In the more than 60-year history of the International Monetary Fund, Managing Director Christine Lagarde already stands out — in more ways than one.
The first woman to run the agency, Lagarde within weeks of assuming office had delivered advice on fiscal austerity in Forbes magazine and wardrobe tips to the readers of Vogue. (For the curious, it’s Chanel, Ventilo and Austin Reed.)
Sept. 22 (Bloomberg) -- International Monetary Fund Managing Director Christine Lagarde talks about "downside risks" for the global economy, the IMF's mission and goals for its annual meetings in Washington this week, and the European sovereign-debt crisis.
But she is also the first IMF director faced with a financial crisis that she takes partial responsibility for creating. If European banks are weak, as she has suggested, she had years as French finance minister to strengthen the ones on her home turf. If the 17-nation euro area has been “behind the curve” in dealing with its problems, as she said in a recent address at the Wilson Center, she was an important voice in crafting responses that were too slow and too timid.
“I’m prepared to take some of the blame,” she said to the audience, acknowledging what many on the outside have long maintained: that Europe’s drawn-out consensus-seeking has not kept pace with international markets that have turned on countries such as Greece and are poised to turn on the likes of Spain and Italy.
European leaders have said the right words, made the right commitments and taken steps once considered unthinkable, such as pledging hundreds of billions of dollars to a common fund to support weaker nations. They have also allowed the European Central Bank to move beyond its traditional inflation-fighting mission in ways that have divided its governing board, and they have used the creditworthiness of fiscally disciplined nations such as Germany and the Netherlands to underwrite overspending in Greece, bank excesses in Ireland and poor economic planning in Portugal.
But nearly two years after it became apparent that Greece’s debt load was unsustainable, Greece still has no clear path out of recession and away from default. The strength of the larger European economy has been called into question, and countries are torn between slashing public spending to make their books look better and risking slow growth or renewed recession because the other parts of their economies are so weak.
“Social tensions,” Lagarde said, seethe below the surface in the form of chronically high unemployment and the danger of a “lost generation” of jobless youths in the heart of the industrial world.
Europe’s approach has been “directionally right,” Lagarde said, but “too slow and a little bit behind the curve.”
As the fund’s annual meetings approach — the first on Lagarde’s watch — the questions now are how she will respond and adapt and whether she can make a tangible difference in Europe’s ability to fix a set of problems that threaten the global economy.
There are other issues. China remains obstinate on financial and currency reform. The U.S. debt is a $14 trillion elephant in the room. But Lagarde will be judged on Europe and how successfully she can change from national advocate to international taskmaster.
Less than three months into a five-year term, Lagarde has had little time to get her footing. The start has not been smooth.
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