Arrest of IMF Head Throws Institution's Leadership Into Disarray

April 22, 2010: IMF Managing Director Dominique Strauss-Kahn, speaks during a news briefing at the 2010 WB/IMF Spring Meetings in Washington.

April 22, 2010: IMF Managing Director Dominique Strauss-Kahn, speaks during a news briefing at the 2010 WB/IMF Spring Meetings in Washington.  (AP2010)

NEW YORK -- The arrest of International Monetary Fund (IMF) chief Dominique Strauss-Kahn on sexual assault accusations in New York throws into disarray not only the IMF's leadership but also its central role in the financial rescue of several struggling European nations, The Wall Street Journal reported Sunday.

Strauss-Kahn was arrested Saturday over an alleged sexual assault of a maid in a Manhattan hotel, authorities said. According to a law enforcement official, Strauss-Kahn allegedly forced a cleaning woman onto his bed and sexually assaulted her at around 1:00pm local time Saturday inside his room at the Sofitel Hotel near Times Square.

Strauss-Kahn, 62, was headed to Europe to discuss the worsening European debt crisis with top leaders there. He was scheduled to meet with German chancellor Angela Merkel on Sunday and eurozone finance ministers Monday and Tuesday. Beside putting the finishing touches on the €78 billion ($110 billion) bailout package for Portugal, the main focus of the meetings was set to be how to resolve Greece's deteriorating sovereign debt crisis.

The arrest of the head of one of the world's most important financial institutions came at a time when the global economy was still recovering from the 2008 financial crisis -- and while Europe was reeling from a still-unfolding series of government debt crises.

The charges, if true, would strike a blow to France's current politics. Strauss-Kahn, a former French finance minister who ran unsuccessfully for the Socialist Party nomination for French president in 2006, was widely expected to resign from the IMF in the coming months to run for the French presidency as a Socialist candidate.

The incident Saturday will undoubtedly cast a cloud over the IMF's role in addressing the rescues, as Strauss-Kahn was seen as a forceful leader in responding to the European debt crisis.

He strongly supported the Greek rescue, even in the face of growing doubts about the Greek government's ability and resolve to meet the commitments of the international aid package. His latest trip was likely to focus on whether to adjust the terms of Greece's loans in order to keep the country -- and the rest of the eurozone -- from falling into a deeper crisis.

Germany's finance ministry said its government would wait to finalize its conclusions on Greece until the troika of the IMF, European Central Bank and European Commission published the findings of their current review of the Greek rescue program.

Merkel wanted Strauss-Kahn's opinion on Greece, Portugal and Ireland before finalizing her own view.

The arrest also throws into question whether Strauss-Kahn would be forced to resign his slot. In 2008, early in his IMF term, he was investigated by the IMF over whether he abused his power by having an affair with a female staffer. Although he was cleared of abuse of power charges, several directors said they warned Strauss-Kahn that such conduct would not be allowed in the future and that he brought the IMF into disrepute.

At the time, the IMF chief acknowledged the lapse in judgment and apologized to the board and staff. "I am committed, going forward, to uphold the high standards" expected of an IMF managing director, Strauss-Kahn said then.

An IMF executive board member said that board members were shocked to hear the news from the media but so far saw nothing official from the IMF about the incident. IMF spokesman Bill Murray declined to comment when reached Saturday evening.