By Catherine Bremer
PARIS (Reuters) - Christine Lagarde has made her mark as International Monetary Fund chief by taking a firm yet pragmatic stance in the austerity-versus-growth debate raging as Europe struggles to pull itself out of a long crisis.
Lagarde, who was quizzed by a Paris magistrate on Thursday over a 2007 arbitration payment she made as French finance minister to settle a spat between the state and a businessman, was appointed IMF head in June 2011.
Appointed in part for negotiating skills that she showed brokering Europe's response to the 2008/09 global financial crisis, Lagarde has shown firmness at the IMF in insisting on the need for nations to stick to budgetary rigor where they can.
"We believe it is a question of pace," she told the Economic Club of New York last month.
"(Reforms) don't have to be brutal or abrupt or massively front-loaded. Those under financial pressure have to demonstrate the ability to do so but be mindful of the fabric of society."
She has offered no radical new ideas, but has given candid and practical guidance to sickly countries as the IMF has reassessed the best mix of austerity and growth policies, rather than preaching one-size-fits-all solutions from the pulpit.
In a speech in Berlin seven months into the job, she said cross-continent budget cuts would only add to recessionary pressures and countries should match their respective policies to the fiscal room for maneuver they had.
The onus was on Lagarde to turn the page for the IMF after her predecessor, Frenchman Dominique Strauss-Kahn, quit the post in disgrace when a New York hotel maid accused him of sexual assault. The charges were later dropped.
Now Lagarde risks being placed under formal investigation over her role in a 285 million euro ($366.98 million) payment made to businessman Bernard Tapie, a supporter of former conservative president Nicolas Sarkozy.
She is not accused of financially profiting from the payout and denies doing anything wrong by opting for a settlement that enriched Tapie. But a court specializing in cases involving ministers is targeting her for complicity in the misuse of funds because she overruled advisers in the case.
SHARP DRESSER, BLUNT SPEAKER
Lagarde, 57, is an anti-trust lawyer by training, not an economist, which worried some when she took over the IMF helm.
Yet she had a strong international profile thanks to several years in the United States with Baker & McKenzie, as the Chicago law firm's first female chairman.
Forbes magazine ranked her this month as the world's 7th most-influential woman.
IMF staff say they appreciate the way she listens attentively to in-house experts and uses honesty and bluntness in delivering the IMF's message to countries in difficulty.
Her straight-talking ruffled feathers in Greece last year when she said in a newspaper interview that she was concerned about "all these people in Greece" trying to avoid paying taxes.
She similarly irked many in France early in her tenure as finance minister by suggesting the French had become work-shy.
A former synchronized swimmer who shuns alcohol, Lagarde started her law career with Baker & McKenzie in Paris and rose quickly through the ranks to the top, helped by the fluent English she learned during a stint at a high school in Maryland.
She joined the government in 2005 as Minister for Foreign Trade and was then made Agriculture and Fisheries Minister.
Appointed finance minister by Sarkozy when he took power in 2007, she oversaw a softening of the 35-hour work week introduced by the Socialists, by removing taxes on overtime.
Standing out from the dark suits of international finance with her cropped silver hair, Chanel jackets and monogrammed Hermes bag, Lagarde soon won a reputation for brokering deals under pressure as Europe grappled with economic meltdown.
She played a key role in crafting Europe's response to the 2009 credit crisis and in putting together the 110-billion-euro Greek bailout.
As IMF head, she made an early call for banks to be recapitalized and said countries like Greece needed to show they were making fiscal efforts in order to win outside support.
In a public spat at a news conference late in 2012, Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, said a goal of cutting Greece's debt to 120 percent of output should be pushed back by two years to 2022, but Lagarde disagreed and insisted an initial 2020 target should remain.
More recently, Lagarde has urged central banks to keep easy monetary policies in place as growth remains tepid this year.
Raised in the northern port city of Le Havre, Lagarde is a proponent of women as top executives, once noting drily that if Lehman Brothers had been Lehman Sisters, it might have survived.
The mother of two adult sons, she spends her rare free time scuba-diving with her Corsican businessman beau Xavier Giocanti. ($1 = 0.7766 euros)
(Reporting By Catherine Bremer)