The fraught politics facing Lagarde

By Felix Salmon
May 24, 2011
Patrick Wintour's interview with Vince Cable, a UK cabinet minister who, perfectly sensibly, says that Greece is going to have to restructure its debts.

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To get an idea of the job facing the new head of the IMF, check out Patrick Wintour’s interview with Vince Cable, a UK cabinet minister who, perfectly sensibly, says that Greece is going to have to restructure its debts. Cable puts a positive spin on the idea: a “soft restructuring”, he says, with Greece staying in the euro zone, could lead to a closer political union.

Then, read the story of what happens when you so much as suggest such a thing to Jean-Claude Trichet, eurocrat-in-chief. Even if you’re from Luxembourg:

Jean-Claude Trichet, ECB president, walked out of a meeting hosted by Jean-Claude Juncker, Luxembourg’s prime minister. According to people familiar with events at the meeting, Mr Trichet was angry at talk of a so-called “soft” restructuring that could involve an extension of Greek debt maturities.

I can see why Trichet is so opposed to such a policy. Central banks, by their nature, hate restructuring assets: granting debt forgiveness is fiscal policy, not monetary policy. But the ECB holds a lot of Greek debt, and it’s almost impossible to see how it could fob that debt off onto the European Financial Stability Facility or any other body in advance of any restructuring.

In any event, the politics here are extremely delicate — note that Cable’s view is still just Cable’s view, rather than being the official view of the UK government — and the managing director of the IMF is the key broker who can forge some kind of consensus on this fraught subject both within Europe and more globally.

That’s why Pierre Briançon is wrong when he complains of Christine Lagarde that she isn’t qualified for the job:

Lagarde, who has no academic training in economics or finance, doesn’t even seem to have a strong set of beliefs.

Right now, a strong set of beliefs is something we don’t want in an IMF managing director. The job involves delicate negotiations with very large egos: it requires toughness, to be sure, but certainly not ideology. In that respect, the fact that it’s impossible to place Lagarde into an ideological hole is a big point in her favor — as is the fact that she seems to get on very well with the likes of Angela Merkel as well as her compatriot Jean-Claude Trichet.

Besides, “no academic training in economics or finance” doesn’t sound so bad to me, given the alternative.


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When people who have no training in economics or finance, it literally always results in them parroting the research and suggestions of the economists and financial experts that works for them, as has been experienced much in the UK.

Posted by Britonomist | Report as abusive

If there isn’t trust between Luxemburgish Jean-Claudes, what hope is there for the European experiment?

Posted by jfruh | Report as abusive

So you’re endorsing Megan McArdle to run the World Bank?

Posted by klhoughton | Report as abusive

If the experience of the US is at all relevant, I’d say the fact that she “has no academic training in economics or finance,” but rather was a highly accomplished attorney, are all virtues rather than demerits.

Three of the most astute, capable, and upstanding financial regulators in the US (Brooksley Born (former CFTC Director), Sheila Bair, and Elizabeth Warren) similarly lack “academic training in economics or finance.” (Further similarities: all three are attorneys. All three are women). All three are incredibly competent and indeed have been more arguably more insightful and prescient than male academically trained technocrats like Larry Summers.

So yeah, two X chromosomes, a law degree, and a dearth of formal training in economics and finance? I’d say that’s a winning combination.

Posted by BasilSeal | Report as abusive

‘The Fraught Politics Facing LaGarde’


Fraught means accompanied by or involving, as in fraught with peril. Perhaps the politics facing Ms LaGarde are fraught with peril – in fact, they probably are – but to say the politics are fraught really doesn’t make any sense.

She is hot, though.

Posted by Elektrobahn | Report as abusive

The French establishment this time maybe got it right do that they are almost sure the the candidate will not commit another sexual assault in the next period at the head of the IMF.

Posted by artimos | Report as abusive

Felix should read Simon Johnson on why Lagarde is not such a fine choice: 5/26/the-problem-with-christine-lagarde/

Posted by GlibFighter | Report as abusive