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Euro crisis awaits Lagarde, the new head of IMF

FRENCH Finance Minister Christine Lagarde was named the new head of the IMF, the organisation said in a statement in Washington yesterday.

She will replace Dominique Strauss-Kahn, who resigned last month after his arrest in New York on charges that included attempted rape.

Lagarde said she was "deeply honoured" to have been picked as the new IMF chief, and President Nicolas Sarkozy called the news "a victory for France".

Lagarde said in a statement she would make it her goal that the international lender continue in the same focus and spirit as in the past, looking to achieve "stronger and sustainable growth" and "macroeconomic stability".

"The French presidency rejoices that a woman is taking on this important international role," Sarkozy's office said in a separate statement.

The confirmation of her appointment seemed assured after the US and leading emerging markets endorsed her, thereby maintaining Europe's grasp on the top job.

The IMF's 24-strong board met to go through the formalities of picking a successor to Mr Strauss-Kahn.

Ms Lagarde (55) got the majority of support from IMF-member countries, guaranteeing her win over Mexico's Central Bank governor Agustin Carstens and making her the first woman to lead the global institution.

Ms Lagarde will have to immediately deal with an IMF-EU effort to keep debt-stricken Greece afloat and focus on potentially thorny IMF "spillover reports" that analyse the economic and policy actions of the world's major economies.

Brazil said yesterday it would back Ms Lagarde, a decision that surprised given most countries in Latin America supported Mr Carstens.

With support from major emerging powers Brazil, China and Russia already clear, the US moved to cement Ms Lagarde's victory with an early morning statement.

"Minister Lagarde's exceptional talent and broad experience will provide invaluable leadership for this indispensable institution at a critical time for the global economy," US Treasury Secretary Timothy Geithner said.

The race has been one of the most hotly contested succession battles in IMF history as emerging market nations expressed displeasure with the 64-year-old tradition of having a European head the IMF and an American lead its sister institution, the World Bank.

But in the end, the lack of backing from major emerging nations sunk Mr Carstens despite his support from Latin America, Canada and Australia.

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Mr Geithner acknowledged the unhappiness among developing countries at European-US dominance of the two pre-eminent international financial institutions, but noted Ms Lagarde had won broad support. The US, which holds the most voting power at the IMF, had refused until the final stage of the process to say who it was supporting.

"The only reason the outcome didn't match what (developing nations) wanted was because emerging market countries did not grab the opportunity," said Arvind Subramanian, a senior fellow at the Peterson Institute and the Centre for Global Development think tanks in Washington. (Bloomberg)

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