NEW YORK/WASHINGTON (Reuters) - Dominique Strauss-Kahn was granted bail on Thursday but faced another night in a New York jail, hours after he quit as head of the IMF under the cloud of sex crime charges.
His resignation intensified a diplomatic race for global finance’s top job which has gone exclusively to Europe for the past 65 years but is now in the sights of fast-growing developing economies.
A judge granted Strauss-Kahn $1 million bail and ordered him to be detained in a New York apartment. He will be subject to electronic monitoring and under the watch of an armed guard, costing him $200,000 a month, a prosecutor said.
Prosecutors argued vehemently the French national should remain behind bars, calling him a flight risk.
“The investigation is in the early stages and the evidence against him is substantial and is continuing to grow every day,” said prosecutor John McConnell.
He said the hotel maid who accused Strauss-Kahn of trying to rape her on Saturday, a 32-year-old immigrant from Guinea, had told a “compelling and unwavering story.”
The case represents a spectacular fall from grace for a man who only a week ago was held in high esteem for his role in tackling the financial crisis of 2007-09 and was central to ongoing efforts to keep Europe’s debt crisis under control.
The charges that Strauss-Kahn tried to rape the maid and committed other sex offenses, plus the prospect of a lengthy legal process, have ruined his once strong-looking chances of winning France’s presidential election next year.
A lawyer for Strauss-Kahn denied he posed a flight risk.
“I have to say that the prospect of Mr. Strauss-Kahn teleporting himself to France and living there as an accused sex offender, fugitive, is ludicrous on its face,” lawyer William Taylor told the judge.
“He is an honorable man. He will appear in this court and anywhere else the court directs. He has only one interest at this time and that is to clear his name.”
In his resignation letter, composed at New York’s notorious Rikers Island jail and released by the International Monetary Fund overnight, Strauss-Kahn vowed to fight charges he tried to rape the woman and committed other sex offenses against her.
“I deny with the greatest possible firmness all of the allegations that have been made against me,” he wrote. “I want to devote all my strength, all my time, and all my energy to proving my innocence.”
He faced one more night behind bars before his bail package was due to be signed on Friday. An arraignment hearing, when he is due to formally answer the charges, was set for June 6.
Any trial could be six months or more away. If convicted, Strauss-Kahn could face 25 years in prison.
Dressed in a blue shirt and gray jacket, Strauss-Kahn looked tired and whispered occasionally to his lawyer during Thursday’s proceedings. He was flanked by seven guards.
French Finance Minister Christine Lagarde emerged as the favorite to be the next managing director of the IMF even as China and other leading economies stepped up their challenge to Europe’s grip on the top job.
U.S. Treasury Secretary Timothy Geithner called for an “open process that leads to a prompt succession,” although sources in Washington said the United States, the IMF’s biggest financial contributor, would back a European for the post.
The U.S. push to find a replacement quickly was also likely to favor a European replacement because it would be difficult for developing nations to unify around a rival candidate.
“The tradition can be changed but not now,” said Herman Van Rompuy who, as president of the European Council, represents the European Union’s member countries.
A Reuters poll of economists showed 32 of 56 think Lagarde is most likely to succeed Strauss-Kahn.
The prime ministers of Italy and Luxembourg publicly backed Lagarde on Thursday. Diplomats in Europe and Washington said she also had backing from France, Germany and Britain -- the three biggest European economies.
Lagarde is a fluent English speaker and has experience of balancing the demands of rich and developing countries because France is chair of the Group of 20 nations this year.
She was expected to get U.S. backing, not least because Washington wants to keep the number two IMF job and the leadership of the World Bank, the IMF’s sister organization that funds developing countries.
German Chancellor Angela Merkel tried to preempt the calls from emerging nations by saying the next managing director should be appointed quickly and should be a European.
In veiled warnings against another U.S.-European stitch-up, China and Japan both called for an open, transparent process to choose a successor on merit.
Canada also pushed for the job to go the best possible candidate, regardless of nationality, but conceded that a European was likely to get it, a government official said.
A senior source at the IMF said Strauss-Kahn had tendered his resignation of his own accord through lawyers before the Fund’s board could contact him to ask his intentions.
Strauss-Kahn’s attorney, Benjamin Brafman, told his arraignment hearing on Monday that the evidence “will not be consistent with a forcible encounter.”
A lawyer for the alleged victim, who has gone into hiding to avoid media attention, told Reuters she opposed bail.
“The idea that the man who did this to her is now on the street, so to speak, and able to do what he wants to do in the world is something which is frightening to her,” attorney Jeffrey Shapiro said.
The vacancy at the top of the IMF comes at a sensitive time given the Fund’s role in helping euro zone states such as Greece, Ireland and Portugal deal with massive debt problems. Europeans argue the crisis means it makes sense for them to retain the post for now.
Lagarde, 55, declined to say if she was interested but told reporters: “Any candidacy, whichever it is, must come from Europeans jointly, all together.”
Several European diplomats said she had been quietly canvassing support in the expectation that Strauss-Kahn would stand down within weeks to run for the French presidency.
A former head of the U.S. law firm Baker & McKenzie in Chicago before joining the French government in 2005, Lagarde is also under something of a legal cloud herself.
A French public prosecutor recommended this month she be investigated for her conduct in an arbitration case involving businessman and former politician Bernard Tapie. Judges at a special court for ministers are expected to decide in mid-June whether to order a full-scale inquiry.
One non-European candidate for the top job could be former Turkish Economy Minister Kemal Dervis, 62, an economist with IMF experience. He is from an emerging economy that is a candidate for EU membership.
In a poll released in France on Wednesday, 57 percent of respondents thought Strauss-Kahn, a Socialist politician, was definitely or probably the victim of a plot.
But French politics has moved on to the search for a replacement challenger to unpopular conservative President Nicolas Sarkozy next year. Former Socialist leader Francois Hollande is now the center-left front-runner but party leader Martine Aubry is under pressure to enter a Socialist primary.
(This story was corrected in paragraph five to change the last name of the prosecutor to McConnell)
Additional reporting by Emily Kaiser in Singapore, Tetsushi Kajimoto in Tokyo, Sam Cage and Andreas Rinke in Berlin, Elizabeth Pineau in Paris, David Milliken in London, David Morgan in Washington, Noeleen Walder, John O'Donnell in Brussels, Mark Hosenball in New York, Writing by William Schomberg, Matt Daily and Paul Taylor; Editing by John O'Callaghan