Jones: Can Lagarde and the IMF save the Euro?

By: /
July 4, 2011

It's not too late to save the Euro zone, but tough choices lie ahead. That's Lagarde's strength: she's not an economist, she's a good politician, and the choices ahead are as much political as economic.

Of course, that wasn't Lagarde’s argument in running: rather, she made the case that because the Euro zone is the current epicenter of the financial crisis, someone from within the crisis is best suited to deliver the necessary medicine. My colleague Richard Gowan pointed out that that’s roughly the equivalent of marching into your local bank and claiming that because you’re long overdue to pay off your overdraft, you should be bank manager. Still, the political case for Lagarde is strong, at least within Europe.

Internationally, the interesting fact of Lagarde’s victory at the IMF is the way the BRICS countries coalesced around her. This was in no way an endorsement of the notion that Europe should retain the IMF-seat, just as the United States has always held the World Bank presidency. Each of the BRICS had an alternative candidate, and as a matter of principle strongly rejected the idea of Europe continuing in the spot vacated by DSK’s dramatic fall. However, the BRICS could only agree on the principle, not the practicalities, and none could agree to each other’s candidates. For all the talk of the ‘BRICS’ or the ‘rise of the rest’, Lagarde’s smooth victory is a reminder that at least as much divides the BRICS as unites them.