European powers began today to distance themselves from Dominique Strauss-Kahn as current French finance minister Christine Lagarde emerged as their favoured replacement to head the IMF.
With Strauss-Kahn, one of Lagarde's predecessors, languishing in New York's Rikers Island jail awaiting trial on charges of attempted rape, the European Union has unfinished business with the euro zone debt crisis and the virtual certainty that Greece will need further financial aid.
For that reason, European Commission chief Jose Manuel Barroso told Dutch media that 'if a succession is necessary, European Union states should present their candidate.'
But emerging powers believe it is time for Europe, the IMF's biggest capital contributor, and the US, its home, to reconsider arrangements dating back to World War II which share leadership at the IMF and World Bank between the two.
Stepping into the fray, Chinese foreign ministry spokeswoman Jiang Yu said today that nominations for the International Monetary Fund should be fair and transparent.
Booming China and many other major developing countries feel it is long overdue that they get the senior jobs at the IMF and World Bank so that their interests get a better hearing.
Strauss-Kahn, who before his arrest was front-runner for the French presidential polls in 2012, was seen as having brought special connections and understanding to the euro zone debt crisis.
Even before he appeared before a US judge yesterday, German Chancellor Angela Merkel and Belgian Finance Minister Didier Reynders fired the starting gun on the succession issue.
Lagarde is considered 'certainly a credible candidate,' a diplomat said, but EU partners are 'waiting to see if French President Nicolas Sarkozy will put her forward'.
Lagarde also has her own judicial woes in France, where a prosecutor has asked for an investigation into whether she exceeded her authority when ordering a special panel of judges to arbitrate in a banking scandal involving tycoon Bernard Tapie.
France has had four of the 11 IMF bosses since the institution was set up in 1946, which may prove Lagarde's biggest drawback, but it would appear she can also count on support from London, judging by an appearance alongside George Osborne last week.
When asked about who would replace Strauss-Kahn when he stepped down in 2012, Osborne said Lagarde would make a good future candidate.
As the convention is that only heads of state or government can nominate candidates, former British Labour prime minister Gordon Brown's long-cherished hopes of succeeding Strauss-Kahn may be dead and buried.
His successor David Cameron's government has already noted 'no groundswell of support' for the Scot.
Germany's mass-market daily Bild mentioned Josef Ackerman, chief executive of Germany's largest bank, Deutsche Bank, as well as Lagarde, while a compromise candidate who could find favour if emerging economies step up a campaign might be Turkey's Kemal Dervis, according to diplomats.
As Turkish finance minister, Dervis used an IMF bailout to set Ankara on its path to sharp growth and has also previously headed the UN Development Programme.
IMF deputy managing director John Lipsky is filling in for Strauss-Kahn for now but he had announced before the Frenchman's dramatic arrest on board an Air France plane that he would leave on August 31 - meaning the IMF faces a challenge replacing its top two officials in a very short period.
Meanwhile, Jean-Claude Juncker, the Luxembourg prime minister heading the euro zone, said he was 'sad and upset' by his friend Dominique Strauss-Kahn's court appearance - and angered by those already seeking a successor.
'He's a good friend of mine, I didn't like the pictures I saw on TV this morning,' Mr Juncker told a news conference in Brussels after talks between 27 European finance ministers hours after the IMF chief was denied bail by a US judge.
Mr Strauss-Kahn, 62, was transferred to Rikers Island after a New York judge earlier denied his request for bail. Wary of possible attacks on the globe-trotting IMF chief, officials have put him in the smallest of the 10 jails in the vast Rikers complex and separated him from the other inmates.
Mr Juncker, who worked with Mr Strauss-Kahn in flying to the rescue of debt-hit euro nations over the last year, also said it was 'indecent' that some European governments had already raised the question of who should take his place.
IMF approves nearly €1.6 billion more for Ireland
The IMF stuck to business yesterday despite the sexual assault arrest of managing director Dominique Strauss-Kahn, approving €1.58 billion in new assistance to debt-laden Ireland.
The International Monetary Fund said it had completed its latest review of the country's progress under the joint IMF/EU €85 billion bail-out package for the country, and was ready to release the newest tranche of its rescue loan.
'Ireland is making progress in overcoming the worst economic crisis in recent history,' the world financial body said in a statement.
The review had been delayed by a political upheaval sparked by the country's economic collapse, which led to a new government being elected in March.
IMF deputy managing director Naoyuki Shinohara said the country's reform programme was 'off to a strong start.'
'Resolute policy implementation by the authorities has kept the programme on track during a period of political change and an unsettled external environment,' he said in a statement.
'Building upon the credibility of the well received capital needs assessment at the end of March, the government plans to implement bank recapitalisation in a timely manner while containing fiscal costs,' he added.
Mr Shinohara said the current economic climate continues to challenge the country's reforms. 'Supporting these efforts with a more comprehensive European plan would help overcome market doubts, regain market access, reduce the threat of spillovers and bring about a recovery of the Irish economy,' he said.
