05/16/2011 05:07 pm ET Updated Jul 16, 2011

Dominique Strauss Kahn Arraigned: The European and Global Impact

The recent events surrounding Dominique Strauss Kahn are a tragedy and will have a major impact at many levels.

From my perspective, I see several levels of consequences:
  1. For the International Monetary Fund: the loss of the leadership of Dominique Strauss Kahn is heavy. His deputy, John Lipsky, is an American economist, who had indicated his desire to leave the Fund. He does not carry the weight of DSK, who is a politician and a leader of international dimension. Dominique could speak to the heads of states and governments in a strong and credible manner. Whether it was in discussions with Europe, the United States or China, his positions were important and meaningful. Replacing him won't be easy: it seems doubtful that his successor could necessarily maintain the European (and French) monopoly of this function.
  2. For developing countries that rely on assistance from the IMF to get out of hard times and need assistance to get their economies back in shape, sometimes painfully, the impact is devastating. Several countries are the beneficiary of this assistance around the world: the IMF is irreplaceable in this area. It is to help these countries that the IMF has been created.
  3. For Europe, the risk is significant. The internal debate that divides the advocates of debt restructuring of the countries in difficulty, to begin with Greece and those who prefer to increase the assistance to Greece (including Greeks and the European Central Bank) they had a referee: the IMF and its Director General. The manner in which the IMF intervenes in similar problems is tough and its method to lend only if the milestones of the needed reforms are implemented is essential. Will this voice be as powerful without DSK? The IMF has a high quality staff but it requires leadership and vision as well.
  4. France did not need this kind of scandal to tarnish its image. She loses a key global leader and one of the best candidates for its presidential elections. He represented a chance to finally have a President who can lead the reforms that the country needs with real international experience. This departs from what has sometimes been a hexagonal foreign policy of the French Republic.

The most urgent problem is obviously the situation of Greece and other countries in difficulty in the Eurozone. The fragility of the Eurozone did not need such a disturbing event. Investors were already worried, and confidence is fragile. Anything could set fire to the powder and provoke a crisis of global amplitude.

Finally, allow me a personal reflection. It is always with great sadness that I see a man falling down. I have known DSK for many years and often admired him for his courageous action in the world of international finance where few leaders had his stature and his authority. His leadership will be missed.