IMF gets a strong jolt under tainted chief Christine Lagarde: The Statesman

Christine Lagarde, managing director of the International Monetary Fund (IMF), delivers a statement at the IMF headquarters in Washington on Dec 19, 2016.
Christine Lagarde, managing director of the International Monetary Fund (IMF), delivers a statement at the IMF headquarters in Washington on Dec 19, 2016. PHOTO: BLOOMBERG

Christine Lagarde assumed authority as managing director of the International Monetary Fund (IMF) in 2011 when her predecessor, Dominique Strauss-Kahn, was under a cloud for reasons purely personal. Through a quirk of circumstances, Lagarde also finds herself in a rough patch over the misuse of public funds involving a massive payout of 400 million euros (S$603 million) to a tycoon during her tenure as the finance minister of France.

Chiefly, she has been convicted and charged with negligence, specifically for her failure to challenge the state arbitration payout to the friend of former French President Nicolas Sarkozy. The case, it bears recall, involved the decision to allow a dispute over Bernard Tapie's sale of Adidas to Credit Lyonnais Bank to be resolved by a rarely-used private arbitration panel ... instead of the courts.

In the context of Monday's verdict of the Cour de Justice de la Republique (Court of Justice of the Republic) - a special tribunal for ministers that has pronounced her as guilty - the predicament of the two is both the same and different.

While Strauss-Kahn was jailed after having to resign from the IMF, his successor has been spared the prison gates, though it is still not clear whether she will have to step out of office. Markedly, she has not been given any sentence and will not be punished. Aside from her personal standing as the individual at the helm of an international fiscal agency, it is the credibility of the IMF that has suffered a severe jolt under a tainted head.

The scandal has without question overshadowed her performance during two successive terms since 2011, and misgivings that the judgment could destabilize her work not least in the context of the IMF's participation in a multi-billion dollar bailout for Greece are not wholly unfounded.

The rehabilitation of migrants is yet another issue as Lagarde was consistent on the point that refugees could boost the German economy. There is uncertainty too over the hitherto crucial US role in the entity after Donald Trump takes over as president in January. His utterances over the course of the election campaign would suggest that he cares little for international agencies, even to the extent of debunking the United Nations as an "anachronism."

Investigators suspect that the payment to Tapie was the result of a closed-door agreement with the then President, Sarkozy, in return for electoral support. The verdict is not explicit on the political nitty-gritty, but Lagarde was suspected of rubber-stamping a deal to effectively buy off the business magnate with taxpayers' money.

Civil courts have since quashed the unusually generous award, declared the arbitration process and deal fraudulent and ordered Tapie to pay the money back. The verdict renders the IMF rudderless amid a torpid phase in Europe's economic history.