IMF chief Dominique Strauss-Kahn‘s arrest puts debt talks in crisis
Charges of sexual assault and attempted rape threaten to create a leadership vacuum at the overseer of the global economy
- Angelique Chrisafis in Paris, Dominic Rushe in New York and Helena Smith in Athens
- guardian.co.uk, Sunday 15 May 2011 20.52 BST
- Article history
Talks on resolving the European debt crisis have been plunged into disarray after the head of the International Monetary Fund, Dominique Strauss-Kahn, was arrested and charged with sexually assaulting and attempting to rape a maid in a New York hotel.
Strauss-Kahn, 62, was taken from the first class cabin of a Paris-bound Air France flight at JFK airport by plainclothes officers before Manhattan police formally arrested him on charges of a criminal sexual act, attempted rape and unlawful imprisonment.
The charges threatened to create a leadership vacuum at the IMF, overseer of the global economy, and threw open next year’s French presidential election, ending the hopes of the French Socialist who was favourite to beat Nicolas Sarkozy.
The allegation is a major embarrassment to the IMF, which has authorised billions of dollars of lending to troubled countries and played a major role in the eurozone debt crisis. The arrest will cast a cloud over the IMF’s role in addressing the rescues and is likely to have a major impact on stock markets as traders react to yet more uncertainty inEurope.
Strauss-Kahn had been flying to Europe to discuss the worsening European debt crisis. He had been scheduled to meet the German chancellor, Angela Merkel, on Sunday and European financial ministers on Monday and Tuesday. The IMF leader was to have discussed how best to tackle Greece’s worsening debt crisis and finalise Portugal’s €78bn bailout package.
A senior Greek government official said the arrest would not change the IMF’s policy in Greece but could cause delays in the short term. The IMF-led bailout has become increasingly unpopular with other IMF members amid growing doubts about the Greek government’s ability and resolve to meet the commitments of the international aid package.
The IMF said on Sunday it “remains fully functioning and operational”. “Mr Strauss-Kahn has retained legal counsel, and the IMF has no comment on the case; all inquiries will be referred to his personal lawyer and to the local authorities.” Its No 2, John Lipsky, would step in as acting chief and it named another official to attend Monday’s meeting in Brussels.
The case also threatened to throw the spotlight on Strauss-Kahn’s reputation in France for targeting women, something often alluded to but hushed up in the press.
On Sunday night Anne Mansouret, a socialist regional councillor, alleged on French state TV that her daughter, the novelist Tristane Banon, had been the victim of an attempted sex attack by Strauss-Kahn in 2002 but had not gone to police. Mansouret claimed Strauss-Kahn had “a kind of addiction, a difficulty in controlling his impulses, which is a problem”. She claimed his “preying” on women was a kind of “violence”.
Strauss-Kahn’s allies said he was a well-known seducer but claimed the allegations of attempted rape seemed far-fetched and unlikely.
The 32-year-old hotel worker at Manhattan’s Sofitel, near Times Square, told police she entered Strauss-Kahn’s room to clean it at around 1pm on Saturday. He allegedly emerged from the bathroom naked, ran after her and dragged her into a bedroom where he began sexually assaulting her on the bed.
According to the police account of the “brutal” attack, he locked the door to the suite, then dragged her down a hallway into a bathroom where he assaulted her again. The woman escaped from the room and was later treated in hospital for minor injuries. Police found Strauss-Kahn had left his room seemingly “in a hurry”, leaving behind personal items including his phone. He was detained by police at 4pm on a flight about to take off for Paris. A spokesman for the hotel said the woman had worked there for three years, and was “completely satisfactory in terms of her work and behaviour”.
Strauss-Kahn does not have diplomatic immunity as head of the IMF. After a night in police custody in Harlem, he was expected to appear before a county judge. Under New York state law, a criminal sexual act and attempted rape both carry potential 15- to 20-year prison sentences. Unlawful imprisonment carries a three- to five-year sentence.
Strauss-Kahn’s lawyer said he would plead not guilty.
Howard Wheeldon, senior strategist at BGC Partners, said the news was a “huge blow” for the IMF. “DSK has changed attitudes to the IMF. Seven or so years ago it wasn’t perceived to be going its job, he’s done a lot to reshape the organisation.
“The timing is very bad, both for the organisation and for the unfortunate degree of uncertainty it will generate in the sovereign debt crisis.”
The French left was thrown into disarray. Strauss-Kahn, the favourite to beat Sarkozy in the 2012 election race had been expected to announce his candidacy at the end of next month. The allegations mark the end of that hope and will worsen infighting on the left. The Socialist economist Jacques Attali said Strauss-Kahn’s 2012 presidential hopes were dead: “Even if he pleads not guilty, which he may be, he won’t be able to be candidate for the Socialist primary for the presidency and he won’t be able to stay at the IMF.”
Other warned that Strauss-Kahn had shamed the entire French political class. The centrist François Bayrou said: “If the facts prove true … it’s something degrading for all women. It’s terrible for France’s image.”
Bernard Debré said Strauss-Kahn’s wallowing in sex was a “humiliation” for France. Dominique Paille, of the centrist Radical party said if true “it would be a historic moment, in the negative sense, for French politics.” Strauss-Kahn’s arrest provoked nervousness in Greece, the country at the centre of Europe’s worsening economic crisis.
“This adds uncertainty to the prospect of early resolution. The more uncertainty exists in terms of major institutions, the higher the cost for a country like Greece,”
Louka Katseli, the minister of labour and social security, told the Guardian. “What is needed are firm decisions [to ensure] financing for the next years,” she said.
“The IMF under his stewardship has been more flexible with Greece than its other creditors the EU and ECB,” said Theodore Pelagidis, professor or economic analysis at the university of Piraeus. “He was much more understanding of the nature of the crisis. This now makes the situation more complex because one of the principal negotiators is out of the game and people are asking who is next and what should we expect?”
Professor Tom Cooley, former dean of Stern School of Business at New York University, said: “It is a blow to the IMF at a time when they have begun to define a new and important role for the institution in the modern global economy.” Cooley said that the IMF was “an organisation of consummate professionals with deep professional leadership so I am sure they will carry on just fine.”
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