New IMF chief faces challenges first day on the jobBy Hugues Honore
WASHINGTON—The International Monetary Fund’s new Managing Director, Christine Lagarde, will make her debut under intense pressure this coming week, as Greece’s financial woes pose an urgent challenge.
The French executive is expected to land in Washington on Monday, the Independence Day holiday for the United States. She will officially begin work on Tuesday morning and hold a press conference Wednesday.
A “busy work agenda awaits,” declared the IMF in its internal online magazine, while it stressed one of Lagarde’s most pressing items includes the “difficult policy choices needed to help global recovery (and) address the euro area crisis.”
“The global economy is being buffeted by continued uncertainty in Europe, uprisings in the Middle East, signs of overheating in some fast-growing emerging market economies, and rising commodity prices that pose a particular challenge for low-income countries,” the publication added.
But the Greek economic crisis eclipses all other priorities.
In the immediate term, Greece is expected to receive 12 billion euros ($17.4 billion) from the eurozone and IMF by July 15 after the ministers approved the fifth tranche of aid from last year’s 110-billion-euro ($160 billion) financial rescue package.
This round of the IMF’s share includes 3.3 billion euros ($4.7 billion), according to the schedule of payments laid out in May 2010.
As part of a longer-term strategy, the IMF must find a way to finance a country that in all likelihood will not be able to return to the markets for long-term borrowing in early 2012, as expected.
In the Greek crisis, Lagarde transitions to the IMF zone from her eurozone duties as France’s former finance minister.
Before securing the job, she promised she would hold the eurozone countries to the same standards as other member states.
“The IMF does not belong to anybody. It belongs to the 187 members of the Fund, and the management of the Fund does not belong to any particular nation or region. We can’t effectively represent the world’s economic balance of power if certain economies are under-represented,” she said.
Lagarde has said that Greeks must make difficult but necessary adjustments to restore viability in their public finance sector and competitiveness to their country.
“This is about a country’s fate, its security. And I believe at that point, we have to ignore the small and big political differences for the service of the country,” she said.
In addition, she said she wants to ensure some continuity from her predecessor, Dominique Strauss-Kahn.
But the two do not hail from the same schools of thought. Strauss-Kahn is a Social Democrat while Lagarde is a “moderate liberal.”
The 2008 Nobel Prize-winning economist Paul Krugman said the “serious, responsible and judicious” Lagarde was still a mystery.
“Under Strauss-Kahn, the IMF was staking out a position as the least dogmatic, most open-minded of the major international organizations. That’s not saying too much, but it was much better than the madmen in authority at the OECD or the BIS,” Krugman wrote on his blog.
“So the question is, will the IMF become more sensible under Lagarde? For the sake of the world economy, let’s hope not.”