Fate of debt crisis uncertain after IMF head’s arrest

The arrest of the International Monetary Fund’s chief Dominique Strauss-Kahn has added a layer of uncertainty to Europe’s debt crisis as it removes a heavyweight financial expert from talks on how to save the 17-nation eurozone.

LONDON — The arrest of the International Monetary Fund’s chief Dominique Strauss-Kahn has added a layer of uncertainty to Europe’s debt crisis as it removes a heavyweight financial expert from talks on how to save the 17-nation eurozone.

Strauss-Kahn, who was France’s finance minister when the euro was created in 1999, is an authority on Europe’s economic issues and comfortable with the region’s complex web of power politics.

His experience is widely perceived to have been crucial as the currency union deals with the biggest crisis since its inception. His absence will increase worries about the IMF’s longer-term capacity to help Europe.

“It’s like losing an experienced ship’s captain, while navigating particularly difficult, unchartered waters,” said Jan Randolph, head of sovereign risk analyst at IHS Global Insight.

The prevailing view in the markets is that Strauss-Kahn’s arrest isn’t going to affect this week’s meeting of European finance ministers. Eurozone countries will sign off on Portugal’s C78 billion ($111 billion) bailout and discuss whether to give Greece more help beyond its current C110 billion rescue.

Markets have kept their cool, with the euro actually trading 1 per cent higher at $1.42116 in mid afternoon trading in London after a brief sell-off in early hours.

Strauss-Kahn had been widely expected to quit his post later this year in order to launch a bid for the French presidency in next year’s election.

But analysts said his arrest in New York on charges he sexually assaulted a hotel maid will quicken changes to the fund’s leadership and affect its position in international finance.

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