Early exit, serious problems

Strauss-Kahn: For obvious reasons, Dominique Strauss-Kahn didn’t meet with Angela Merkel as originally planned on Sunday. This illustrates one of the damages his New York arrest will inflict on Europe’s long-drawn debt drama. Euro zone finance ministers were due to talk and maybe decide early this week on the final version of the Portuguese bailout, a sweetening of the Irish package, and a possible overhaul of the Greek one. Now they’ve lost the man who not only was instrumental in involving the International Monetary Fund in the euro zone periphery’s rescue plans, but who could also have helped them bridge their own divisions by the force of his diplomatic skills. In particular, his rapport with the German chancellor helped the euro zone move at times when it looked paralysed.

His political ambitions in France would most probably have led Strauss-Kahn to leave his IMF job before this summer anyway — in barely a month. But he will be incapacitated during the month the institution needs a leader most. In the first year of their debt crisis euro zone leaders have constantly relied on him to bring Germany’s chancellor to the common table. He convinced her a year ago that demanding Greece met short-term tough fiscal targets was unrealistic and counter-productive. This week he was counted upon to press the case for reasonable interest rates on Portugal and Ireland, and to send the signal that Greece could still count on the conditional tough love of its lenders if, as widely thought, its turnaround programme is off track.

Euro zone leaders must now do without him. But the questions the IMF would have faced after his departure would have had to be confronted anyway. Isn’t it high time for a non-European to head the institution, given the shift of power in the world economy? What should be its new doctrine? Strauss-Kahn led the IMF away from what he criticised as the “group think” of the so-called Washington consensus, but no “new think” has emerged on the best ways to tackle global imbalances — the IMF’s original mission. Beyond the personal travails of a man and the euro zone’s existential crisis, these are the problems the IMF shareholders — still dominated by America and Europe — must now seriously look at.