IMF board meets after Lagarde’s conviction

Christine Lagarde, International Monetary Fund head, was yesterday found guilty of negligence in public office during her time as French finance minister by a special Paris court.

The IMF board met in Washington last night to consider the case, in which the tribunal decided not to impose any sentence or to place the verdict on Ms Lagarde’s judicial record. Michel Sapin, finance minister, said the French government continued to have “complete confidence ” in Ms Lagarde in her role at the IMF.

The court, dedicated to judging ministers, said Ms Lagarde failed to prevent a €403m payout that Paris made to flamboyant entrepreneur Bernard Tapie in a long-running dispute with the state. The payment was later ruled to have been fraudulent. The tribunal said Ms Lagarde should have appealed the payout, awarded by an arbitration panel in 2008.

The conviction was an unwelcome stain on the IMF managing director’s stint at the fund. But establishment figures rallied behind her. Olivier Blanchard, former IMF chief economist, called the ruling unfair. “She is the one of the most scrupulous persons I have ever worked with, so any notion that she might have gone along with a deal she thought was legally wrong should be rejected. ‘Negligence’ is the opposite of how she works.”

Ms Lagarde was reappointed to a second five-year term earlier this year and remains popular with staff and the IMF’s major shareholders, who credit her and her political skills for turning round the fund’s reputation after the removal of her predecessor, and compatriot, Dominique Strauss-Kahn.

The IMF’s board had been preparing for a possible conviction. People close to major shareholders said that in the absence of a prison term – and with continuing support from the French government – Ms Lagarde would probably be able to stay in her position.
Most of the fund’s major shareholders were eager to avoid a wrangle over leadership, particularly with the new Trump administration preparing to take over in Washington. Any leadership battle could bring questions over the representation of emerging economies at the IMF and the World Bank back to the fore and spark an unwelcome fight over control of the multilateral institutions.