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

Regardless of the way in which the institutional crisis facing the IMF and the World Bank, which on the eve of their Annual Meeting must decide the fate of the current director of the Fund, is resolved, Kristalina Georgieva, accused of pressuring Bank 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 the two institutions have known for years eventful.

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

It wasn’t always like that. In 75 years of existence, the Fund has so far counted 12 heads, including Georgieva, but in two very different stages. From 1946 to February 2000, there were 7 executives, at an average of almost 8 years per head. But so far in the 21st century, 5 have succeeded, with an average permanence a little more than half that of the 20th century.

To the first administrator of the Fund, the Belgian Camille Gutt (1946-51), followed by the Swedes Ivar root (1951-56) and Per Jacobsson (1956-63). Then came the first of the 5 heads of French nationality that the Fund had to date, 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.

From financial crises to institutional crises

Under the De Larosière and Camdessus administrations, the IMF acted in the Latin American debt crisis of the 1980s, the “Tequila effect” of 1994/95, the crises in South-East Asia which began in 1997, the Russian devaluation of 1998, the Brazilian devaluation of 1999. These were not quiet years. In one of his farewell speeches, Camdessus even allowed himself to baptize Tequila “the first financial crisis of the 21st century”.

But what, in addition to new financial crises, the 21st century would bring are crises in the leadership of the IMF itself. After Camdessus, 5 women administrators succeeded one another, including the first two women in charge, but the average term of office has been greatly reduced and could be further shortened if Georgieva is replaced in the coming days or weeks.

In quick succession, at the head of the Fund were the German Horst Koehler, briefly (2000-2004), before being president (and not chancellor) of his country; 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 Bulgarian Kristalina Georgieva, since the end of 2019.

Sexual assault

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

Every once in a while I get rich

The Spanish thing Rodrigo de Rato was no better. No ocurrió durante su gestión en el Fondo, sino antes, aunque se conoció después: in 2018 fue condenado por las cortes de su país a 4 años de prisión por apropiación indebida de fondos durante su gestión en Bankia, una entidad privada, a través de the cards black», Thanks to which he and his successor, Miguel Blesa, who committed suicide, 12.5 million undeclared euros were distributed to the entity or to the Spanish treasury.

Costly neglect

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

In this post, Lagarde had approved 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 dispute with Crédit Lyonnais, a bank public. The French court, however, exempted Lagarde from all criminal charges and 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 mega-credit of $ 57,000 million to Argentina, from which the country received around $ 45,000 million.

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

Georgieva denies the accusations, but the findings of the investigation are too specific and involve too much testimony: from a thank you note to one of the officials who helped prepare the data and a visit to his home (which he had never done and never rehearsed.) the day before the report was published.

By the way, the accusations resonate more amid the strategic confrontation between the United States and China, a power Georgieva is said to have favored. So, 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.

On Friday afternoon, Italy, the UK and Germany agreed to back the Bulgarian economist, fearing that if they drop it, the US will demand an end to the tradition “of a European in the Fund, of an American in the World. Bank ”And also wants to get their hands on this chair. Meanwhile, on Saturday night, the board took the surprising decision to meet again this Sunday and question both Georgieva and the professionals at WilmerHale who prepared the accusatory report against her, a clear sign that they want to settle the matter. , or ratify it. or to terminate his functions, before the start of the Annual Meeting which begins this Monday.

Support from major European countries comes even in the midst of a new accusation, released by the Bloomberg agency, that last July Georgieva “softened” criticisms of Brazil’s environmental policy after a meeting with Alfonso Bevilaqua, the representative of Brazil on the Board of Directors of the IMF. Bevilaqua is also a member of the “ethics committee” which must rule on the situation of the managing director.

Even if Georgieva was truly innocent of the charges against her, such a mess would only undermine the credibility of the IMF and the World Bank. Exactly what the two institutions demand of the economic policies of the countries which use them.

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