Tess Vigeland: The International Monetary Fund picked a new leader today: Christine Lagarde. For almost four years, she’s been France’s finance minister. The IMF chose her over a Mexican economist, who argued the Fund didn’t need another European managing director.
Lagarde will try to win over his supporters while she deals with the European debt crisis, the scandal over her predecessor Dominique Strauss-Kahn and an investigation into an arbitration payout that she approved. From Washington, Marketplace’s David Gura reports.
David Gura: Christine Lagarde is unlike every one of her predecessors. She’s a lawyer — not a professional economist — and she’s a woman.
Arvind Subramanian is a fellow at the Peterson Institute for International Economics. He suspects IMF leaders were asking themselves this question as they deliberated:
Arvind Subramanian: Will a European — who has been in this business, who kind of has been close to the banking sector — will that person be able to take some of these tough decisions?
The Mexican candidate, Agustin Carstens, argued that the IMF shouldn’t be so Euro-centric, that it needs to pay more attention to emerging markets. Subramanian has some advice for Lagarde.
Subramanian: She should try and ensure that, you know, the voting structure and the broader governance is more legitimate and more representative.
Right now, Europe has a lot of voting power within the IMF — about 30 percent. Subramanian says that could change if Lagarde says this to Europe:
Subramanian: You want more money from the rest of the world? Well, you can get it, you can have it, but in return, you have to reduce your representation within the IMF.
And give emerging markets a bigger role and more say about who gets help.
Domenico Lombardi: You know, the European crisis, as important as it might be, is only one of the items that she will be working on.
Domenico Lombardi is an economist at the Brookings Institution. He says Lagarde also has other things on her mind: morale issues at the IMF in the wake of the Strauss-Kahn sex scandal, and a financial investigation into an arbitration deal Lagarde approved.
In Washington, I’m David Gura for Marketplace.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.