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Is France's Christine Lagarde the one to rescue the global economy?

France's Finance and Economy Minister Christine Lagarde is expected to replace Dominique Strauss-Kahn as head of the International Monetary Fund.


She will soon, by some calculations, be the most powerful woman in the world: As the first female head of the world's most important financial body, the International Monetary Fund, she will hold the fates of nations in her hand, in a moment when hopes of a near-term global recovery are waning.

So it is a bit disarming to meet Christine Lagarde - 55, seated in the baroque vastness of her 17th-century official office in Paris, dining on a vegetarian salad prepared by one of her personal chefs and dressed in impeccable Chanel - and to be greeted with hearty laughter over a self-effacing joke about her ignorance of northern Canadian dress.

"Is it what, like, polar clothes? I'll have to dig into my wardrobe and find a pullover or something," she says of a planned visit, in flawless, shopping-mall American English, followed by a knowing untruth: "I never seem to get these things right."

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The fact is, Ms. Lagarde always gets these things right. If you ask the leaders of dozens of countries why they are backing the current French Finance Minister for this most crucial job, they will describe similar encounters. She has an extraordinary ability to win people over.

Her personal style sends varied messages: To Britons, she is the rare continental European who has somehow mastered the art of small talk. To Germans, she is the rare economic leader who actually seems human. To North Americans, she is just like one of us.

In France, however, people tend to think of her less as a personality than as a set of archetypes: As a Frenchwoman who spent crucial years in the U.S. and speaks flawless English, she must represent collusion with Anglo-American, free-market capitalism. As a former national synchronized-swimming champion, she must be a loyal, precise team player in President Nicolas Sarkozy's cabinet. As an exercise fanatic who sleeps a few hours a night and seemingly devotes zero time to her family, she must have an almost robotic discipline. And as one of France's most elegant, well-dressed women, she must be able to get away with anything.

None of those images is terribly accurate. But they are the expectations that Ms. Lagarde carries with her in her bid to become the next head of the IMF.

On some levels it's shocking the IMF would consider her for the job that had been held by Dominique Strauss-Kahn, another high-flying French politician given to lavish tastes, until an alleged incident in a New York hotel led to his arrest on sex-assault charges on May 14.

Surely, the 187-nation organization, humbled by scandal, would look further afield - especially after it spent a decade pledging to select its next chief from the developing world.

Surely, France, of all places, could not have a lock on the global economy.

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And yet when the Washington-based IMF makes its final decision at the end of this month, Ms. Lagarde is almost certain to be selected, by a strong majority, as the next managing director. While there will be other candidates, including Mexico's central-bank governor, Agustin Carstens, the world's financial leaders widely agree Ms. Lagarde is the only person for the job. Even the Chinese, usually enraged by Euro-American domination, have endorsed her.

"We're in the strange situation of having another European in line for this job, but a European whose personal and professional qualities make her almost impossible to compete with," Russian deputy finance minister Sergei Storchak told Reuters on Thursday. "She has the right background, perfect English and the ability to lead negotiations."

Yet those are among the few things that are really solidly known about Ms. Lagarde's prospects as an IMF leader: She's a terrific, warm speaker and a charming, persuasive negotiator, especially in English (in French she's actually cooler and more removed). Her knowledge of macroeconomics and banking is superb, and she is extremely well briefed on international finance.

Yet she is not an economist. There is no body of papers outlining her positions on key global matters. And she has been vague, even contradictory, on the crucial issue of the moment, the European economic crisis.

Mr. Strauss-Kahn was a bold reformer, pushing the IMF into the developing world, and away from the laissez-faire rigidities that had earned it that world's enmity; he had been quietly pushing Europe to deal with the crisis's underlying causes. Whether Ms. Lagarde is either interested or capable of following in that path is unknown.

"She's a very pragmatic woman - and that's her greatest weakness in my eyes," says Cyrille Lachèvre, a confidant of Ms. Lagarde as her biographer and as the business editor of the conservative Paris newspaper Le Figaro. "It's hard to know what she really thinks, and what are her ideas. … It's a very large question mark."

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An outsider makes her way in

Beyond her persuasiveness, what convinces leaders that she is the woman for the moment is the unlikely trajectory of her life and career. When she got the call in 2005 from prime minister Dominique de Villepin to join France's conservative government, she had already established herself as a figure of extraordinary independence from conventional French thought - and, for much of her life, from France itself.

Raised in Paris by middle-class academics, she became a national-level swimmer and suffered the death of her father as a teenager, then made the very un-French move of going to Bethesda, Md., for finishing school. She studied law at the very left-wing University of Paris X Nanterre, but then returned to the States as an aide to a Republican congressman.

Her law career, with the Chicago firm Baker McKenzie, was meteoric: She joined at age 25; by 1999, at 43, she was the chairwoman, and had transformed the firm's structure and culture.

In the dying days of Jacques Chirac's presidency, she sailed through a series of minor cabinet posts as something of an outsider: A non-drinking vegetarian who liked free markets and preferred to address her staff in English, Ms. Lagarde was out of step with the anti-American Gallic defiance of the day. Her staff called her "Christine the Guard," mocking both her linguistic tastes and her stubbornness, or simply "the American."

But with the election of Nicolas Sarkozy in 2007, she became part of a movement, and not just because Mr. Sarkozy was also a pro-U.S. non-drinker. The new President, a child of immigrants educated at non-elite schools, purged his cabinet of the Énarques - graduates of the École Nationale d'Administration, which produces most French bureaucrats and leaders. He preferred lawyers like himself. Ms. Lagarde moved from fringe to centre, and took charge of reforming the French economy.

She stood out as a powerful woman in a macho cabinet and, more importantly, one with no patience for French economic pieties. Employment laws were a particular object of scorn: The 35-hour work week (invented in part by her friend Mr. Strauss-Kahn as a minister in a 1990s Socialist government) was "the ultimate expression of our historic tendency to see work as a form of servitude" - a "tradition of contempt" for work "that reaches back to the ancien régime."

Provoking months of outrage, she even called for an end to contemplation: "France is a country that thinks," she said. "But enough thinking now! It's time to roll up our sleeves."

That seemed a bit rich to observers who pointed out that she enjoyed two maids, two private chefs, a huge apartment, an official boat to take her along the Seine from ministerial to parliamentary offices and a staff of 41, all on the public payroll. She was also one of the most fashionable women in France, turning heads with daring wardrobes, in skin-tight silk and body-length white patent leather, by her country's most famous designers.

And her personal life, while free of the kinds of dark rumours attached to Mr. Strauss-Kahn and a number of her cabinet colleagues, did not meet France's far more conservative standards for women. Divorced, with two grown sons, she has admitted she was never primarily interested in being a wife or mother. She now reportedly lives with French businessman Xavier Giocanti. "I had to accept that I could not be successful at everything," she said this year. "You draw up priorities, and you accept a lot of guilt."

That said, she doesn't consider her sex secondary to her success. Indeed, all else being equal, she'd hire a woman ahead of a man.

"Women inject less libido and less testosterone into the equation," she told an interviewer months before the Strauss-Kahn controversy. "It helps in the sense that we don't necessarily project our own egos into cutting a deal, making our point across, convincing people, reducing them to a partner that has lost in the process."

A reformer, interrupted

Ms. Lagarde seemed to be on a path to the very top of French government, widely tipped as a potential next prime minister and apparently about to change the very nature of the French economy by embracing the Anglo-American capitalism her predecessors had attacked.

And then, months into her job, the global economy crashed. Her bold economic and workplace-law reforms never happened, in part because they proved far more difficult than she anticipated and in part because the recession and the international credit crisis eclipsed all else.

Ms. Lagarde recognized almost immediately that the state would have to become involved, in a large, ongoing way. Together with Gordon Brown in Britain and Timothy Geithner in Washington, she pushed for a co-ordinated international stimulus, and won. The irony was not lost on her.

"I am supposed to be the free-market reformer, but I'm forced to talk about government intervention," she said in a Globe and Mail interview last year.

But she had never fully believed in American-style unregulated markets, either: When trader Jérôme Kerviel lost $7-billion of the bank Société Générale's money in early 2008, nearly crashing it, Ms. Lagarde moved quickly to reinforce France's already tough regulations.

She told The Globe that her ideal world would be one in which markets are free but fairly heavily regulated. "Yeah, I'd like to see less state ownership, less direct involvement in the economy, less actual pushing and pulling of economic players. But less regulation? No, I don't think so. More efficient regulations and a stricter set of rules? Yes, for sure."

That philosophy, by French standards, makes her a liberal - which, here, is a political insult, meaning a free-market fanatic. But by U.S. norms, she's a radical state interventionist.

Personally, she considers this a major transformation: Declaring her candidacy for the IMF last week, she proclaimed, "I am a woman of liberal temperament, but my liberalism is tempered" - a message that appeals both to the IMF's wealthier donor nations, which prefer more open markets, and to those that depend on IMF loans to stay aloft.

But that does not address the key question of the day - and the reason why IMF members, including China, are willing to accept a European atop the organization: How do you go about ending the European financial crisis? They all know the rescue of the 16-member euro-zone economy is crucial to the salvation of the world financial system.

Where does she stand? Ms. Lagarde has backed the rescues of Greece and Ireland, and played an important role in bringing countries together to agree on this approach. But on the underlying causes and ultimate solution, she has been dangerously vague.

Her predecessor, Mr. Strauss-Kahn, understood the crisis as, at base, one of trade imbalances, with the poorer European nations becoming dependent on the exported goods - and the exported credit - of the wealthier ones, such as Germany and France.

To prevent debt from pooling up in the periphery of Europe again, he frequently suggested in off-the-record discussions, it would be necessary to integrate Europe's economies much more tightly, uniting their fiscal plans and some aspects of their national budgets in a continent-wide plan. He had been pushing Europe carefully in that direction.

Will Ms. Lagarde carry on that effort? And does she have the economic intuition and political clout to transform an entire continent, the largest economy in the world, into something that won't crash so easily again?

Some doubt it: Martin Wolf, the influential economics columnist with the Financial Times, has decided she is not the right candidate. "Her economics are limited. If she were to become head of the organization, she would have to rely on the advice of those around her."

Despite being one of the most public and open figures in international finance, on a practical level Ms. Lagarde is still largely unknown and untested.

Much of her legend is not quite real: She is not temperamentally or economically American; she is not wholly synchronized with the Sarkozy team. But is she able, through style and personality, to get away with anything?

In the next few weeks, we'll begin to see.

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