Well, quelle surprise, the job of head of the International Monetary Fund went to France’s Christine Lagarde, continuing the seven-decade long tradition of having a European as boss of the financial regulator.
The only other real candidate for the job was Agustin Carstens, governor of the Bank of Mexico, but he wasn’t able to garner the support of other emerging economies. Brazil and China joined in the US’s late support of Lagarde, ensuring an official vote wasn’t even held and Lagarde was awarded the position by consensus.
Although both are French, there’s plenty of differences between Lagarde and disgraced former chief Dominique Strauss-Kahn — who remains under house arrest and in legal limbo in New York after allegations he s-xually assaulted a hotel cleaner.
So who is Lagarde?
She was born in Paris in 1956. As a teen, Lagarde was on the national synchronised swimming team. She studied law and made two unsuccessful attempts to join the Ecole Nationale d’Administration, a prestigious college for public servants. An avid vegetarian, she never drinks coffee or alcohol. When chairman of law firm Baker & McKenzie, she wore leather pants to a cocktail party at the office, horrifying traditionalists. Lagarde is divorced, has two children and makes quince jam and scuba dives in her spare time.
Not that she has much spare time. She’s the French finance minister, the first female to ever be minister for finance in one of the G8 nations. Lagarde is a proud feminist too, arguing that greedy and aggressive men helped fuel the 2008 global markets collapse. “In gender-dominated environments, men have a tendency to … show how hairy-chested they are, compared with the man who’s sitting next to them. I honestly think that there should never be too much testosterone in one room,” she told The Independent.
Even after being interviewed for the IMF role she pointed out how no women were part of her judging panel. “While I was being questioned for three hours by 24 men, I thought, ‘It’s good that things are changing a little’,” she told French television.
Recently Bloomberg Business Week examined one of Lagarde’s judgment days last year, when a council of European fiannce ministers was called to try and salvage the euro. BBW explains how Lagarde reacted to the crisis, proving her reputation as being cool and calm when needed:
“For the next several hours, her temporary office became the hub of global negotiations that produced an unprecedented trillion-dollar rescue package for the euro. Seated on a couch, Lagarde juggled dozens of phone calls from government officials, according to an aide who did not wish to be identified… Every 30 minutes or so, Lagarde dialed in to Basel, Switzerland, where European central bankers and IMF Chief Dominique Strauss-Kahn had gathered… Others drifted in and out, including Salgado and Olli Rehn, the European Union Commissioner for Monetary Affairs. Occasionally, Lagarde took people aside for one-on-one chats.
“By 2am, consensus had formed around a plan to backstop troubled euro zone economies by issuing bonds guaranteed by the 16 euro zone members as well as other EU countries and the IMF. As day broke in Asia, stock and bond markets rose after the ministers released a communiqué detailing the plan.”
Although she relied on Europe to get the top job, it’s likely she’ll now have to stand up to European finance ministers and get tough on Greece, says a former IMF official. But Nils Pretley in The Guardian remains sceptical of Lagarde questioning her allies:
“The anointment of Christine Lagarde comes as the French political establishment is promoting a scheme to encourage banks to roll over large portions of their Greek debt. To many eyes, this idea looks a half-baked scheme that dances around the awkward fact that Greece is basically insolvent. So should we expect a hard-hitting sceptical analysis from the IMF of the French plan? Probably not.”
It’s not her finance background but her political background that will prove the most crucial, says Howard Schneider in the Washington Post.
“Lagarde is a lawyer by training and a skilled diplomat by reputation, and her ability to tackle those issues — more the province of a negotiator than the PhD economists that have run the fund since it was founded after World War II — will define the success or failure of a five-year term that will begin July 5.”
But is she too “responsible”? Paul Krugman questions Lagarde’s ability to dream big over at The New York Times:
“It’s not as if she’s especially enigmatic: in addition to being smart, by all accounts she’s serious, responsible, and judicious. But that, of course, is what worries me. For we’re living in an era in which, for the time being, conventional prudence is folly, conventional virtue is vice. The things Very Serious People want to do — slash deficits right away, “normalize” interest rates, worry about inflation — are exactly the kind of things that could turn the slump of 2008-? into decades of stagnation.”
Lagarde can transform the institution of the IMF, declares Mohamed El-Erian in the Financial Times. She just needs to abandon nationality-based appointments in favour of a meritocracy, reform how the IMF deals with a debt crisis and prepare the Fund’s balance sheets for likely future financial trouble.
The IMF job has a five year contract. Lagarde’s time starts … now.