BRUSSELS/WASHINGTON (Reuters) - European leaders raced on Friday to nominate a successor for fallen IMF chief Dominique Strauss-Kahn before a G8 summit next week, with French Economy Minister Christine Lagarde in pole position.
As Europe rallied around Lagarde as their most likely choice for the International Monetary Fund’s top job, which has always gone to a European, the most widely tipped potential candidate from among emerging economies ruled himself out.
Strauss-Kahn was due to leave jail on bail on Friday and be placed under house arrest and round-the-clock monitoring after he was indicted for the alleged attempted rape of a New York hotel maid last Saturday.
The man once seen as a possible next president of France denies the charges and has vowed to prove his innocence.
Lawyers representing Strauss-Kahn posted $1 million in bail and a $5 million insurance bond, but said other release conditions set out by a judge -- which included being placed under 24-hour home detention with electronic monitoring -- needed to be resolved before he could be released.
German Chancellor Angela Merkel all but endorsed Lagarde, telling a Berlin news conference: ”Among the names mentioned for the IMF succession is French Minister Christine Lagarde, whom I rate highly.
But diplomats said some European Union countries questioned whether the well-regarded corporate lawyer, who would be the first woman to head the IMF, could be anointed before a special court decides next month if she should be investigated in a French legal case.
Since Strauss-Kahn resigned on Wednesday, EU governments have rushed to find a European replacement before emerging nations, which have long demanded a bigger say in running the Washington-based global lender, can mount a bid for the job.
Asian, Middle Eastern and African diplomats at the IMF headquarters in Washington said emerging nations were seeking a consensus candidate.
That task was made harder when former Turkish economy minister Kemal Dervis, seen as the front-runner among potential non-European contenders, ruled himself out.
“Speculation about succession at the IMF has included me in the group of persons with relevant experience. But I have not been, and will not be, a candidate,” he said in a statement.
The New York Times reported that Dervis had an affair with a subordinate when he was a senior World Bank executive. Asked to comment, his office at the Brookings Institution in Washington said he would have no further statement.
European and U.S. officials want to move quickly to replace Strauss-Kahn but they also risk angering developing economies if they are seen to do a backroom deal for Europe again.
“We are consulting broadly with the fund’s shareholders from emerging markets, as well as advanced economies,” said U.S. Treasury Secretary Timothy Geithner, stressing that the process should be open and move quickly.
“We are prepared to support a candidate with the requisite, deep experience and leadership qualities, and who can command broad support among the fund’s membership.”
The United States and European nations jointly hold more than half of the IMF’s votes, giving them enough power to decide who leads it.
Diplomats said European Council President Herman van Rompuy, who chairs summits of the 27-nation EU, and European Commission President Jose Manuel Barroso were trying to secure a deal on Lagarde after the three biggest European powers -- Germany, France and Britain -- threw their weight behind her.
Jean-Claude Juncker, who chairs euro zone finance ministers, and Italian Prime Minister Silvio Berlusconi endorsed her on Thursday.
“It has to be a quick decision. It would be best to have consensus before going to the G8,” one diplomat said.
Leaders of the Group of Eight industrialized nations -- the United States, Russia, Japan, Canada, Germany, France, Britain and Italy, plus the European Union -- meet in the French seaside resort of Deauville on May 26-27.
Strauss-Kahn, a global high-flier, spent the last of four nights at New York’s notorious Rikers Island jail on Thursday.
Once released, he would be taken to an undisclosed location where he would be safely and discreetly handed over to lawyers and, possibly, members of his family to avoid the media, said a spokeswoman for the New York City Department of Correction.
He would also have unlimited access to his lawyers to prepare his defense.
Under his IMF contract, Strauss-Kahn is entitled to a one-off payment of $250,000 with annual pension payments “far, far less than that amount,” the IMF said, dismissing media reports of a bigger package as “grossly over-estimated.”
Europeans argue it is essential to keep global finance’s top job with the IMF so immersed in helping euro zone states such as Greece, Ireland and Portugal with massive debts.
Some officials said the absence of Strauss-Kahn’s powers of persuasion contributed to disarray in Europe this week over whether Greece should restructure or “reprofile” its debt.
IMF official Ajai Chopra, following Strauss-Kahn’s line, said a more comprehensive approach to the euro zone debt crisis was urgently needed and the EU should do more to help Ireland regain access to debt markets.
The IMF board was due to hold a regular meeting on Friday to approve its part of a 78 billion-euro bailout for Portugal. It was unclear whether it would discuss the process for choosing a new managing director.
The case marks a spectacular fall for Strauss-Kahn, who was highly regarded for his part in tackling the global financial crisis of 2007-09 and Europe’s debt crisis.
His lawyer, Benjamin Brafman, has said the evidence “will not be consistent with a forcible encounter.” Prosecutor John McConnell said on Thursday the maid, a 32-year-old from Guinea, told a “compelling and unwavering story.”
An arraignment hearing is set for June 6, when Strauss-Kahn will formally answer the charges, but a trial may be six months or more away. If convicted, he could face 25 years in prison.
A Frenchwoman considering filing a complaint against Strauss-Kahn over an alleged 2002 sexual assault in France does not want to testify to U.S. investigators looking into the New York case, her lawyer said.
Lagarde is also under some scrutiny.
Chairman of the U.S. law firm Baker & McKenzie in Chicago before she joined the French government in 2005, she is a fluent English speaker and has experience balancing the demands of rich and developing countries.
A public prosecutor has recommended that she be investigated for allegedly abusing her authority to sidestep the justice system and push through a 285 million-euro arbitration settlement with businessman and ex-minister Bernard Tapie, overruling Finance Ministry experts at key stages. She denies wrongdoing and says she is victim of a smear campaign.
A special jurisdiction created to try ministers for offenses committed while in office will rule in mid-June whether she should face a full inquiry.
Diplomats said Belgium, whose finance minister may harbor
IMF ambitions, was among smaller countries that queried whether Lagarde could be nominated before the case is cleared up.
“We must be absolutely certain that the candidate is able to serve until the end of the mandate this time,” one said.
China and Japan called for a transparent, merit-based process. A European source said Beijing was privately supportive of Lagarde who now needed Latin American backing.
Russia and other ex-Soviet states backed the Kazakh central bank chief, Grigory Marchenko.
Additional reporting by Julien Toyer in Brussels, Daniel Flynn in Paris, Thorsten Severin in Berlin; Writing by William Schomberg and Paul Taylor; Editing by Janet McBride and Christopher Wilson