IMF Chief Pulled from Plane in New York on Rape Charges; Greece Says "Nothing Changed"; Talks Persist in Brussels; Time to Dissolve IMF

Dominique Strauss-Kahn, IMF chief faces arraignment in New York on rape charges.

IMF leader and potential French presidential candidate Dominique Strauss-Kahn, 62, was pulled from an airplane bound for Paris just before its departure Saturday in New York, the Associated Press reported.

The IMF chief was arrested after a 32-year-old maid told authorities Strauss-Kahn attacked her Saturday afternoon after she entered his suite at the luxury Sofitel hotel to clean the $3,000-a-night suite, which she had been told was empty, the AP reported.

According to an account given by the woman to police, Strauss-Kahn came out of a bathroom naked, pursued her down a hallway, and pulled her into a bedroom, where he started to sexually assault her. The woman said she fought him off, then he pulled her into the bathroom, where he forced her to perform oral sex on him and attempted to remove her underwear. The woman once again broke free and alerted hotel staff, who called police, the authorities said.

Strauss-Kahn, considered a potential Socialist Party challenger to French President Nicolas Sarkozy in 2012, was arrested on an Air France jet about to depart from John F. Kennedy International Airport.

2008, Strauss-Kahn was investigated by the IMF about whether he’d had an improper relationship with a woman subordinate. He was cleared of abuse-of-power allegations but apologized to the IMF staff, The Wall Street Journal reported. The IMF said then that his actions had shown “a serious error of judgment,” AP reported.

Expect Successor To Be From Same Mold

I rather doubt this affects the market unless his successor is of a vastly different non-bailout mode, and that is unlikely. IMF clowns got to be where they are precisely because of what they stand for. Expect his successor to be from the same mold.

Greece Says Arrest Won't Change Reform Plans

The Wall Street Journal reports Greece Says Arrest Won't Change Reform Plans

Greece said that the arrest in New York of the chief of the International Monetary Fund, Dominique Strauss-Kahn, would have no impact on the government's resolve to fix the country's public finances.

"We have a specific program that the IMF also takes part in, and we are continuing to implement that program," Greek government spokesman George Petalotis said. "As such, it is not an issue of individual personalities, it is an issue of institutional arrangements."

Mr. Strauss-Kahn had publicly rejected talk of a Greek debt restructuring. But Greece remained hopeful that the IMF would agree that Greece needs more time to repay its debts.

Outside the government, Mr. Strauss-Kahn has been broadly criticized by protest groups and the media as a co-architect of harsh austerity measures imposed on Greece in exchange for last year's bailout.

During an protest strike against government reforms earlier this year, an effigy of Mr. Strauss-Kahn was burned in front of parliament. Public opinion polls show many Greeks blame the IMF for the country's current financial problems and recession.

Several Greek media outlets have also highlighted the IMF's own spending habits, focusing on the high-priced office that the fund rents in an upscale district of Athens, as well as Mr. Strauss-Kahn's pricey hotel bill during his last visit to the Greek capital.

Talks Persist in Brussels

Bloomberg reports Strauss-Kahn Arrest Overshadows Greek Crisis as Talks Persist

European officials are working to prevent the region’s first default as Greek ministers plead for terms to be relaxed on 110 billion-euros ($155 billion) of aid from the IMF and European Union in a debt crisis that has also engulfed Ireland and Portugal. Economists said that talks to reconsider Greece’s aid terms are taking place between institutions rather than individuals and so can endure such turmoil.

“It’s not a fatal blow to the Greek situation,” James Nixon, chief European economist at Societe Generale in London, said in an interview. “Any of these negotiations are larger than a single person.”

Greek Prime Minister George Papandreou on May 13 opposed a debt restructuring, appealing to claims made by the IMF that the country’s debt “is sustainable.” Germany opposes a common-bond issue, saying such a move would weaken member states’ incentives to cut their deficits.

It’s “disappointing” that Strauss-Kahn’s meeting with Merkel is cancelled because the IMF had been pressing for stronger measures that may involve the possibility of a restructuring of Greek debt, Societe General’s Nixon said.

“The meeting could have been quite important in injecting some realism in the discussions and presumably now that voice won’t be heard,” he said. “The IMF have been pushing for a more realistic position, and presumably the gravity of that voice has been lost.”

IMF Leadership Vacuum

Right now there is an IMF leadership vacuum. It would be best for the world if it stayed that way.

Countries that take loans from the IMF usually regret it.

Now would be a great time to take advantage of the situation and disband the IMF. Don't expect it to happen because IMF rescues are not aimed at rescuing countries, but rather rescuing big banks that made stupid loans to countries like Greece, Ireland, Portugal, Argentina, etc.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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