The case of Kristalina Georgieva and the curse of the IMF in the 21st century

De Rato, Strauss-Kahn, Lagarde and Georgieva. Each had their share of scandals and questions, before, during or after their administration

Regardless of how to resolve the institutional crisis that the IMF and the World Bank are going through, which on the eve of their annual Assembly must decide what to do with the current director of the Fund, Kristalina Georgieva, accused of pressuring the Bank’s staff to manipulate data and improve China’s position in an international ranking when it was number two in the entity, the truth is that both institutions are experiencing hectic years.

So far this century, the “brother” entities founded in 1946 by the victors of the Second World War have experienced internal turmoil, particularly the IMF.

It was not always like this. In its 75 years of existence, the Fund so far had 12 heads, including Georgieva, but in two very different stages. From 1946 to February 2000, there were 7 managers, at an average of almost 8 years per head. But so far in the 21st century, 5 have succeeded each other, with an average permanence just over half that of the 20th century.

To the first director of the Fund, the Belgian Camille Gutt (1946-51), followed by the Swedes Ivar Rooth (1951-56) and Per Jacobsson (1956-63). Then came the first of the 5 heads of French nationality that the Fund had so far, Pierre-Paul Schweitzer, at the helm between 1963 and 1973, followed by the Dutch Johannes Witteven, director between 1973 and 1978. And then almost a quarter of a century with a French accent: Jacques de Larosiere, between 1978 and 1987, and Michel Camdessus, who ran the entity until Valentine’s Day 2000.

Michel Camdesus spent more than 13 years at the helm of the IMF and with his predecessor, Jacques de Larosiere, they completed almost a quarter of a continuous century of French leadership.

From financial crises to institutional crises

Under the managements of De Larosiere and Camdessus, the IMF acted in the Latin American debt crisis of the 1980s, the “Tequila effect” of 1994/95, the Southeast Asian crises that began in 1997, the Russian devaluation of 1998, the Brazilian devaluation of 1999. They were not quiet years. In one of his farewell speeches, Camdessus even allowed himself to baptize the Tequila as “the first financial crisis of the 21st century.”

But what, in addition to new financial crises, the 21st century would bring were crises in the leadership of the IMF itself. After Camdessus, 5 female directors succeeded each other, including the first two women in charge, but the average term of office was sharply reduced and could be shortened further if Georgieva is replaced in the next few days or weeks.

In quick succession, at the head of the Fund were the German Horst Koehler, briefly (2000-2004), before being president (not Chancellor) of his country; the Spanish Rodrigo de Rato (2004-07), French Dominique Strauss-Kahn (2007-11) and, after ten men, two women, the French Christine Lagarde (2011-2019) and the Bulgarian Kristalina Georgieva, since the end of 2019.

Rodrigo de Rato in Néstor Kirchner, in the background, the then Minister of Economy, Roberto Lavagna

Sexual assault

With the exception of Köhler, these names were associated, before, during or after his time at the Fund, to scandalous cases. The most notorious, because it occurred during his tenure, was that of Strauss-Kahn, who had to resign due to the allegations of violation of Nafissatou Diall, a maid in a hotel in New York. The Frenchman was considered the almost certain next president of France, and there are even those who suspect maneuvers of the then president of that country, Nicolas Sarkozy. The resigned Strauss-Kahn reached years later, in 2012, a financial settlement with his accuser and engaged in advisory and investment activities that earned him a place in the “Pandora Papers”.

From time to time I get rich

The Spanish Rodrigo de Rato thing was not better. It did not happen during his tenure at the Fund, but before, although it became known later: in 2018 he was sentenced by the courts of his country to 4 years in prison for misappropriation of funds during his tenure at Bankia, a private entity, through the cards black”, Thanks to which he and his successor, Miguel Blesa, who took his own life, 12.5 million undeclared euros were distributed to the entity or to the Spanish treasury.

Costly negligence

Christine Lagarde spent more than 8 years at the head of the IMF and during her tenure an accusation survived: in 2016, I now feel as director, the French justice accused her of “negligence” for her role as super minister of the Government’s Economy, Finance, Industry and Employment by Sarkozy.

In that position, Lagarde had approved a public compensation of 403 million euros to Bernard Tapie, controversial former owner of Adidas, former president of Olympique de Marseille and friend of Sarkozy, following a conflict with Credit Lyonnais, a bank with state participation. The French court, however, exempted Lagarde from any criminal charges and the IMF shareholders confirmed their confidence in him. (In 2017, the French Court of Cassation forced Tapie to return the 403 million euros). And in 2018 Lagarde was decisive in granting the megacredit of USD 57,000 million to Argentina, of which the country received about USD 45,000 million.

Macri and Lagarde shake hands at a G20 meeting. The French was decisive in the granting of the 2018 megacredit

This is how you get to Georgieva, today in the pillory for the case of 2018, when – according to a private investigation hired by the World Bank itself – it was the handyman of a manipulation of data to favor China, whose government the Bank wanted to have a good time to close a multilateral arrangement of capitalization of the entity.

Georgieva denies the charges, but the findings of the investigation are too precise and involve too many testimonies: from a thank you note to one of the officials who helped cook the data and a visit to his home (something he had never done and never repeated. ) the day before the report is published.

By the way, the accusations resonate more amid the strategic confrontation between the US and China, a power which Georgieva allegedly favored. Thus, for example, economists like Joseph Stiglitz (the academic mentor of Martin Guzman) and Jeffrey Sachs, They denounce a “witch hunt” against the still holder of the Fund.

Georgieva, in an official IMF photo, which today reflects her loneliness IMF

In the hours of Friday afternoon, Italy, the United Kingdom and Germany have agreed to support the Bulgarian economist, fearing that if they let her down, the US will demand to end the tradition of “a European in the Fund, an American in the World Bank ”And also wants to get hold of that armchair. On Saturday night, meanwhile, the board made the surprising decision to meet again this Sunday and interview both Georgieva and the WilmerHale professionals who prepared the accusatory report against her, in an apparent sign that they want to settle the matter. , either to ratify it or to terminate it from office, before the start of the Annual Assembly that begins this Monday.

The support of the great European countries occurs even in the midst of a new accusation, aired by the Bloomberg agency, that last July Georgieva “softened” criticism of Brazil’s environmental policy after a meeting with Alfonso Bevilaqua, the Brazilian representative on the IMF board. Bevilaqua is also a member of the “ethics committee” that must decide on the situation of the director-manager.

Even if Georgieva were truly innocent of the accusations against her, such a mess will only undermine the credibility of the IMF and the World Bank. Exactly what both institutions require from the economic policies of the countries that use them.

KEEP READING:

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