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IMF chief Lagarde ‘charged’ in French probe

The head of the IMF, Christine Lagarde has been placed under formal investigation in France on allegations of "negligence" after a probe into suspected corruption dating from her time as French finance minister.

IMF chief Lagarde 'charged' in French probe
Christine Lagarde, who revealed she had been charged on Wednesday after being questioned as part of a corruption investigation. Photo: AFP

The shock announcement came a day after Lagarde was grilled for more than 15 hours by a special court in Paris that probes ministerial misconduct, the fourth time she has been questioned in a case that has long weighed upon her position as managing director of the International Monetary Fund.

"The investigating commission of the court of justice of the French Republic has decided to place me under formal investigation," she said in exclusive comments to AFP.

In France, being placed under formal investigation is the nearest equivalent to being charged, and happens when an examining magistrate has decided there is a case to be answered. It does not, however, always lead to a trial and cases are often dropped at a later date.

Asked whether she intended to resign from the IMF, she responded: "No." But her fate now hangs on what the IMF board of directors will decide.

"I have instructed my lawyer to appeal this decision which I consider totally without merit," said Lagarde, who replaced Dominique Strauss-Kahn as IMF chief in 2011 after he became embroiled in a New York sex scandal involving a hotel maid.

(Yes, You! The headline on the Lagarde story in Spain's Huffington Post)

"I return back to Washington where I will indeed brief my board," she added.    

In an email to The Local  IMF Communications Director Gerry Rice wrote: "The Managing Director has already made a statement on this matter.

"She is now on her way back to Washington and will, of course, brief the board as soon as possible. Until then, we have no further comment."

French government spokesman Stephane Le Foll was similarly tight-lipped, saying Paris "had no comment to make on choices that are down to the IMF and no comment on judicial decisions".

The case relates to her handling of a 400-million-euro ($527-million) state payout to disgraced French tycoon Bernard Tapie in 2008, which investigating judges suspect may have been doled out in return for his support of ex-president Nicolas Sarkozy in the 2007 election.

The payout to Tapie was connected to a dispute between the businessman and partly state-owned bank Credit Lyonnais over his 1993 sale of sportswear group Adidas.

Tapie claimed Credit Lyonnais had defrauded him by intentionally undervaluing Adidas at the time of the sale and that the state, as the bank's principal shareholder, should compensate him.

Lagarde referred the dispute to a three-member arbitration panel that ruled in favour of Tapie and ordered the payout, which included 45 million euros in moral damages.

Arbitration panel a 'sham'? 

Investigating judges are seeking to determine whether the arbitration was a "sham" organised to reward Tapie for his support of Sarkozy.

The IMF chief has always denied having acted on the former president's orders. After a third grilling in March, she had said she "always acted in the interest of the country and in accordance with the law".

"After three years of procedure the only surviving allegation is that through inattention I may have failed to block the arbitration that put an end to the long standing Tapie litigation," Lagarde told AFP Wednesday.

She had until now avoided formal charges that could have forced her to quit as head of the IMF, and had instead been placed under a special witness status that forced her to come back for questioning when asked by the court.

Five people have also been charged in the case, including Stephane Richard, then Lagarde's chief of staff, now boss of telecoms giant Orange.

Questioning has in the past revolved around a signature stamp used in a letter dated from October 2007 that investigators think is crucial in determining who took the decision to resort to an arbitration panel.

Lagarde says she was unaware of the contents of the letter and has told judges it was stamped with her signature in her absence.

In France, those found guilty of "negligence" can be sanctioned by a year in prison and a €15,000 fine.

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ECONOMY

Make reforms while sun shines on world economy: Lagarde

International Monetary Fund chief Christine Lagarde has urged France and other countries to push through reforms "while the sun is shining" on the global economy.

Make reforms while sun shines on world economy: Lagarde
International Monetary Fund chief Christine Lagarde. Photo: AFP

In an interview with France's Le Journal du Dimanche published on Sunday Lagarde said the strength of the global economic recovery had taken the IMF by surprise.

“In 2017, for the first time in a long time, we revised our growth forecasts upwards whereas previously we used to lower them,” she said.

Global growth of 3.6 percent was both “stronger and more widely shared” in 2017, she said, noting that developed economies were now growing again under their own steam and no longer merely being pulled along by demand in emerging markets.

Lagarde said the favourable climate lent itself to implementing reforms.

“When the sun is shining you should take advantage to fix the roof,” she said, using one of her favourite maxims.

This year's global growth is on a par with the average of the two decades leading up to the global financial crisis of 2007-2008.

The IMF has forecast a further slight improvement in 2018, to 3.7 percent.

In Lagarde's native France, seen for years as one of Europe's weak links, the recovery kicked in in earnest this year.

From 1.1 percent in 2016, growth is expected to rise to 1.9 percent in 2017 — still short of the 2.4 percent forecast for the eurozone as a whole but better than the 1.6 percent initially forecast in the eurozone's second-largest economy.

Centrist President Emmanuel Macron aims to consolidate the momentum and bring down stubbornly high unemployment with an ambitious programme of labour, tax and welfare reforms.

Lagarde said the changes were key to boosting France's credibility at a time when Macron is pushing for reforms at the European level, including closer integration among eurozone members.

The managing director of the IMF was France's finance minister in 2008, when the euro looked to be in serious jeopardy.

Nearly 10 years later, the currency is out of the woods.

But, Lagarde warned, “the mission has not been accomplished — and maybe never will — because Europe is not united on moving towards greater integration while maintaining national sovereignty.”