WASHINGTON // Dominique Strauss-Kahn, once considered a leading contender to win the French presidency next year, resigned as head of the International Monetary Fund after being charged with attempting to rape a New York hotel maid.
Mr Strauss-Kahn, 62, informed the Executive Board of the IMF of his intention to resign as managing director with immediate effect, the IMF said in a statement.
His arrest reshaped the race for the French presidency, eliminating President Nicolas Sarkozy’s biggest rival. His resignation from the IMF, more than 17 months before his term was scheduled to end, may open the field to a candidate from an emerging-market country to run the fund, set up after World War II to promote global financial stability.
Mr Strauss-Kahn denied charges that he attacked a 32-year-old woman at a Sofitel hotel in midtown Manhattan on May 14. He was ordered held without bail by a New York judge after prosecutors said he presented a flight risk. He had been arrested and removed from an Air France flight at John F. Kennedy International Airport.
The IMF chief is charged with criminal sexual act, attempted rape, sexual abuse, unlawful imprisonment, sexual abuse and forcible touching, according to court papers. Mr Strauss-Kahn, a former French finance minister, faces as long as 25 years in prison if convicted of the most serious charges, prosecutors said. His lawyer said he will plead not guilty.
John Lipsky, the first deputy managing director at the IMF, was serving as acting managing director while Mr Strauss-Kahn was out of Washington, in accordance with standard IMF practice.
Mr Strauss-Kahn’s arrest cast a shadow over a meeting of European finance chiefs in Brussels, who on May 16 endorsed a 78 billion-euro ($111 billion) aid package for Portugal, the third euro-area country to receive a bailout after Greece and Ireland.
The IMF was represented at the euro-area finance ministers’ meeting by Deputy Managing Director Nemat Shafik, who oversees the organisation’s work in a number of EU nations. Seventeen nations use the euro.
European officials are working to prevent the region’s first default as Greek ministers plead for terms to be relaxed on 110 billion-euros of aid from the IMF and European Union.
“It’s certainly, in these negotiations with Europe, very hard to replace him,” said David Dodge, a former governor of the Bank of Canada. “He understands so deeply and profoundly the European political and economic situation. I don’t think there’s anyone at the Fund who would come close to having that.”
Mr Strauss-Kahn has consistently been among the most popular possible candidates to contest France’s 2012 presidential election, opinion polls show.
Mr Sarkozy would have trailed Strauss-Kahn by 5 percentage points in the first round of the presidential voting if the election had been held at the end of last month, a CSA poll for 20 Minutes newspaper, BFM Television and RMC radio showed April 28. Mr Strauss-Kahn had declined to say whether he was planning to run for office.
Mr Strauss-Kahn was chosen in 2007 to a five-year IMF term in keeping with an informal agreement under which a European heads the while an American leads the World Bank.
His resignation may bolster a drive by Brazil, China and other emerging markets for a selection process that’s based on qualifications rather than nationality.
Last month, officials from the Group of 24, which includes Brazil, China and Mexico, repeated a call for “an open, transparent, merit-based process” for choosing the heads of the World Bank and IMF, “without regard to nationality.”
Potential candidates include Singapore Finance Minister Tharman Shanmugaratnam, former South African Finance Minister Trevor Manuel and Kemal Dervis, who was Turkey’s minister of economic affairs at a time his country got aid from the IMF, according to Eswar Prasad, a senior fellow at the Brookings Institution in Washington and a former IMF official.
The choice “should be absolutely merit-based,” said Dodge. “But I would argue that, all other things being equal, it would be very nice to have someone who has at least deep roots in, if not necessarily a current representative of, one of the major emerging-market countries.”
Mr Strauss-Kahn took the helm of the IMF in November 2007, following his loss in the primaries of his French Socialist Party ahead of the 2007 presidential elections.
Mr Strauss-Kahn, who succeeded Spain’s Rodrigo Rato, helped reshape the agency’s mission and restore its relevance. When he arrived, its emergency lending dropped to $58.7 million in 2006 from $66.4 billion in 2002. Among his first moves there was to cut about 400 jobs.
The global financial panic triggered by the bankruptcy of Lehman Brothers Holdings in September 2008 restored the IMF’s relevance as its emergency loans soared to a record of $91.7 billion last year from $1.1 billion in 2007.
Mr Strauss-Kahn gained backing from the Group of 20 to triple the fund’s resources, and the group has over the past two years given the agency a host of new missions to help avoid another crisis. The IMF is helping the G20 single out countries whose policies threaten global growth, and has also submitted proposals to fortify the international monetary system.
More recently, he played a key role in efforts to stem the European debt crisis which started last year in Greece, with a pledge to contribute about a third of future bailouts in the region by the European Union. The IMF has co-funded aid packages to Greece and Ireland.
Under Mr Strauss-Kahn, the IMF also approved a plan that will make China the third-strongest voice in the 187-member organisation, founded in 1945, while weakening Europe’s influence to make room for emerging countries.
Sandrine Rastello and Shamim Adam // Bloomberg News