Lagarde should step aside

THE French justice system is more sclerotic and quixotic than our own, which is why it may have been unfair to have blocked the appointment of Christine Lagarde to a second five-year term as managing director of the International Monetary Fund in February 2015.

But it always looked as if the powerful finance ministers, who make the biggest strategic decisions at the Fund, were taking a risk. Allegations against Lagarde, dating back to a controversial decision she took as French finance minister in 2008, were still outstanding.

Former Chancellor George Osborne was the earliest to back her reappointment. He ignored potential legal obstacles, and given Lagarde’s subsequent strong interventions in the Brexit debate, when the IMF issued its dire warnings of the impact of Leave, he cannot have been disappointed with the Fund even if the voters took no notice.

The big question is whether Lagarde should remain in her post, as the guardian of the integrity of the global monetary and banking system, now that prosecution over her role in the Credit Lyonnais scandal looks inevitable.

It is possible, one supposes, that the special panel which adjudicates the behaviour of wrongdoing by French bigwigs may hold off from giving Lagarde her day in court while she still holds high office. After all, the French are always adept at manoeuvring their own into high office globally – something the UK has never been good at.

No sooner than her predecessor Dominique Strauss-Kahn had been turned from office for his priapic behaviour, Paris insisted that a French managing director had to be replaced by another, even though there was no precedent. Lagarde, a well-respected and articulate finance minister, was popped into the post.

There must, however, be serious questions as to whether someone facing high level charges of negligence involving a financial transaction, which led to riches beyond avarice for the French tycoon Bernard Tapie, should be allowed to carry on. The global economy faces enormous challenges ranging from geo-political uncertainties in the Middle East and Turkey, to Brexit and the fast changing governance of China. More seriously for Lagarde, however, is the crisis gripping the eurozone of which France is such an important part.

The IMF is caught in the middle of an unsettling dispute with Germany and Brussels over how best to handle Greece’s debt legacy. A similar battle is raging in Europe between European institutions and Italy over how to recapitalise and revitalise the country’s moribund banking system weighed down by an estimated £300bn of bad loans.

The IMF needs firm leadership and cannot afford to have the ethics of its managing director challenged. The executive board has expressed its confidence in Lagarde, but so do the directors of football clubs and public companies before they tip the manager or chief executive over the ramparts. Lagarde should place the honour of the institution before her own interests. There will be no shortage of replacement candidates – and they don’t have to be French – knocking on the door.

Poor service

HOWARD Archer of IHS Global Insight describes a flash forecast of the Markit purchasing managers indices (PMIs) as ‘a truly horrible survey’. Certainly sharp falls in the manufacturing and services sectors confirm the view of these pages that Brexit was always going to be disruptive. The big surprise so far is that so much of the official economic data, from the Bank of England’s most recent agents report (released this week) to the jobless data and retail sales, have been benign.

Yet we must take the PMIs seriously. The services component, because it represents some 70pc of the economy, is particularly disturbing. It dropped 4.9 points to 47.4, the largest month-to-month fall since the numbers were first recorded in 1995. Several leading economists are predicting negative growth in the third quarter, reinforcing the Bank of England’s pre-Brexit projection of a ‘technical recession’, two quarters of negative growth.

Nevertheless, PMIs must be treated with caution. The survey is preliminary and was taken in the immediate aftermath of the Leave vote when the future of the Government looked to be uncertain for months. So that known unknown has been bypassed. Moreover, Markit is a commercial organisation so there must be real questions as to reasons for issuing a flash forecast when it doesn’t normally do so. A service to clients perhaps? A useful tool for policymakers, perhaps? A good brand-building opportunity, certainly.

Deal breakers

I DON’T want to sound like a broken record but when it comes to takeovers the opera isn’t over until the fat lady sings. Sainsbury’s may have won the day with Home Retail Group but other deals are gasping for air.

Anheuser-Busch InBev is under pressure to come up with more dosh for Peroni brewer SAB Miller. Deutsche Boerse shareholders look increasingly unwilling to say yes to a London Stock Exchange deal with headquarters, share quote and some euro-clearing staying in the City. And ever louder voices, including those of employees, are being heard against the highly geared Softbank £24m swoop on UK chip design powerhouse ARM.

Announcing a company has agreed to being bought is easier than executing the deal.