Strauss-Kahn arrest adds to European uncertainty

AP News
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Posted: May 16, 2011 5:31 PM
Strauss-Kahn arrest adds to European uncertainty

The arrest of International Monetary Fund chief Dominique Strauss-Kahn adds more uncertainty to Europe's debt crisis by removing a widely respected expert from talks on how to save the 17-nation eurozone.

Strauss-Kahn, who was France's finance minister when the euro was created in 1999, is an authority on Europe's economic issues and comfortable with the region's complex web of power politics.

His leadership is broadly perceived to have been crucial to the currency union's struggle with the biggest crisis since its inception. His absence will increase worries about the IMF's longer-term capacity to help Europe.

"It's like losing an experienced ship's captain, while navigating particularly difficult, unchartered waters," said Jan Randolph, head of sovereign risk analyst at IHS Global Insight.

The prevailing view in the markets is that Strauss-Kahn's arrest isn't going to affect this week's meeting of European finance ministers. Eurozone countries signed off on Portugal's euro78 billion ($111 billion) bailout and discussed whether to give Greece more help beyond its current euro110 billion rescue.

Markets have kept their cool, with the euro actually trading higher at $1.4163 in late evening trading in London after a brief sell-off in early hours.

Strauss-Kahn had been widely expected to quit his post later this year in order to launch a bid for the French presidency in next year's election.

But analysts said his arrest in New York on charges he sexually assaulted a hotel maid will quicken changes to the fund's leadership and affect its position in international finance.

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Geir Moulson in Berlin contributed to this report.