Courtesy of Simon Johnson, Baseline Scenario
Ms. Christine Lagarde, French finance minister, is the nominee of the European Union for the recently vacant position of managing director at the International Monetary Fund. The EU has just over 30 percent of the votes in this quasi-election; the US has another 16.8 percent and seems willing to keep a European at the fund if an American can remain head of the World Bank. It should be easy for Ms. Lagarde to now travel round the world engaging in some old-fashioned horse trading, along the lines of: Support me now, and I or the French government will get you something suitable in return, either at the IMF or elsewhere.
The contest to run the IMF seems over before it has even really begun. But Ms. Lagarde has a serious problem that may still derail her candidacy, if there is ever any substantive, open, or transparent discussion of her merits. There is major design flaw in the eurozone and Ms. Lagarde is the last person that non-European governments should want to put in charge of helping sort that out.
[…]
And it would need to be a lot of money. If Ms. Lagarde becomes head of the IMF, she will most likely continue to throw loans at the eurozone problems – if there are even preventive programs for Spain, Italy, or Belgium, the IMF will need to tap its shareholders for at least another $1 trillion in credit lines.
Ms. Lagarde personifies the strategy of gambling for eurozone resurrection with other people’s money. Why would taxpayers in US and elsewhere want to support her on this basis?
An edited version of this post appeared this morning on the NYT.com’s Economx.
via The Problem With Christine Lagarde « The Baseline Scenario.
