IMF could pick Lagarde as chief as soon as Tuesday

[June 28, 2011]  WASHINGTON (AP) -- French Finance Minister Christine Lagarde is expected to be chosen as early as Tuesday to be the new leader of the International Monetary Fund.

Lagarde would be the first woman to lead the lending organization. She would replace Dominique Strauss-Kahn, who resigned last month after being charged with sexually assaulting a New York City hotel housekeeper. Lagarde was opposed by Agustin Carstens, a Mexican central banker whose candidacy never caught fire, even among developing countries.

Lagarde has broad support in Europe. And a high-ranking Chinese official said Monday that Beijing supports Lagarde, according to several reports.

U.S. officials haven't publicly backed any candidate. But most analysts expect the Obama administration to support Lagarde. Combined, the United States, Europe and China hold a majority of votes on the IMF's board.

The 24-member executive board represents the 187 members of the IMF, which lends to financially troubled countries. The board members will seek to agree on a new managing director by consensus. The IMF's board will meet Tuesday.

Lagarde's selection will likely provoke protests from developing countries. Under an informal arrangement dating to the end of World War II, a European always leads the IMF and an American runs its sister organization, the World Bank. The United States also names the IMF's top deputy. Developing nations have pushed to open the positions to candidates outside the United States and Europe.

Analysts say Europe and the United States aren't willing to give up their privileges. And key developing countries, such as China, India and Brazil, tend to regard each other as rivals rather than allies. Carstens complained that he was at a disadvantage from the start because European officials moved quickly to close ranks behind Lagarde.

Lagarde, 55, led the Chicago-based law firm Baker & McKenzie before entering French politics in 2005.

Her supporters have argued that a European should lead the fund because Greece, Ireland and Portugal are now among the IMF's biggest borrowers. Lagarde helped lead negotiations for a bailout package last year that combined European Union and IMF funds in a pool to aid highly indebted European countries.

But her record in helping negotiate the deal isn't widely regarded as a strong achievement. Many analysts argue that Europe's leaders have been too timid in responding to the crisis and have been discredited by their failure to solve it for good.

Eswar Prasad, an economics professor at Cornell University and a former IMF official, said Lagarde's biggest challenge will be to show that she doesn't favor European countries.

"She will have to assert her independence from the European position and advance a broader view," Prasad said. "Whether she can cast off the baggage she brings with her is an open and important question."

Greek officials are now calling for a second bailout package to be completed by the fall, even though Greece has failed to make promised deficit cuts.

On Monday, U.S. stock markets reacted positively to news that French banks had agreed to accept slower payments of Greece's debt to help that country meet other obligations. Greece's parliament also began debating a new round of budget cuts.

[Associated Press; By CHRISTOPHER S. RUGABER]

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