The IMF and Madame Managing Director


Christine Lagarde said the IMF must better reflect the shifting balance of power in the global economy

Christine Lagarde is surely the first synchronised swimmer to take one of the top jobs in international finance.

She is also the first woman, which is a novelty that the staff of the institution clearly relish. The new managing director's "town hall meeting" with staff on her first day in the job, on Tuesday, was full of people and by all accounts plenty of goodwill.

But the IMF can't rely on goodwill alone, in fact sometimes it needs to inspire the exact opposite.

Aside from that missing Y chromosome, Christine Lagarde is not a novelty at all. Though there are 187 countries in the IMF, five of the 11 managing directors have been French and all have been European.

When I interviewed her after her press conference today, I asked Lagarde whether she felt uncomfortable that her nationality had been a large factor in her getting the job. Was it something in the wine perhaps that made French people better-suited to the job of running the Fund?

Well, she said, the wine did give people greater longevity, and she intended to be in the job for five years. As for the rest of it, she was looking forward, not back. Change of subject.

I'm tempted to say, fair enough. After all, it's not only the unusually rapid and united support of European governments that got her this job. I've now been told that China and Brazil also played a key part.

Hours after her candidacy was announced, the Chinese called her privately to offer their support. Days later, the Brazilian finance minister made it known to the Europeans and the US that Brazil would not be getting behind an alternative, emerging market candidate.

From that point on, Lagarde's coronation was assured. Even the Americans could not have changed the result. (And, as we know, they didn't try.)

So when she says, as she did in our interview, that she did not see herself as a purely European candidate, those are not (just) empty words.

Yet, there is no getting round the fact that European governments put her where she is today. Now she must decide whether she will return the favour in her approach to the crisis in the eurozone.

Most economists, in fact, any serious observer of the situation, says there will be no solution without a major reduction in the debt of the governments in trouble, particularly Greece. Martin Wolf has a stab at the numbers involved in his latest column in the FT. The only question is whether private investors will bear the loss or European governments will, not to mention the IMF, which now has so much of its balance sheet tangled up in Greece, Portugal and Ireland.

In her interview she told me there would need to be a more comprehensive solution than has been attempted in the past, and said that European governments' approach in the past had been too ad hoc. It's easy to say, but she didn't give much indication how she would force such a solution in practice.

Governments often need the IMF to be the outsider, forcing them to do what they lack the political will to do on their own.

Plenty of people wonder whether she can possibly take that approach in the eurozone, when only days ago she was negotiating on the other side. But as she said herself, with her typical grasp of English cliché, "the proof of the pudding will be in the eating".

Stephanie Flanders, Economics editor Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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  • rate this

    Comment number 73.

    She is also the first woman, which is a novelty that the staff of the institution clearly relish

    What? What makes anyone think that? A new person is usually extended at least some goodwill, and a first meeting with a new boss is well attended - even by cynics. I would warrant exactly the same attendance and good will would have occured if it was another he.

  • rate this

    Comment number 72.

    Interesting that you state the role of the IMF is to make governments do what they need to do concerning finances. Seems they have a shaky record on such matters. Bankers choice, they like the French because they place style above substance. The vintage of the wine is much more important than the interest rates or extent of borrowing when discussing such matters..

  • rate this

    Comment number 71.

    Without debt the western world would not be able to offer its' citizens the standard of life they currently enjoy. The only problem is that debt has been allowed to grow to such an enormous extent that it now threatens the viablity of both the US Dollar and the Euro. The politicians have been allowed to bribe their electorate's with the fiction that this can go on forever.
    It can't.

  • rate this

    Comment number 70.

    Big fan of yours Steph, but your "wine" and "Manhattan prosecutor" remarks let you down - you're better than that :-)

  • rate this

    Comment number 69.

    The UK made a fatal error in not joining the euro 10 years ago. We now retain the sovereign freedom to debase our own currency, stoke up inflation, and beggar the thrifty to save the profligate. Luvverly!


Comments 5 of 73



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