In order to enter the Socialist primary for the May 2012 presidential elections, Strauss-Kahn would need to declare his candidacy between June 28th and July 13th. It’s too soon to say what all of the implications of Strauss-Kahn’s arrest will be—some fear it will push French politics to the far right; others worry that Strauss-Kahn will leave the IMF rudderless at a critical time. But for now one thing seems clear: Though he seemed poised to become the next French president, his campaign is probably over before it even began.
To understand Strauss-Kahn’s trajectory, rewind to November 16, 2006: Ségolène Royal was chosen by the Socialists to become the party’s first female candidate for president. She got 60 percent of the vote; Strauss-Kahn trailed with 20 percent.
It was a humiliating defeat: Strauss-Kahn was an acclaimed finance minister, a successful mayor of Sarcelles, a sizeable and hard-to-manage suburb just outside Paris’s beltway. He was a well-regarded politician, an insider who got the support of key political bigwigs, including Lionel Jospin, the French prime minister from 1997 to 2002. Ségolène, as she’s called, was a novice. DSK’s team couldn’t believe she had managed to portray herself as the “people’s candidate,” the outsider who would shake up the party.
After losing the bitter primary, Strauss-Kahn’s camp did little to help Ségolène against Sarkozy. DSK needed a new lease on life, a new platform. The story goes that he and his advisers started taking a close look at all the big international institutions where he could burnish his image. Then, in June 2007, the International Monetary Fund’s managing director, Rodrigo de Rato of Spain, announced that he wanted to step down. By tradition, the head of the World Bank is an American and the IMF head is a European, so news of the opening rocketed around the capitals of Western Europe.
Strauss-Kahn, then 58, had the political skills and experience to be a serious contender. He boasted a PhD in economics, had been a professor of economics at the prestigious Sciences Po—as the Paris Institute for Political Studies is known—and was a visiting professor at Stanford. He had also earned a lot of respect, both at home and abroad, as France’s finance minister in the late 1990s.
Jean-Claude Juncker, a close friend and president of the Eurogroup—composed of finance ministers from countries that use the euro as their currency—endorsed DSK as the European Union’s candidate to head the IMF. But before making it public, DSK had to win Sarkozy’s support. It wasn’t that hard.
The French president had two good reasons to send Strauss-Kahn to the IMF. Sarkozy saw having a Frenchman at the head of the powerful international organization as a way to elevate the country’s leadership on the world stage. It was also a chance to get rid of a potential rival. The IMF job was a five-year stint, renewable once. It began in the fall of 2007 and would end in late 2012—long enough to keep Strauss-Kahn away until after the May 2012 presidential elections. (That strategy might be familiar to Barack Obama, who sent Utah’s GOP governor Jon Huntsman, a potential 2012 rival, to be ambassador to China. Huntsman resigned in January to return to the United States and explore a run for the Republican 2012 presidential nomination.)
After getting Sarkozy’s blessing, DSK began a world tour to win the support of members of the IMF board: the United States, Europe, China, Japan. Everywhere he went, he convinced the members to back him, and he promised not to quit before the end of his term—he even implied he would stay for a second term. In the end, the only member he didn’t get onboard was Russia, which had its own candidate.
On November 1, 2007, Strauss-Kahn got the IMF job. He now had 2,900 people from 187 countries working for him and a budget of $340 billion, with $600 billion out in loans. He traveled 150 days a year across the globe. Heads of state called him on his BlackBerry.
“I have the opportunity to tell every head of state or head of government on the planet what works and what doesn’t,” he said on French TV in February. His mission? “Foster global growth and economic stability, provide policy advice and financing to countries in economic difficulties, and reduce poverty in the world.”
When he arrived, the IMF—created in 1944 during the Bretton Woods conference in New Hampshire—had lost much of its credibility. It was decried by poor nations as a bully giving with one hand, strangling with the other. The conditions it imposed before awarding a loan were so drastic that many economists said it was no longer fostering growth. And despite its traditional European leadership, the IMF was seen as a tool of the US Treasury.
As DSK took charge, critics raised questions about the IMF’s usefulness. It had been created in the wake of the Depression and World War II. Now, at the dawn of the 21st century, when all the major economies felt invincible, what was the point of keeping alive such an enormous and expensive machine? No one was losing sleep over the threat of another global financial crisis.
Strauss-Kahn began by getting rid of 400 people, 15 percent of the workforce, through buyouts. It was a very traditional social-democrat approach—nobody was fired, only strongly encouraged to leave with generous subsidies and help. But cutting 400 jobs during his first months in office didn’t make him many friends.
He reorganized the IMF’s shares—which determine how much control each country has over the Fund—to boost the role of emerging economies. In November 2010, China became the third-most powerful country on the board, after the United States and Japan. “This historic agreement is the most fundamental governance overhaul in the Fund’s 65-year history and the biggest-ever shift of influence in favor of emerging markets and developing countries to recognize their growing role in the global economy,” DSK said in November 2010.
This movement toward a more balanced distribution of power may lead to another revolution: breaking with the tradition of having a European IMF chief. The next managing director of the IMF could come from either Latin America or China. To pave the way, DSK appointed Zhu Min, former deputy governor of the People’s Bank of China, as his special adviser. It’s the highest position a Chinese person has held at the IMF.
But the biggest force driving the IMF revolution was the 2008 financial meltdown, the largest systemic risk to the global financial system since the Great Depression, which had helped spawn the IMF nearly 70 years earlier.
“Before the crisis there was this idea—do we need an institution like the IMF?” DSK told Time in July 2010. “It was like wondering about the need for firefighters when you don’t have a fire.” DSK likes to think that when the fire did come, he was the one who played the role of fire chief—a role that Sarkozy and Obama also would claim.
At the G20 summit in London in April 2009, the IMF country members committed to tripling the loan capacity of the Fund, from $250 billion to $750 billion. It showed that the IMF could be a vital tool in the crisis.
The G20 met again in Pittsburgh in the fall. At the official opening dinner on September 24, Strauss-Kahn sat across from President Obama. United Nations secretary general Ban Ki-moon was to DSK’s right. The Frenchman looked as if he were presiding over the dinner on an equal footing with the President of the United States. As a chess player—some say he plays up to two or three hours a day on his iPad—Strauss-Kahn understood the value of having a key role on the world’s chess board.
The Greek debt crisis in May 2010 was a turning point for the IMF. For the first time in its history, the Fund lent money to a country in the European Union: 30 billion euros, its biggest loan ever. The IMF had regained its relevance.
During all this, Strauss-Kahn was discovering his new home of Washington with his wife, Anne Sinclair, at his side. It was a change in more than language alone.
In France, Sinclair can’t navigate the Parisian upmarket department store Le Bon Marché without being constantly stopped. Sinclair is France’s Katie Couric and the country’s most famous TV journalist of the last 30 years.
From 1984 to 1997, she hosted the weekly TV show 7/7 on the TF1 network. In a country of 62 million, 10 million to 12 million watched her each Sunday evening at 7. By comparison, 60 Minutes draws 13.2 million viewers weekly in a country of 300 million. The CBS Evening News—which Couric is leaving in June—draws 5.5 million nightly viewers.
Sinclair’s show was a one-on-one interview, often compared to Larry King Live or Charlie Rose. She hosted Bill Clinton when he was President, Hillary Clinton when she was First Lady, Shimon Peres, and Mikhail Gorbachev, among others. Most French viewers could identify Sinclair’s voice with their eyes shut. She was a tough interviewer who wouldn’t let go of her guests. A brunette, she has eyes that are an almost electric light blue.
When DSK became France’s finance minister, Sinclair left the TV spotlight to host a radio show. And when he became head of the IMF, she quit journalism to come with him to Washington.