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Page last updated at 08:12 GMT, Monday, 16 May 2011 09:12 UK

IMF 'in limbo' following Strauss-Kahn arrest

IMF chief Dominique Strauss-Kahn has consented to a medical examination over allegations of serious sexual assault.

Mr Strauss-Kahn, who was arrested on Saturday, denies attacking and attempting to rape a hotel maid.

But how will the arrest affect the future of the European financial bail-out, a strategy Strauss-Kahn has driven forward?

The arrest "is an extraordinary disruption" which "throws the IMF into limbo", the FT's Martin Wolf warned.

As one of the only policy makers who isn't German who the Germans take seriously, he said, the IMF head was vital in securing the "scale and generosity" of the Greek, Irish and Portuguese bail-outs.

But while economist Professor Ngaire Woods accepted that the arrest "injects a lot of uncertainty" into the world economy and "what the markets hate is uncertainty", she nevertheless thought the repercussions may be positive.

For a non-European perspective, having a European in charge of an institution whose largest borrower is Europe was like "having a fox in charge of a hen house", she said.

While it is "relatively unlikely" that a non-European would take over, whoever does step in "are going to find themselves held more tightly to account by other countries... that is not a bad thing."

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