Christine Lagarde outside IMF’s headquarters following her interview with the 24-member Executive Board (photo: IMF)
NEW MANAGING DIRECTOR
“The IMF has served its 187 member countries well during the global economic and financial crisis, transforming itself in many positive ways. I will make it my overriding goal that our institution continues to serve its entire membership with the same focus and the same spirit,” Lagarde said as she accepted the nomination by the IMF’s 24-member Executive Board.
“As I have had the opportunity to say to the IMF Board during the selection process, the IMF must be relevant, responsive, effective, and legitimate, to achieve stronger and sustainable growth, macroeconomic stability, and a better future for all,” she added.
Ms. Lagarde was appointed for a five-year term following a month-long selection process that started on May 20 following the resignation of Dominique Strauss-Kahn. She will take up her new position on July 5.
Mexico’s central bank governor Agustín Carstens, the other candidate for the position as Managing Director, extended his best wishes and full support for Lagarde.
Uneven global recovery
A demanding policy agenda awaits Lagarde at the IMF’s headquarters in Washington D.C. The global economy is being buffeted by continued uncertainty in Europe, uprisings in the Middle East, signs of overheating in some fast-growing emerging market economies, and rising commodity prices that pose a particular challenge for low-income countries.
“The Fund has a lot on its plate with an uneven world recovery, the reopening of global imbalances, potentially destabilizing capital flows, high levels of unemployment, rising inflation, and difficult country cases,” Lagarde said.
One of the uncertainties clouding the outlook is the continued sovereign debt crisis in Europe. The most acute problems are in Greece, where the government is trying to secure domestic political backing for a strengthened package of measures to put its economy on a more secure footing.
As finance minister of France during the global financial crisis, the 55-year old Lagarde is very familiar with the problems faced by the euro area.
In an interview with French TF1, she called on Greece’s opposition to back the government. “This is about a country’s fate, its security. And I believe at that point, we have to ignore the small and big political differences for the service of the country.”
Pressing for further reforms
Before her appointment, Ms. Lagarde―a former Olympic synchronized swimmer and mother of two grown sons―visited China, India, Russia and Brazil as part of her commitment to consult closely with fast-growing emerging markets.
“The IMF does not belong to anybody. It belongs to the 187 members of the Fund, and the management of the Fund does not belong to any particular nation or region. We can’t effectively represent the world’s economic balance of power if certain economies are under-represented,” she said.
In November 2010, the IMF agreed on reforms of its framework for making decisions to reflect the increasing importance of emerging market and developing economies. Lagarde called for swift implementation of these reforms, and for further work to be done on country representation.
The chairman of the IMF’s policy steering committee, Tharman Shanmugaratnam, expressed support for Ms. Lagarde’s call for further reforms. “I have spoken with Ms. Lagarde and we agreed on the importance of continued reforms to the governance of the Fund, so as to reflect the evolving balance in the global economy and financial system. This includes securing full implementation of the 2010 reforms and pressing ahead with the review of the quota formula that will commence before the Annual Meetings in September this year,” he said.
A more effective IMF
Ms. Lagarde takes office as the IMF is beefing up its work on “spillover effects”—the impact that one country’s policies can have on other countries because of the tremendous increase in trade and financial linkages in the global economy. This work is part of the IMF’s efforts to further policy collaboration at the international level.
In her statement to the Board, Lagarde called for tougher, more effective, and more consistent surveillance for better crisis prevention and tailor-made policy advice. “Beyond its primary mandate of ensuring the stability of exchange rates, the Fund needs to improve the integration of financial sector expertise into its surveillance, working in cooperation with the Financial Stability Board and other relevant bodies,” she said.
Pledge to strengthen diversity
In her interview with TF1, Lagarde said she was proud to be the first female head of the IMF.
As part of her candidacy, she stressed the need to ensure equal opportunities at the Fund and diversity in all its facets, gender-wise, academic and geographic.
“Diversity will strengthen legitimacy, but will also reinforce effectiveness. This is an area where progress will be achieved,” she told the IMF’s Executive Board.
Two strong candidates
Ms. Lagarde was selected by the Board by consensus. In her statement, she thanked the IMF’s global membership for its broad-based support, and expressed her respect and esteem for “my colleague and friend, Agustín Carstens.”
Outside observers have been critical of the selection process for the position of Managing Director, calling for a more open and transparent process.
“The selection process for the Managing Director encouraged two highly credible individuals to step forward. Mr. Agustín Carstens and Ms. Lagarde were exceptionally strong candidates, and I would like to thank them both for reaching out to a broad range of our constituencies in the process, for displaying a spirit of mutual respect throughout, and for respectively highlighting the need to enhance the Fund’s ability to promote global stability,” Minister Tharman said in his statement.
