IMF’s decision to stick by Lagarde is a prudent one
At a time of uncertainty, instability at the top of the international financial organisation would have done nothing for confidence
A lawyer defending International Monetary Fund chief Christine Lagarde against a charge of negligence says that when she was French finance minister, she took a decision in a politically sensitive case that turned out badly. That is putting it mildly, given that it cost the French taxpayer €404 million (HK$3.2 billion) before the courts reversed it. But he insisted she had not been negligent. The Court of Justice of the Republic did not agree and found her guilty. But Lagarde’s fate was ultimately in the hands of the IMF board of directors. Their expression of full confidence is the right one. Her unanimous support included China – not surprising considering she has backed Beijing’s financial reforms and the yuan’s inclusion in the IMF’s Special Drawing Rights basket.
It did help that the special court, composed of judges and lawmakers, imposed no penalty, and that the prosecutor conceded that the evidence was weak. Nonetheless the directors would have been concerned to avoid any reflection on the leadership of a global institution accused of having become unrepresentative. Lagarde apparently succeeded in convincing them she was politically unsophisticated rather than culpable.
This was no time for a change of leadership at the IMF, and her case is not without merit. It arises from a fraudulent payout to businessman Bernard Tapie in an arbitrated dispute over his €315 million sale of the Adidas sports brand to Credit Lyonnais, which resold it a year later for more than €700 million. Tapie was a backer of Lagarde’s then boss, former president Nicolas Sarkozy. The court of justice endorsed her decision to send Lapie’s claim of having been cheated to arbitration, but found her guilty of negligence for not having appealed against the outcome.
Lagarde has skilfully articulated the IMF’s position on controversial issues, such as unprecedented fiscal and monetary stimulus and the Greek bailout. Now the election of Donald Trump on a platform of radical change clouds the international outlook. Instability at the top of the international financial organisation would have done nothing for confidence.