The weekend reports of Dominique Strauss-Kahn's dangerous liaison have set tongues wagging worldwide, at a time when the IMF's Managing Director was positioning the organisation to implement a new global, financial regulation system. Neither favourable nor disfavourable behaviour in Mrs Piroska Nagy's regard has been established, and the investigation had been discretely ongoing since August, but in light of the fate of Paul Wolfowitz, his very future is clearly at stake.
It would be interesting, then, to examine who may stand to benefit from Mr Strauss-Kahn's aventure d'un soir. The investigation was launched in response to governing board member A Shakour Salaan's request. The Wall St Journal, who broke the story, claiming this was done with "advice from the representatives of Russia and the U.S." And this does seem probable. The Times speaks of a "dismayed President Sarkozy." This rather less so.
Clearly, if the IMF was to return to a role exceeding even it's former strength, as proposed in the Financial Times, there would be difficulties for those countries whose growth most depended on their financial sector and speculation. There may be effects on oil and gas prices. There would certainly be voices opposing restoring the oversight that has been carefully dismantled in the U.S., given their muzzling of government as crisis approached. Russia nominated its own candidate when Nicolas Sarkozy convinced enough leaders to make DSK Europe's, and may well seek to nominate his eventual successor.
But the Times may be naive to say that "President [Sarkozy] was furious that Mr Strauss-Kahn had risked a chance to restart his career and to help France internationally."
Strauss-Kahn stood as a candidate for the French Socialist Party's nomination to face Sarkozy in the 2007 elections, rather noisily leaving the party's executive on losing to Ségolene Royal. He was one of a number of respected Socialists to be offered cabinet and other senior posts under Sarkozy's effective ouverture policy. Having such a respected enemy so far away establishing a stable international career while weakening the opposition, was accepted as Sarkozy's plan.
But Strauss-Kahn did not go away. Though his role prevents him from commenting on France's situation, he has managed to keep the French left in waiting. The end of last month saw a long interview with the Journal du Dimanche where, perhaps at the price of his future, he revealed his plans for the IMF and the global economy, and said "as a citizen, la France ne me quitte pas." As his party prepares to elect a leader on November 6th, Ifop had him as clear favourite to fight Sarkozy in 2012.
A week ago, another survey was just as favourable, giving Strauss-Kahn a popularity rating of 73% against Sarkozy's 44%. On Friday we learned that, asked who would manage the crisis better, DSK took 26% compared to Sarkozy's 18%. The message is clear - Sarkozy is not safe when Strauss-Kahn is strong.
Sarkozy's role in organising another Bretton Woods has also been cited as justification for his disappointment. As debate continues over prioritising the immediate crisis and implementing long-term regulation, he was seen as to the left of the US position, and hailed for his negotiation skills. Though the US has shown, as in the conditions attached to its bail-out, less stringency with the institutions, it may satisfy Sarkozy.
Sarkozy has approached the crisis in two phases. Firstly in silence, followed by his characteristic media blitz. He has increased in the polls, notably since the turning-point at Toulon. Taking the language of the left, he pitched aggressive either/or threats to high-earning executives. He talked of reforming capitalism. Yet little has come of it, and the tone has already softened. The pay issue will be according to voluntary agreement to industry-imposed guidelines by the end of the year. The reform of capitalism appears to be taken forward with the U.S. at November's summit - we may then begin to judge the enforceability of the regulation proposed.
It would be interesting were any party to accept, if not Strauss-Kahn's resignation, questions over the regulatory capacities of the IMF.
