Daily Archives: June 28, 2011

I remember sitting in a meeting at the International Monetary Fund back in the 1980s, debating the meaning of a small annotation in the margin of a memorandum that had just returned from the office of the managing director. It was just a squiggle; yet we debated possible interpretations for a full half an hour!

This is a small example of what is well known to IMF insiders – the post of managing director is not to be taken lightly in an institution that operates like a well-disciplined army, with staff looking up to the unquestioned general for decisive leadership.

This is why the resignation of Dominique Strauss-Kahn has been so disruptive to the functioning of the IMF. It is also why Christine Lagarde – who following Tuesday’s public backing from Tim Geithner, US treasury secretary, will assume the post shortly barring any legal complications – must move on five key issues in her first few months at the helm. Read more

The pressure on Lorenzo Bini-Smaghi to resign from the executive board of the European Central Bank is a fundamental challenge to the bank’s independence and to its ability to represent European interests rather than those of individual countries.

When the ECB was being created, European politicians said it would be a truly European institution, making decisions for the benefit of the eurozone as a whole. But with the French government apparently succeeding in forcing Mr Bini-Smaghi to resign in order to make way for a French appointment to the ECB executive committee, the ideal of the bank’s independence has been destroyed, and Europe will be the worse for it.  Read more

As Winston Churchill once said of the US, European leaders can be trusted to do the right thing for the euro area’s financial stability only after exhausting all other possibilities.

But they would be well-advised to spend their summer holiday contemplating ways to complete the clean-up of the banking sector; to deal with insolvent countries; and to make better use of the EU’s funds and crisis management facilities.  Read more