Christine Lagarde Takes the Stage for the Last Time?

Christine Lagarde Takes the Stage for the Last Time?

In recent years, the work of the International Monetary Fund has become a never-ending drama, directed by Washington, which is also known as «the main shareholder of the joint-stock company» known as the IMF. All the other shareholders, as well as the fund’s staffers, are assigned the role of actors in a play written by Uncle Sam. 

One of the biggest roles is given to the fund’s managing director. Usually a French actor is invited to play that part. The stage director makes sure that the managing director sticks to the script and does not allow himself to improvise. Otherwise, a new actor will be found to play the role of the managing director, while the old one is summarily booted from the theater. 

The last time this happened was in 2011, when the managing director, Dominique Strauss-Kahn, went completely overboard and began to recite lines on stage that were not found in the script. That was the impression one had from watching the Frenchman’s improvisations, in which he claimed that the global dollar system had become outdated and was in crisis, and that it was necessary to diversify the range of currencies that serve as global legal tender. He brought up the name of John Maynard Keynes, an Englishman who at the conference in Bretton Woods had proposed the creation of a global monetary system based on the bancor – a supranational currency. Also wildly at odds with the script was Strauss-Kahn’s support for the suggestion by Libya’s leader Muammar Gaddafi that the gold dinar be introduced into circulation. And another very tactless move was the Frenchman’s reminder to the lead director that it might be a good idea to speed up Congressional ratification of the review of the quotas assigned to the fund’s members and the doubling of the IMF’s capital. 

That all ended painfully for the Frenchman – he not only lost his leading role, but found himself kicked out of the theater. There was even a chance that he might end up seated in the dock. The charges were later dropped, but no one remembers that. Strauss-Kahn now bears a stigma that has made it almost impossible for that former lead actor to find a good job. And he had planned on becoming the president of France. 

On July 5, 2011, Christine Lagarde, also a native of France, took over as managing director. Exactly one month after being lavishly congratulated, Christine Lagarde received notice that legal proceedings had been launched against her, although not in an American court (as had been the case for Strauss-Kahn), but in a French one. At that point, many experts and conspiracy theorists began to speculate that that court case had been opened at the initiative of the same stage director of the IMF, who was acting through his agents in the French courts. The goal of the operation was to inoculate the new managing director against the risk of any surprises that the most prominent actor could dream up for the lead director. After this vaccination, the active phase of the court proceedings came to an end, although the charges were not dismissed. Over the past four years the media has very rarely remembered to take an interest in this anemic, yet still active court case. However, Ms Lagarde did not forget about it for a single day. Her life was not easy. It is enough to recall how Christine Lagarde begged Washington to ratify the decision to reform the IMF, going so far as to promise a belly dance in exchange.

Madame Lagarde’s run of bad luck began last February, when Uncle Sam began to drag the fund into the games it was playing in Ukraine. The screenplay was constantly being rewritten. The IMF began to be transformed into a theater of the absurd. 

But on Dec. 17, the judicial investigation into Madame Lagarde’s actions, which had lasted for over four years, suddenly ended. The French Cour de justice de la République, a special court that judges government ministers, summoned her to testify in what is being called the Tapie affair. The history of that case goes back to the early 1990s, when Madame Lagarde was still working for the legal and consulting firm Baker & McKenzie, very far from the IMF. 

The main parties in this story are the French bank Crédit Lyonnais and the French businessman Bernard Tapie. In 1993 that bank purchased a large stake in the company Adidas from Tapie. After a period of time, the bank resold that stake at double the price. Bernard Tapie saw signs of deceit and fraud in the bank’s actions and filed a lawsuit against Crédit Lyonnais demanding compensation for damages. Mr Tapie is a very interesting figure – he is not only an entrepreneur, but also a politician, who even served as a minister in the leftist government of President Mitterrand, and has a prior conviction for fraud for which he spent six months in prison. Over the course of many years, he persisted with his legal demands for compensation from Crédit Lyonnais. I cannot be certain that Christine Lagarde had even heard about this scandal back in the 1990s, as she was busy with the affairs of Baker & McKenzie and building her career in the US. Once Nicolas Sarkozy took office, she was invited to return to France, where she began working for various governmental entities, including a stint as finance minister. 

In 2007, she examined the history of the dispute between Bernard Tapie and Crédit Lyonnais, and insisted on resolving the case in a court of arbitration. Since the state held a stake in the bank’s capital, this was actually a dispute between a private entrepreneur and the government. In 2008, the court sided with Tapie, awarding him a total of approximately 400 million euros, including 100 million in interest and 45 million for pain and suffering. His payment came out of state coffers. By that time the bank no longer existed. Suspicions arose that Ms Lagarde had pressured the court, seeking a ruling in Tapie’s favor. The lady’s actions could be explained by the fact that she was following orders from her boss – President Nicolas Sarkozy. And Sarkozy interceded for Tapie because that businessman had provided the president of the French Republic with substantial financial assistance during his election campaign. 

Experts in the details of the Tapie affair who understand the technicalities of legal proceedings in the French Republic note that the case could drag on indefinitely, much longer than Christine Lagarde will be managing director of the IMF. The dramatic upsurge in the court’s activity as 2015 drew to a close was due to the fact that the Frenchwoman’s behavior over the last year – despite all her loyalty to the fund’s biggest shareholder – was clearly beginning to annoy Uncle Sam. 

First of all, she had deeply irritated Washington with her constant reminders of the need to ratify the IMF’s five-year-old decision to reform that organization. An actor does not have the right to tell the theater owner and the lead director how to alter dialog that has already been typeset. 

Second, Uncle Sam was displeased with Madame Lagarde’s headstrong behavior at the G20 summit in Turkey. As is public knowledge, she held a meeting there with President Putin during which she «interceded» for Ukraine, requesting a deferment on the repayment of Kiev’s $3 billion debt to Russia. But Madam Lagarde thus ended up putting Uncle Sam in a very awkward position, because Washington was then forced to admit that it could not guarantee Ukraine’s ability to pay its Russian debt. 

Third, not everyone in Washington was happy that on Nov. 30 the fund decided to include the yuan in its basket of reserve currencies. And the IMF’s managing director was blamed for that blunder.

Fourth, Uncle Sam was extremely irritated when the fund officially acknowledged that Russia meets the criteria for an official creditor in regard to its $3 billion loan to Ukraine. That programs a sovereign default to occur in Ukraine. 

Uncle Sam is apprehensive lest another blunder occur. After Dec. 20, when Kiev obeyed Washington’s order to ignore its obligation to repay its debt to Moscow, Ukraine effectively entered into a state of sovereign default. Washington is insistently demanding that the IMF continue to lend to Kiev even after such a default. This is why Washington forced the fund to make the decision to change the rules of the game that had been in effect for decades. The new rules make it possible for the fund to offer loans to a county even if that country is bankrupt in regard to its obligations to its official creditors. The rules were rewritten specifically to apply to Ukraine’s debt to Russia. However, even the new version of the rules does not stipulate that lending to a bankrupt country continue automatically. The fund must «exercise judgment based on case-specific circumstances». And Uncle Sam does not want any more surprises. By subpoenaing Madame Lagarde, she is also being issued a very clear reminder of the decision that is expected of her. If she does not wish to take such a clear hint, then early next year we will get to watch an enthralling drama, a mixture of theater and real life, titled «The Firing of the Latest Managing Director of the IMF.» 

Some skeptics claim that my theories suffer from one serious flaw: Madame Lagarde was not summoned to appear in an American court, but a French one, thousands of kilometers from Washington. Well – and so what? The official residence of the French president is equally far from the White House, but it’s doubtful that we could come up with an example of a time when the current French president, François Hollande, was not acting on orders from the White House. It is unlikely that the French Cour de justice de la République behaves differently in this respect than the president of the French Republic. Naturally the success of any production depends not only on the play, the stage director, and the actors, but also on those who make sure that the show goes on, while remaining offstage, behind the curtain. This fully applies to the IMF’s theatrical performance. 

Tags: IMF  France  US  Lagarde