hearing. The board can remove Strauss-Kahn without cause, the official noted.

While Strauss-Kahn remains confined to a Rikers Island jail cell, the dividing lines are sharpening in a dispute over whether someone from a rich or an emerging economy should lead the IMF after his exit.

Europe is aggressively staking its traditional claim to the top position. But fast-growing nations such as China, Brazil and South Africa are trying to break Europe's grip on an organization empowered to direct billions of dollars to stabilize the global economy.

Europeans have led the IMF since its inception after World War II. Americans have occupied both the No. 2 position at the IMF and the top post at its sister institution, the World Bank. The World Bank funds projects in developing countries.

Europe has "an abundance of highly qualified candidates" to lead the IMF, German government spokesman Christoph Steegmans declared Wednesday. He also noted the relevance of having a European at the helm, to deal with the debt problems that have racked the eurozone.

Steegmans didn't name any potential candidates or say whether Germany might propose one. But German Chancellor Angela Merkel, along with the finance ministers of Sweden and the Netherlands, have pressed Europe's case for the IMF leadership.

Still, developing nations see Europe's stranglehold on the position as increasingly out of touch with the world economy. China's is now the world's second-largest economy. India's and Brazil's have cracked the top 10. Many emerging economies are sitting on stockpiles of cash and have become forces of financial stability, while rich countries have become weighed down by debt.

"We must establish meritocracy, so that the person leading the IMF is selected for their merits and not for being European," Brazilian Finance Minister Guido Mantega said, calling for a "new criteria" for leadership. "You can have a competent European ... but you can have a representative from an emerging nation who is competent as well."

China suggested it was time to shake things up at the IMF, with Foreign Ministry spokeswoman Jiang Yu saying the leadership "should be based on fairness, transparency and merit."

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