He previously served as France’s finance minister and is the subject of intense speculation in France that he will declare his candidacy for president as a member of the Socialist Party. He unsuccessfully ran for his party’s nomination in the last election.
At the IMF, Strauss-Kahn has overseen a number of crucial emergency loan packages for troubled economies, most recently for Greece and Pakistan.
The organization is also being eyed to help orchestrate potential bailouts for Portugal and Ireland as Europe suffers a painful debt crisis. And it is working to help Egypt as that country tries to stabilize its economy in the post-Mubarak era.
“This sordid episode — no matter how it ultimately plays out — will spell the end of Strauss-Kahn as an effective leader of the IMF even if he retains his position, which is highly unlikely,” said Eswar Shanker Prasad, an international economics professor at Cornell University. “With Strauss-Kahn’s departure, the IMF can no longer be counted on to watch Europe’s back as it becomes increasingly clear that the EU-IMF program in Greece is not working.”
Prasad added, “Additional uncertainty is the last thing that Europe needs right now, but that will be the reality as the IMF absorbs this body blow and reorients itself to a post-Strauss-Kahn era.”
In 2008, Strauss-Kahn was investigated on suspicion that he might have abused his authority in an extramarital affair with an economist who had left the IMF with financial compensation. He kept his position but acknowledged that he had made a “serious error of judgment.”
As a member of the Socialist Party, Strauss-Kahn has been criticized in France for enjoying a lavish lifestyle of expensive cars and clothing, which he has denied.
At the IMF, Strauss-Kahn has been helping to transform the organization after the financial crisis. He wants to be able to probe financial firms around the world and demand more data. And he wants the IMF to develop better indicators for when a country might be going off track economically.
The United States is the biggest shareholder in the IMF and makes its largest financial contribution each year.
Treasury Secretary Timothy F. Geithner, who represents the United States at the IMF, has been pushing the organization to use its power to pressure China to allow its currency to increase in value, which the country has resisted. Allowing the renminbi to appreciate would make it easier for American companies to sell into China.
Under Strauss-Kahn, the IMF has exerted only modest pressure, aware that China is an important emerging power. The IMF, which once had as many as 3,000 employees, is based near Foggy Bottom. Strauss-Kahn’s deputy, John Lipsky, has already announced his plans to depart later this summer.
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