US support for Lagarde seals her election as head of IMF

FRENCH FINANCE minister Christine Lagarde has been elected to the helm of the International Monetary Fund (IMF), sealing a major diplomatic victory for Europe.

Taking the post filled until last month by her compatriot Dominique Strauss-Kahn, she will begin her five-year term on July 5th amid the escalating debt crisis in Europe and intensive efforts to avoid a Greek default.

Ms Lagarde’s victory yesterday over Mexico’s central bank governor Agustin Carstens was assured after the United States made its support clear and emerging economic powers China, Brazil and Russia did the same.

In a statement issued after the IMF’s executive board confirmed its decision, Ms Lagarde (55) said she was “deeply honoured”. She said she wanted to pursue “stronger and sustainable growth” and “macroeconomic stability”.

She becomes the first woman to lead the fund.

She immediately turned the spotlight on to Greece, urging it to push through unpopular austerity measures that the IMF and EU have said are required for further aid.

“If I have one message tonight about Greece, it is to call on the Greek political opposition to support the party that is currently in power in a spirit of national unity,” she told TF1 television.

Ms Lagarde’s election will be greeted with relief in Europe, where governments were determined to retain the post for a European despite pressure from emerging economic powers, and for President Nicolas Sarkozy, who championed her candidacy. He described yesterday’s news as “a victory for France”.

“The French presidency rejoices that a woman is taking on this important international role,” the Élysée Palace said.

Speculation is rife about Ms Lagarde’s possible successor at the finance ministry. The Irish Government will be watching closely, given that the finance ministry was considered sympathetic to Dublin’s case for a reduction in the cost of its bailout loans.

One of the frontrunners is François Baroin, the current budget minister and a former journalist, who already has responsibility for government spending.

Mr Baroin (45), a loyal supporter of former president Jacques Chirac, whose appointment to cabinet last year was seen as a gesture to the traditional right, has been at the forefront of efforts to pare France’s deficit and has overseen the scrapping of an unpopular tax shield for the wealthy.

His lack of international experience and lack of foreign languages may work against him, however, particularly as the finance ministry is overseeing France’s G20 presidency this year.

Mr Baroin is familiar with the debate over Ireland’s corporate tax rate. He hinted at a softening in the French position earlier this month by saying that while France “eventually” wanted to see tax harmonisation in the EU, it would take into account Ireland’s “singular situation”. Intensive talks between French and Irish officials aimed at resolving the standoff began around the same time.

Another contender is Bruno Le Maire (42), Mr Sarkozy’s agriculture minister, who has enjoyed good relationships with his Irish counterparts in a brief where France and Ireland often find common ground. Once an aide to former prime minister Dominique de Villepin, Mr Le Maire has won praise for preserving the right’s close links with farmers. He reacted calmly to the collapse of milk and vegetable prices in mid-2009 and managed to enact a law to modernise the farming sector without setting off protests.

He is a former European affairs minister and speaks German and English, which may boost his chances.

Some members of Mr Sarkozy’s UMP party have encouraged him to choose a woman to replace Ms Lagarde. Three names have circulated in Paris: Valérie Pécresse, the higher education minister, Nathalie Kosciusko-Morizet, the environment minister, and Anne-Marie Idrac, a former trade minister.

Ms Pécresse’s chances are helped by her academic credentials and foreign languages (she speaks fluent English, Russian and Japanese), while Ms Kosciusko-Morizet won praise for her assured handling of the debate over France’s huge nuclear power industry after the recent Fukushima disaster.