Judges begin probe into IMF chief Lagarde

French magistrates on Tuesday formally began an embezzlement investigation into new International Monetary Fund chief Christine Lagarde, opening the way for possible criminal charges.

The Court of Justice of the Republic asked three appeal court magistrates to investigate whether the former French finance minister is guilty of “complicity in forgery” and or “complicity in misuse of public funds”.  

If she is brought to trial and found guilty she could face 10 years in prison and a fine of €150,000 ($212,000).  

Lagarde, who took up her new post last month, has denied any wrongdoing or illegality in a case stemming from a massive payment to a controversial tycoon out of public funds in 2008 when she was still a minister.  

The IMF’s executive board has expressed confidence in the 55-year-old, whose immediate predecessor, French politician Dominique Strauss-Kahn, resigned after he was accused of sexually assaulting a New York hotel maid.  

Lagarde has been accused of exceeding her authority by cutting short a legal battle between flamboyant businessman Bernard Tapie and a formerly state-owned bank by sending the case to private arbitration.  

The panel awarded compensation to Tapie, an acquaintance of Lagarde’s then boss, President Nicolas Sarkozy, supporting his claim he had lost out in the bank’s alleged mishandling of the sale of his sportswear brand Adidas.  

The total payment from taxpayers was around €400 million ($560 million) — although Tapie is thought to have so far pocketed less than that — and the result outraged French opposition politicians.

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Italy’s economic policies will hit the poor hardest: IMF

Economic policies implemented by the populist government in Rome leave Italy's economy vulnerable to recession, with the poorest likely to suffer the most, the IMF warned.

Italy's economic policies will hit the poor hardest: IMF
Italy's economic policies could lead to recession, the IMF said. Photo: Andreas Solaro/AFP

“The authorities' policies could leave Italy vulnerable to a renewed loss of market confidence,” an International Monetary Fund annual report on the country said yesterday.

“Italy could then be forced into a notable fiscal contraction, pushing a weakening economy into a recession. The burden would fall disproportionately on the vulnerable,” the IMF added.

The Italian economy, the eurozone's third largest, fell into a technical recession at the end of 2018.

The fund expects the Italian economy to grow by no more than 0.6 percent this year, well below the government's own estimate of 1.0 percent.

The European Commission is tipped to lower its Italian growth forecast on Thursday, and slower growth could spell trouble for Italy, where around 20 percent of national output is swallowed up each year by payments on the public debt, the second biggest in the eurozone.

Photo: Depositphotos

The IMF report praised the coalition government's “objective to improve economic and social outcomes (as) welcome.”

But it added that the only sustainable way of achieving such goals was through “faster potential growth” that would require structural reforms, “a credible fiscal consolidation” and stronger bank balance sheets.

The coalition government of the anti-establishment Five Star Movement (M5S) and the far-right League party was forced to water down its ambitious and costly budget in December to avoid being punished by the EU Commission and financial markets.

The IMF report emphasised Wednesday that Italy “needs to tackle long-standing structural impediments to productivity growth. 

“This includes decentralising the wage bargaining regime, liberalising service markets, and improving the business climate.”

Deputy Prime Minister and M5S leader Luigi Di Maio quickly rejected the IMF report, charging that the Fund “has starved people for decades.”

The IMF, Di Maio claimed, “has no credibility to criticise a measure like the citizenship income programme,” the party's plan to introduce a welfare payment of 780 euros a month for Itay's least well-off.