Christine Lagarde has survived as managing director of the International Monetary Fund, which is clearly what the court in Paris wanted. The intention was to wound rather than to kill, to embarrass the former French finance minister but leave her in place.

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The court has got its way but at some cost, because it would be naive to imagine that Lagarde has not suffered damage as a result of the trial. It will make her job tougher because she will find it more difficult to command respect when the IMF is taking decisions. It will lay her open to the charge that she is a member of the global elite, living by different rules to everybody else.

As one IMF observer put it: “Her support on the board will be narrower and more contingent. It will be harder for her to stand up to the Europeans over debt relief to Greece because the Europeans are going to be the ones keeping her in her job.”

In different circumstances, the IMF’s board might have given Lagarde the push even though the French court decided not to impose any punishment after finding her guilty of showing negligence over a payout to the businessman Barnard Tapie.

But the 24-strong board of the Washington-based organisation had little appetite for what would be a fraught selection process. The global economy has never really recovered from the deep financial crisis of 2008-09. There are fears about Brexit, Italian banks, Greece and a possible trade war between China and the United States after Donald Trump takes over at the White House next month.

If she had been pushed out, Lagarde would have been the second successive leader of the organisation to exit under a cloud. Dominique Strauss-Kahn resigned in 2011 after being put on trail in New York City for attacking a maid in his hotel room. To misquote Oscar Wilde, to lose one managing director may be regarded as a misfortune, to have lost two would have looked like carelessness. The IMF board did not want to give the impression that it had chosen the wrong person a second time.

Lagarde had three things going for her. She is well liked in Washington and the IMF’s staff is loyal to her. Second, there has been something of a show trial about the legal proceedings in Paris. Even the prosecution admitted that the evidence against the former French finance minister was flimsy. It would have been a different matter had the court imposed a prison sentence, but there was never the remotest prospect of that. Significantly, the French government said at the trial’s conclusion that it retained confidence in her.



Finally, a decision to oust Lagarde would have resulted in considerable pressure on the IMF’s European shareholders to support a replacement nominated by a developing country. There would be two obvious non-European candidates: Agustin Carstens of Mexico, the newly appointed managing director of the Bank for International Settlements, and Raghuram Rajan, who recently stepped down as the central bank governor of India. The IMF’s leading European shareholders are keen to avoid that battle for as long as possible.

So Lagarde survives, still maintaining that she did nothing wrong, pledging to get back to work, but a little diminished nonetheless.