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High-flying Strauss-Kahn tainted by accusations

Dominique Strauss-Kahn, before the scandal broke, was one of the world's most prominent public figures, steering the International Monetary Fund through the global financial crisis and a likely
heir to the French presidency.

He was then paraded before the world’s cameras handcuffed, unshaven and disheveled at his initial hearing when he shared court time with petty criminals.  

Not only was he forced to quit the IMF, but he also had to abandon what had been expected to be a successful challenge to French President Nicolas Sarkozy in upcoming elections.  

The 62-year-old Strauss-Kahn, now clear of criminal charges of sex assault, is free to return to France, where his May 14 arrest in New York caused a political uproar.  

“This is the end of a terrible and unjust ordeal,” Strauss-Kahn told reporters outside of his upscale home in Lower Manhattan where he has been staying while awaiting the outcome of the legal process.  

“I’m eager to return to my country, but first there are a few small things I need to do before leaving,” Strauss-Kahn said, pledging: “I’ll express myself at greater length once I’m back in France.”  

His return would also mark the culmination of a tough fight put up by the super-wealthy Frenchman’s legal team against the illiterate Guinean housemaid who has accused him of sexual assault.  

Though he has long battled claims of dalliances with other women, Strauss-Kahn has repeatedly denied the allegations by Nafissatou Diallo.  

Claims about Strauss-Kahn’s private life had always lurked in the background, and his New York arrest sparked a scandal that has all but destroyed his hopes for the 2012 French presidency after a failed bid for the Socialist candidacy in 2006.  

A gifted orator, fluent in English and German, the silver-haired Strauss-Kahn is married to Anne Sinclair, one of France’s most popular television journalists. She remained by his side in court.  

The former economics professor won respect in Europe as France’s finance minister from 1997 to 1999.  

During that time, he took part in negotiations to create the single European currency, the euro, and generated a wave of privatizations, including that of France Telecom, overcoming resistance within Socialist ranks.  

He had presented himself as the reform candidate for the 187-country IMF, based in Washington, when he took the helm of the global lender in 2007, promising to be “a consensus builder.”  

But the Frenchman’s candidacy had stirred controversy in Europe, and he has had several run-ins with scandal.  

In 2008, he was discovered to be having an affair with a Hungarian IMF economist. The IMF’s investigation concluded he had not exerted pressure on the woman, but said he had made an error of judgment.  

Born to a Jewish family in the rich Paris suburb of Neuilly-sur-Seine on April 25, 1949, Strauss-Kahn spent part of his childhood in Morocco and later studied at the elite Paris political school Sciences-Po and the top business school HEC.  

He entered politics in 1986, winning a parliament seat to represent the alpine Haute-Savoie region, and was later re-elected in the Paris region of Val d’Oise in 1988.  

Named finance minister in 1997, Strauss-Kahn was forced to step down two years later because of allegations that he had received payment from a student health insurance fund for legal work he did not perform.  

He was cleared of any wrongdoing in 2001.

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ECONOMY

World unprepared for next financial crisis: ex-IMF chief Strauss-Kahn

The world is less well equipped to manage a major financial crisis today than it was a decade ago, according to Dominique Strauss-Kahn, a former chief of the International Monetary Fund (IMF).

World unprepared for next financial crisis: ex-IMF chief Strauss-Kahn
Former French Economy Minister and former managing director of the International Monetary Fund (IMF) Dominique Strauss-Kahn , poses during a photo session in Paris on Thursday. Photo: JOEL SAGET / AFP
In an interview with AFP, the now-disgraced Strauss-Kahn — who ran the fund at the height of the 2008 financial meltdown — also said rising populism across the world is a direct result of the crisis. 
 
Strauss-Kahn resigned as head of the IMF in 2011 after being accused of attempted rape in New York, although the charges were later dropped. He settled a subsequent civil suit, reportedly with more than $1.5 million.
 
Q: When did you become aware that a big crisis was brewing?
 
A: When I joined the IMF on Nov 1, 2007, it became clear quite quickly that things were not going well. That is why in January 2008, in Davos, I made a statement that made a bit of noise, asking for a global stimulus package worth two percent of each country's GDP. In April 2008, during the IMF's spring meetings, we released the figure of $1,000 billion that banks needed for their recapitalisation.
 
Q: Did the Bush administration grasp the danger of Lehman Brothers going bankrupt?
 
A: No, and that is why Treasury Secretary Henry Paulson decided not to save Lehman, because he wanted to make an example of it in the name of moral hazard. Like everybody else, he considerably underestimated the consequences. Allowing Lehman to go under was a serious mistake. Especially because only a week later they were forced to save the insurer AIG, which was much bigger.
 
Q: Ten years on, are we better equipped to deal with a crisis of such a magnitude?
 
A: No. We have made some progress, particularly in the area of banks' capital adequacy ratios. But that is not nearly enough. Imagine Deutsche Bank suddenly finding itself in difficulty. The eight percent of capital it has at its disposal are not going to be enough to solve the problem. The truth is that we are less well prepared now. Regulations are insufficient.
 
Q: How so?
 
A: After 2012-2013 we stopped talking about the need to regulate the economy, for example concerning the size of banks, or concerning rating agencies. We backtracked, which is why I am pessimistic about our preparedness. We have a non-thinking attitude towards globalisation and that does not yield positive results.
 
Q: Do we still have international coordination?
 
A: Coordination is mostly gone. Nobody plays that role anymore. Not the IMF and not the EU, and the United States president's policies are not helping. As a result, the mechanism that was created at the G20, which was very helpful because it involved emerging countries, has fallen apart. Ten years ago, governments accepted leaving that role to the IMF. I'm not sure it is able to play it today, but the future will tell.
 
Q: Do you believe that Donald Trump's election is a consequence of the crisis?
 
A: I believe so. I'm not saying that there was a single reason for Trump's election, but today's political situation is not unconnected to the crisis we lived through, both in the US with Trump and in Europe.
 
Q: Connected how?
 
A: One of the consequences of the crisis has been completely underestimated, in my opinion: the populism that is appearing everywhere is the direct outcome of the crisis and of the way that it was handled after 2011/2012, by favouring solutions that were going to increase inequalities.
 
Quantitative easing (by which central banks inject liquidity into the banking system) was useful and welcome. But it is a policy that is basically designed to bail out the financial system, and therefore serves the richest people on the planet.
 
When there's a fire, firemen intervene and there is water everywhere. But then you need to mop up, which we didn't do. And because this water flowed into the pockets of some, and not of everyone, there was a surge in inequality.
 
By AFP's Antonio Rodriguez