Potential change in IMF leadership could impact global economics

Marketplace Staff May 16, 2011
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Potential change in IMF leadership could impact global economics

Marketplace Staff May 16, 2011
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JEREMY HOBSON: The head of the International Monetary Fund, Dominique Strauss-Kahn, is expected to be arraigned in New York this morning. He was arrested over the weekend and charged with sexually assaulting a maid at a Manhattan hotel.

Strauss-Kahn has been a key player in bailout negotiations for countries like Greece and Portugal.

For more on this story, let’s bring in Simon Johnson. He’s the IMF’s former chief economist and he’s with us live from Washington. Good morning.

SIMON JOHNSON: Good morning.

HOBSON: Well tell us about the impact this could have on the bailouts that are currently being negotiated in Europe.

JOHNSON: I don’t think it will have a big effect in the short term. The key issues there are really between the Europeans and within the euro zone. They have to decide how generous they want to be to Greece and to Portugal and what they’re looking for in return in terms of policies.

HOBSON: So not a big impact right away?

JOHNSON: I don’t think so. I think the IMF is going to make sure there’s plenty of continuity and the key issues are really European issues.

HOBSON: The head the IMF has traditionally been a European and it looks like that tradition may now be in question.

JOHNSON: There is certainly going to be a more interesting and more open race for that job then we’ve previously thought. The French finance minister Christine Lagarde is being mentioned as a potential successor. But there are a number of very strong candidates from emerging markets including from Turkey, South Africa, Singapore, Mexico. And I think it’s going to be a hopefully quite a transparent and open process.

HOBSON: And for an American audience listening to this and saying “Head of the IMF, European debt crisis — what does this have to do with me?” Does this have any effect at all on the U.S. economy?

JOHNSON: Not I think in the short term. Obviously if the situation becomes more uncertain — if it’s mishandled in some way — that could affect volatility in markets. But honestly I think it’s going to be taken care of in a very cautious and responsible manor.

HOBSON: Simon Johnson, former chief economist with the IMF, joining us live. Thanks so much.

JOHNSON: Thank you.

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