IMF's Strauss-Kahn no stranger to controversy

WASHINGTON (Reuters) - International Monetary Fund chief Dominique Strauss-Kahn is no stranger to controversy about his private and public life.

The latest turn in a turbulent career is a formal investigation appointed by the IMF over a possible abuse of power involving an affair with a senior IMF economist who has since left the fund.

A former French Socialist finance minister, Strauss-Kahn was written off by critics in 2006 after he failed to win his party's nomination for the French presidential election and looked set to finish his career as an economics professor in Paris.

But in an unlikely resurrection he was nominated as Managing Director of the Washington-based global financial institution by his erstwhile enemy, center-right President Nicolas Sarkozy, and grabbed the chance with both hands.

He defied critics of Europe's historical claim to the top IMF position and those who questioned his ability to do the job at one of the globe's premier financial institutions.

He returns frequently to France and is seen as someone who could take over as the next head of the Socialist party. An Opinionway poll released on Thursday said 60 percent of French people thought French President Nicolas Sarkozy was managing the financial crisis well, but a quarter of those surveyed thought Strauss-Kahn would do a better job.

In May, French newspapers reported that he held a lunch with allies from the Socialist Party to emphasize he still had the 2012 election in mind.

In his first year at the Washington-based IMF, Strauss-Kahn has dived head-first into some tough questions over the fund's relevance and its failure to keep up with the fast-changing world economy that has come about with the rise of emerging economic powers like China and India.

Through political maneuvering he won support among the IMF's 185 member countries for a plan to increase the voting shares of emerging and some developing economies, giving them a bigger stake in the institution. The April deal was slammed for not going far enough to rebalance the voting power within the fund after decades of U.S. and European dominance.

He also pushed through cost cutting measures to put the IMF on sounder financial footing by offering buyout packages to staff and agreed to invest profits from a limited sale of IMF gold stocks. The response to the buyout was so overwhelming that the fund was forced to ask some employees to stay on, however all department heads at the fund have been replaced.

LIMITING THE DAMAGE

During a meeting last weekend of finance chiefs in Washington, Strauss-Kahn tried to position the fund more at the center of the worst financial crisis since the 1930s, by issuing strong warnings that countries should act quickly and coordinate their policies to limit the damage.

He assured the membership the IMF was ready to assist countries in trouble with a war chest of some $200 billion. In recent days emerging economies, many of which left its fold long ago, have returned to it for finance, including Hungary, Ukraine and Serbia.

The suave architect of France's economic recovery in the late 1990s, Strauss-Kahn, known as "DSK", served in a Socialist government as finance minister between 1997 and 1999. He cut the public deficit to qualify France for the euro and took steps that paved the way for the privatization of some state-owned firms.

That won him fans in financial markets, if not always within his party. He also helped implement the controversial 35-hour work week in France -- a reform that Sarkozy says has hamstrung the economy, cut productivity and hit wages.

A formidable debater, Strauss-Kahn is equally comfortable talking the language of politics or economics -- in English, French or German -- skills that proved useful for his new international role.

He has also shown political resilience, having rebuilt a career that appeared doomed in 1999 when he was forced to resign from Socialist Prime Minister Lionel Jospin's government after he was caught up in a corruption scandal.

A court later cleared Strauss-Kahn, paving the way for a return to the political limelight which saw him run against Segolene Royal in his opposition Socialist party's primaries for France's 2007 presidential elections.

Strauss-Kahn lost out to Royal but dutifully supported her campaign against Sarkozy, branding the diminutive, center-right leader a "mini-candidate" and a danger to democracy.

Looking to prove his opponents wrong, Sarkozy reached out to Socialist rivals after his election triumph against the hapless Royal, placing leftists in his cabinet and then pushing Strauss-Kahn for the prestigious IMF job.

Socialists muttered that Sarkozy was simply trying to lure away their star performers and demoralize the leftist camp.

A fan of classical music and art, as well as a keen skier, Strauss-Kahn has also gained a reputation as a ladies' man. His marriage to high-profile TV interviewer Anne Sinclair has guaranteed him even more tabloid coverage.

(Reporting by Lesley Wroughton, Editing by Sandra Maler)