Angela Merkel and I.M.F. Chief Christine Lagarge Split Over Debt

BERLIN– With a deal on Greek debt finally done, Europe will shift its attention to two of its most powerful women, friends who have dueling views about what needs to be done to prevent future Greek-like meltdowns from spreading to other economies.

The International Monetary Fund’s managing director, Christine Lagarde, who is French, finds herself on a collision course with ChancellorAngela Merkel of Germany, posing a test for the unusually close relationship between the two leaders. They have opposing stances on how much money is need to protect vulnerable economies, and how it should be raised.

Ms. Lagarde says Europe needs at least $1 trillion in emergency funds and is pressing for a much more robust European contribution before the I.M.F. commits to raising more money from its members. She has worked hard to drag along Ms. Merkel, who is hamstrung by a domestic constituency sharply opposed to committing more money to rescue neighbors.

In spite of the sometimes tough negotiations, colleagues and confidants describe a warmth and chemistry between the two leaders that transcends policy differences. They are on a first-name basis. They frequently exchange text messages. Shortly after Christmas, Ms. Lagarde brought Ms. Merkel a trinket from Hermès and received a recording of the Berlin Philharmonic playing Beethoven from Ms. Merkel, a classical music lover.

“There are many circles and many forums where it’s only the two of us who are women,” Ms. Lagarde said in an interview. “So there’s a sense of recognition, complicity, solidarity.”

Yet for all that personal solidarity, the two leaders have come to represent competing philosophies for solving the debt crisis that has punished European economies and threatened the financial stability of the rest of the world.

Their opposing worldviews may well come from formative experiences. As a high school student, Ms. Merkel traveled from East Germany to Moscow to take part in a Russian language competition; Ms. Lagarde attended a prominent girl’s school in suburban Washington, complete with an internship on Capitol Hill.

Ms. Lagarde, nicknamed l’Américaine in her native France, has been vocal in support of pro-growth policies on the part of the richer European countries to help their more indebted neighbors. She has pressed Europe to make its firewalls — the pools of money available to keep borrowing rates at sustainable levels — so enormous that they scare off would-be speculators.

Since becoming the head of the I.M.F., and in stark contrast to her public statements in her prior job, as French finance minister, she has repeatedly castigated Europe for doing too little, too late, and lacking focus on spurring higher growth rates.

Ms. Merkel, who declined to be interviewed for this article, has argued that free-spending governments got many European countries into trouble in the first place, and that the path to stability runs through austerity. Large firewalls, in this view, only give countries like Greece a false sense of security and an excuse to ease up on the painful measures demanded of them. Ms. Merkel has demanded assurances that all European countries bring their finances under strict control before the governments of the European Unionagree to free up resources to help.

Their differences were brought into sharp relief in January when Ms. Lagarde gave a speech at the German Council on Foreign Relations in Berlin in which she demanded that Germany step up its efforts to save the world from “a 1930s moment.” Switching from her fluent English to halting, phonetic German, she concluded with a line by the German poet Goethe. “It is not enough to know, we must apply,” Ms. Lagarde told the audience. “It is not enough to will, we must do.”

The speech made headlines around the world, evidence of a backroom dispute breaking out into the open. Yet Ms. Lagarde had arrived in Berlin on the eve of her address with a copy of the speech, for Ms. Merkel to read, before Ms. Lagarde delivered it in front of the political and foreign-policy establishment. The two women debated the crisis in private over a dinner of veal tenderloin in the modern Chancellery’s eighth-floor dining room.

Ms. Lagarde also brought Ms. Merkel an orange-blossom-scented candle from the French perfumer Fragonard. The candle represented “hope,” Ms. Lagarde said. “Because we had tough discussions,” she said, there “was an element of symbolism about it.”

Ms. Lagarde, 56, and Ms. Merkel, 57, appear to be opposites, the glamorous, Chanel-clad French extrovert and the grounded German introvert, recently spotted doing her own grocery shopping in the same suit jacket she had worn to sign the new European fiscal pact in Brussels earlier that day.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: