Surveying the front pages of New York City’s more colorful tabloids Monday, one could be forgiven for thinking that the arrest of Dominque Strauss-Kahn involved little more than an older Frenchman behaving very badly at an expensive midtown hotel. (Of course, the charges facing Strauss-Kahn are quite serious, and include various counts of sexual assault and rape, which carry up to 25 years in prison if he is convicted.) As editors churned through countless Gallic-inflected puns (e.g., “No Merci,” “French Whine,”“Le Perv,” etc.), much of the initial press coverage was long on the lurid details of the sexual allegations (quelle surprise), and noticeably short on why Strauss-Kahn garnered worldwide headlines, and the economic and political fallout from his arrest.
Strauss-Kahn (or DSK as he’s known in his native France) might not be a household name in the U.S., but he cuts a very big figure on the world stage. Since 2007, the former French finance minister and Socialist party politician has been the managing director of the International Monetary Fund, headquartered in Washington, D.C. (On Sunday, the IMF appointed an acting managing director, and many commentators predict that Strauss-Kahn’s formal resignation is imminent.)
Recently praised by Nobel Prize winning economist Joseph Stiglitz for presiding over the emergence of a “new IMF,” Strauss-Kahn had been seen by many as a progressive force who looked to distance the IMF from its history of harsh privatization and deregulation measures, which gained notoriety during the fund’s controversial structural adjustment programs in the developing world during the 1980s and ‘90s.
Strauss-Kahn’s tenure as the managing director of the IMF coincided with the world financial crisis, and his stewardship of the multinational organization during the turbulent period received high marks from member countries. Similarly, when Greece’s ballooning public debt threatened the viability of the eurozone last year, Strauss-Kahn was seen as a pivotal figure in persuading a truculent Germany to approve an unpopular bailout deal that many credit with shoring up the beleaguered euro.
More recently, Strauss-Kahn has been a proponent of a second bailout loan for Greece, after its debt problems resurfaced — to dramatic effect — this month. (In fact, he was en route to meet with German Chancellor Angela Merkel in Paris to discuss a new round of loans when he was apprehended by the NYPD on an Air France flight at JFK.) Strauss-Kahn’s arrest and exit from the IMF represents the loss of an important ally for Greece, and could spell harsher terms for the country if a second EU-IMF loan is issued.
More importantly, the political leadership that Strauss-Kahn exercised in organizing European leaders to tackle the eurozone’s sovereign debt crisis over the past year was seen by many as a testament to his unique influence and stature. Felix Salmon points out that, even if a new IMF managing director is named in short order “none of DSK’s possible successors have his degree of power and influence in the all-important European political circles.” And The Financial Times’ Wolfgang Munchau underscores the loss of Strauss-Kahn’s leadership in future bailout negotiations when he reminds us that “the eurozone’s contagious financial crisis [still] presents the biggest threat to global financial stability today.”
On the political front, Strauss Kahn was widely expected to announce his candidacy for the French presidency later this summer, and was forecast as the odds-on favorite to beat President Nicolas Sarkozy. The incumbent Sarkozy, having presided over a listless economy and an erratic foreign policy in his four years in office, has seen his approval numbers hit historic lows in recent months. While The Guardian’s Angelique Chrisafis cautions analysts from deducing that Strauss-Kahn’s arrest automatically chalks up a win for Sarkozy, it is fair to say this has dealt a blow for Strauss Kahn’s own Socialist party, and complicated the dynamics in the upcoming election.
One possible beneficiary of Strauss-Kahn’s current misfortunes is Marine Le Pen, head of France’s far-right National Front party, who has already declared her intentions to run for president. Having unveiled a populist domestic platform last week, Le Pen also champions stringent anti-immigration policies, France’s withdrawal from the eurozone and a return to its national currency.
While the outcome of his criminal investigation remains uncertain, the ripple effects of Strauss-Kahn’s imminent departure from the IMF and the French presidential race will almost certainly alter the global economic and political landscape for months, if not years, to come.