“… I try to not be French, not be European, when I do my job…”
— Christine Lagarde
Through the six decades of its existence, the International Monetary Fund has always been headed by candidates from the developed world and this time was no exception. However, Christine Lagarde’s election as the managing director of the IMF, the eleventh European to be elevated to the position, evoked much more than academic interest across the world as the simmering Euro- zone crisis was in the spotlight.
The lack of consensus among the emerging economies to propose a common candidate and the timely backing from the United States might have saved the day for the first woman ever to head the Washington-headquartered agency, but it would be an understatement to say that she has her plate full.
First of all, the IMF is accustomed to playing the role of a benevolent lender to the poor and developing economies of the world. In return, the beneficiaries are asked to make necessary policy changes. But this time around, Lagarde’s clientele include some familiar faces such as Greece, Spain, and Italy, which makes her task even more difficult. The former finance minister of France has to walk a tightrope to prove that she is not just a pawn of the European coalition.
Still, the new incumbent has many things going for her. The very fact that Lagarde is female makes her stand out, especially as she has replaced Dominique Strauss-Kahn, who resigned after he was arrested on charges of molestation, though the charges have since been dropped. Moreover, Lagarde has proved herself in the legal profession, having climbed the corporate ladder to head the Chicago-based law firm Baker & McKenzie, the first female to be elevated to the position. Her familiarity with the Wall Street is another big plus.
Well, I look under the skin of countries’ economies and I help them make better decisions and be stronger, to prosper and create employment.
— Christine Lagarde, quoted in The Guardian
From holding a top executive slot in corporate America, Lagarde moved to the rough and tumble of French politics when she was offered the post of trade minister in the Dominique Villepin cabinet in 2005. But her political career really peaked when she was promoted as finance minister two years later by Nicolas Sarkozy, adding yet another “first” to her credit. Though a political novice, the deft negotiating skills acquired as a lawyer made her a prominent face among the pantheon of Euro-zone leaders. Among her achievements, Lagarde includes the successful negotiation of a €750 billion European Union rescue fund during the financial crisis of 2009. She was also instrumental in containing the European debt crisis by prompting Greece, Ireland, and Portugal to seek bailouts. Lagarde and German Chancellor Angela Merkel spoke the same language on the issue of spending cuts to be undertaken by Euro-zone borrowers and sidelined the question of jointly issued Eurobonds. As the finance minister of France, she put the onus of the financial crisis “partly on the male-dominated, testosterone-fueled culture at global banks,” as BBC News put it.
Lagarde’s flawless English and presentation style give her an edge in global economic forums. The elegant silver-haired 55-year-old, who is also known for her penchant for Chanel jackets, was featured in fashion magazine Vogue last year. Swimming for Lagarde is not just a pastime, having been a member of France’s synchronized swimming team as a teenager. Interestingly, Lagarde attributes her success in politics to swimming, which taught her “to grit your teeth and smile,” as she told The Guardian in an interview.
Though Lagarde admits that she has a soft spot in her heart for her home ground of Europe, she understands that the resolution of the Euro-zone crisis is of utmost importance to the global economy. Lagarde says she would not mince words when talking to the governments of big troubled European countries much like the way the IMF deals with smaller economies. Soon after Lagarde took over as the IMF chief, she drew a line in the sand when she squarely blamed the tax evaders in Greece for precipitating the crisis.
And Lagarde showed that she really means business when Hungary approached the agency for loans to resuscitate its economy. The Eastern European economy has been asked to swallow a bitter pill, which includes raising taxes, and agreeing to amend some of the laws governing its central bank.
The IMF chief has no qualms in admitting that she is not an expert economist, but is confident that she understands the subject. Moreover, she has the charm and the persona to drive home the collective interest of a group of people over and above the vested interests of individual members. Only a few months into the job, Lagarde demonstrated that she is a great believer in straight talk when she said that European banks are under-capitalized.
However, being the finance minister of France and fire-fighting to rescue the ailing Euro-zone members is one task and trying to do the same job as the IMF boss is quite another. Lagarde and Merkel may be thick European pals, but they seem to differ now on the question of the amount of money required to shield the struggling economies and how to raise the funds.
With Greece deciding to stay put in the currency bloc, Lagarde might have heaved a sigh of relief. But the Spanish conundrum remains unanswered. More than the fiscal deficit, the country’s troubled banks remain at the heart of the crisis. On their part, the IMF and the European Commission agree on pumping money directly into the banks, but political approvals from contributing nations pose a stumbling block.
Lagarde is chairing the IMF at a time when the agency’s role is increasingly coming under global scrutiny. But judging by her score card in the last year, it seems the ace swimmer can turn the tide and steer the global economy to safer shores.
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© Thomas White International, Ltd. 2019