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European finance ministers meet without Dominique Strauss-Kahn

The IMF chief has been one of the most respected financial voices arguing in favor of rescuing debt-burdened European nations. Now Strauss-Kahn is being held in New York on sexual assault charges, and his absence in Brussels is glaring.

May 16, 2011|By Henry Chu and Anthee Carassava, Los Angeles Times
  • Nemat Shafik, deputy managing director of the International Monetary Fund (IMF), represented the IMF at a meeting of the European Union finance ministers.
Nemat Shafik, deputy managing director of the International Monetary… (Jock Fistick / Bloomberg )

Reporting from London and Athens — Of all the voices arguing in favor of rescuing European nations submerged in debt, Dominique Strauss-Kahn's has been one of the strongest and most respected.

The onetime French finance minister is committed to the euro common currency and to closer European integration. Former colleagues from around the region knew he'd take their calls when they phoned the International Monetary Fund chief in Washington.

So the absence of Strauss-Kahn, who was being held in New York on sexual assault charges, was glaring Monday when European finance ministers gathered in Brussels for an important two-day meeting he was due to attend to help deal with the debt crisis.

The talks are going ahead as scheduled, with an IMF deputy subbing for the boss. As expected, European finance ministers approved a $111-billion joint IMF-EU bailout for Portugal — the third such rescue package in a year — and are to discuss more aid for Greece.

"The details still need to be finalized. On that, the IMF has a certain expertise, but it's an expertise that can be represented even without the managing director there," said Daniel Gros, director of the Center for European Policy Studies in Brussels.

But the alleged assault inside a swanky Manhattan hotel room has knocked a savvy, forceful leader from the front lines of combat against Europe's debt problems and added another dollop of uncertainty to an already delicate situation.

Consternation was especially sharp in Greece, whose profligacy ignited the debt crisis and forced Athens to request a humiliating financial bailout last year. Just five months ago, demonstrators angry over spending cuts ordered by the IMF and the EU burned an effigy of Strauss-Kahn outside the Greek Parliament, despite his assurance that "we're here to help" and his admonition not to "fight the doctor. You take the bitter medicine he prescribes, even if you don't like it." Now that the doctor is temporarily out of the picture, many Greeks are worried they may be in for an even rougher ride. Over the last few months, doubts have piled up over Athens' ability to pay back its emergency loans and to return to the markets for funding next year.

Strauss-Kahn is believed to be sympathetic to the idea of lending more assistance to Greece and was expected to play a key role in persuading skeptical governments, including those in Berlin and Amsterdam, to accept the idea.

"Strauss-Kahn has an amazingly strong personality, and he proved that he could trot to [German Chancellor Angela] Merkel's doorstep, influence decision-making and make it happen," said Stefanos Manos, a former Greek finance minister. "From the start of the Greek debt crisis, Strauss-Kahn had a very clear idea of what was needed, and he pushed the traditionally dillydallying European decision-making to get it done."

Without the IMF chief in their corner, many Greeks fear that demands by harder-line German politicians for harsher conditions on Athens and more extensive privatization of national assets will prevail.

"The chambermaid blocks Greece!" screamed a headline in the Athenian newspaper Eleftherotypia, referring to the 32-year-old hotel employee who has accused Strauss-Kahn of attempted rape.

His absence did not appear to affect the European finance ministers' unanimous approval Monday of Portugal's bailout, whose contours were agreed on days ago. The three-year rescue package will provide Lisbon with emergency loans at an interest rate yet to be announced, a move the ministers said would "help restore confidence and safeguard financial stability" in the Eurozone.

There is also concern over who would replace Strauss-Kahn should he lose his job at the IMF. The top post has historically gone to a European, but countries such as Brazil and China might insist on a break with tradition, in recognition of the growing importance of economies in Asia and other regions.

henry.chu@latimes.com

Times staff writer Chu reported from London and special correspondent Carassava from Athens.

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