Strauss-Kahn Rips Europe on Crisis Steps

EUROPE NEWS
DECEMBER 20, 2011

Strauss-Kahn Rips Europe on Crisis Steps

BOB DAVIS, WSJ

BEIJING—Former International Monetary Fund chief Dominique Strauss-Kahn, looking to re-establish his credentials as a global political presence after a sex scandal, sharply criticized Europe's handling of its debt crisis and predicted as many as seven years of subpar European growth unless the Continent's leaders changed policies.

Europe's political shortcomings are "bleeding away, day by day, the remaining confidence investors may have in politicians being able to solve the crisis," Mr. Strauss-Kahn said. A €640 billion rescue fund (about $833 billion) being assembled by the European Union and the IMF is "in limbo" because it requires political approvals that may take months to obtain, he added.

He chose a conference in Beijing organized by a Chinese Internet company, NetEase.com Inc., to make his remarks, the first since he resigned under pressure earlier this year. Neither Mr. Strauss-Kahn nor the conference organizers would say how much he was paid for the address.In his speech, He said Europe's leaders had focused too heavily on the Continent's debt problems and insufficiently on growth—though the IMF under his leadership had insisted that European nations cut social spending in exchange for IMF loans.

In May, Mr. Strauss-Kahn was charged with sexually assaulting a hotel maid in Manhattan and resigned his IMF post shortly afterward. The charges were dropped in August after the prosecutor said the maid had lied. Mr. Strauss-Kahn wouldn't comment on questions about the scandal, either in the conference or afterward in a small lunch, though the scandal was much on the minds of conference-goers.

At the lunch, one individual approached him with a book he said demonstrated that Mr. Strauss-Kahn had been set up in Manhattan.

"What does it say?" Mr. Strauss-Kahn asked.

"It was Sarkozy" who set him up, the man said, referring to French President Nicolas Sarkozy, a longtime rival of Mr. Strauss-Kahn.

The 62-year-old former IMF managing director continued smiling politely and said he couldn't discuss the matter, the same thing he said to a Wall Street Journal reporter who also asked about the events in a short interview.

Mr. Strauss-Kahn returned to France in early September, too late to participate in the primaries of his Socialist Party. Although he had harbored presidential ambitions before his arrest in New York, he said he wouldn't run for president in 2012. But he continued to deal with damaging allegations.

Shortly after his return, Mr. Strauss-Kahn was questioned by French police as part of a separate probe into sexual-assault accusations made by a French novelist against the politician. In October, French prosecutors dismissed the complaint filed by novelist Tristane Banon, saying the three-year statute of limitations on sexual assault had lapsed.

His name has also been cited in a judicial probe into alleged pimping conducted by prosecutors in Lille, Northern France. Mr. Strauss-Kahn's lawyers have repeatedly said their client wished to be heard by Lille prosecutors "as quickly as possible," saying they wanted to put an end to a "press lynching."

Such austerity was bound to make the Continent's economic problems worse, he said, because it would sap demand and make it harder to pay back debt. "It's a growth crisis," Mr. Strauss-Kahn said, "and behind the growth crisis is a leadership crisis."

He expressed deep skepticism of plans to sanction countries that miss fiscal targets.

"What will happen if a punished country refuses to pay," he asked. "The answer is probably nothing."

Mr. Strauss-Kahn didn't push a specific plan, other than weaving the countries of the EU into a tighter fiscal union. He also urged China and other developing nations "having resources to rescue the ones in trouble." He said that was in China's interest because it relies so heavily on trade with Europe.

He didn't specify how much money China should be prepared to lend either directly to European nations or through the IMF, but he did say that Beijing should get a larger vote in the IMF if it helps bail out Europe.

Even that, though, might be difficult to obtain because some European nations aren't willing to reduce their voting share to make room for China and others. European leaders are generally in "denial" about the extent of their problems, Mr. Strauss-Kahn said.