International Monetary Fund Managing Director Christine Lagarde received renewed support from the fund’s board as a French court decision putting her under formal investigation for negligence threatens to sully the organization’s reputation.
“The executive board has been briefed on recent developments related to this matter, and continues to express its confidence in the managing director’s ability to effectively carry out her duties,” the board, which represents the fund’s 188 member countries, said in an e-mailed statement.
The statement eases pressure on Lagarde, who has denied any wrongdoing throughout more than three years of procedures focusing on a 2008 decision she made as France’s finance minister. The board, which was aware of the court case when she was selected in 2011 as the first woman to lead the IMF, has expressed support at every step.
The latest turn in the legal process has refocused attention on an institution roiled by the 2011 arrest of Dominique Strauss-Kahn, her predecessor, on charges including the attempted rape of a hotel maid. The charges were later dropped, and he settled the maid’s lawsuit in 2012.
Lagarde earlier this week was placed under formal investigation for “negligence” in allowing an arbitration process to end a dispute between Bernard Tapie, a businessman and supporter of then-French president Nicolas Sarkozy, and former state-owned bank Credit Lyonnais. The court has been looking into whether she erred in agreeing to the arbitration, which resulted in the business tycoon being awarded about $500-million (U.S.).
Lagarde, 58, said she has instructed her lawyer to appeal a court decision she considers “totally without merit.”
“After three years of procedure, the sole surviving allegation is that through inadvertence or inattention I may have failed to intervene to block the arbitration that brought to an end the long-standing Tapie litigation,” she said in a statement through her lawyer on Aug. 27.
Formed after the Second World War to help safeguard the stability of the global monetary system, Washington-based IMF has extended loans in recent years to crisis-hit European nations including Cyprus, Greece and Portugal, as well as emerging-market trouble spots such as Pakistan, Tunisia and Jordan.
During her tenure, Lagarde has sought to raise the influence of emerging-market members of the fund and has urged policy makers to do more to protect the global financial system and their economies from another crisis.
“Despite massive and unprecedented policy responses to the crisis over the past five years, the recovery remains modest and fragile,” she said in a July speech in Aix-en-Provence, in southern France. “Demand-support policies can only go so far. We now need to step up supply-side policies and reforms to boost investment and reinforce the recovery.”