Europeans Race to Nominate Strauss-Kahn Successor

European leaders raced on Friday to nominate a successor for fallen IMF chief Dominique Strauss-Kahn before a G8 summit in France next week, with French Finance Minister Christine Lagarde in pole position.

Strauss-Kahn will leave jail on bail on Friday and be placed under round-the-clock house arrest after being indicted for the alleged attempted rape of a New York hotel maid last Saturday. He denies the charges and has vowed to prove his innocence.

German Chancellor Angela Merkel all but endorsed Lagarde on Friday, telling a Berlin news conference: "Among the names mentioned for the IMF succession is French Minister Christine Lagarde, whom I rate highly."

But diplomats said some European Union countries questioned whether the highly regarded corporate lawyer, who would be the first woman to head the International Monetary Fund, could be anointed before a special court for ministers decides next month if she should be investigated in a pending French legal case.

Since Strauss-Kahn resigned on Wednesday, EU governments have rushed to find a European replacement before emerging nations, which have long demanded a bigger say in running the Washington-based global lender, can mount a bid for the job.

Jean-Claude Juncker, who chairs euro zone finance ministers, and Italian Prime Minister Silvio Berlusconi endorsed Lagarde on Thursday.

Diplomats said European Council President Herman van Rompuy, who chairs summits of the 27-nation EU, and European Commission President Jose Manuel Barroso were trying to secure an agreement on her name after the three biggest European powers -- Germany, France and Britain -- threw their weight behind her.

"There have been preliminary contacts to check if Christine Lagarde has the support of other countries because she is considered the best candidate in Europe," one diplomat said.

"It has to be a quick decision. It would be best to have consensus before going to the G8," he said.

Leaders of the Group of Eight industrialized nations -- the United States, Russia, Japan, Canada, Germany, France, Britain and Italy, plus the European Union -- meet in the French seaside resort of Deauville on May 26-27.

STRAUSS-KAHN LEAVES VACUUM

Strauss-Kahn, a global high-flier seen as having a strong shot at the French presidency until his arrest, spent the last of four nights at New York's notorious Rikers Island jail on Thursday.

The package of conditions set by a judge on Thursday to let him leave jail -- $1 million cash bail, a $5 million insurance bond and house arrest at a New York apartment under armed guard and electronic monitoring -- was due to be signed on Friday.

Once out of the Rikers cell and in the apartment, he will have unlimited access to his lawyers to prepare his defense and will be joined by his wife and daughter.

The Europeans argue it is essential to keep global finance's top job while the IMF is so deeply engaged in helping euro zone states such as Greece, Ireland and Portugal deal with massive debt problems.

Some officials said the absence of Strauss-Kahn's persuasive leadership had contributed to disarray in Europe this week over whether Greece should restructure or "reprofile" its debt, with the European Central Bank and Juncker publicly at odds.

John Lipsky, the IMF's American No. 2 who is now the acting chief, said on Thursday members agreed "the process of selection of the managing director should be open, transparent and merit-based."

While U.S. Treasury Secretary Timothy Geithner called for an "open process that leads to a prompt succession," sources in Washington said the United States, the IMF's biggest financial contributor, would back a European.

Together, the United States and European nations hold more than half of IMF votes, giving them a big say over who leads it.

The IMF board was due to hold a regular meeting on Friday to approve its part of a 78 billion euro bailout for Portugal but it was unclear whether it would discuss the process for choosing a new managing director.

TESTING TRADITION

The case marks a spectacular fall for Strauss-Kahn, who was highly regarded for his part in tackling the global financial crisis of 2007-09 and the key role he was playing in efforts to manage Europe's debt crisis.

His lawyer Benjamin Brafman said at a hearing on Monday the evidence "will not be consistent with a forcible encounter."

But prosecutor John McConnell said the maid who accuses Strauss-Kahn of trying to rape her, a 32-year-old immigrant from Guinea, had told a "compelling and unwavering story."

An arraignment hearing is set for June 6, when Strauss-Kahn will formally answer the charges, but a trial may be six months or more away. If convicted, he could face 25 years in prison.

"I deny with the greatest possible firmness all of the allegations that have been made against me," Strauss-Kahn wrote in his resignation letter.

A Reuters poll of economists showed 32 of 56 thought Lagarde was most likely to succeed Strauss-Kahn.

Lagarde declined on Thursday to say if she was interested in the post but told reporters: "Any candidacy, whichever it is, must come from Europeans jointly, all together."

Chairman of the U.S. law firm Baker & McKenzie in Chicago before she joined the French government in 2005, she is a fluent English speaker and has experience balancing the demands of rich and developing countries.

But Lagarde is also under scrutiny.

A public prosecutor has recommended that she be investigated for allegedly abusing her authority to go around the justice system and push through a 285 million euro arbitration settlement with businessman and ex-minister Bernard Tapie, overruling finance ministry experts at key stages.

She denies wrongdoing and says she is victim of a smear campaign.

The Court of Justice of the Republic, a special jurisdiction created to try ministers for offences committed while in office, will rule in mid-June whether she should face a full inquiry.

Diplomats said Belgium, whose finance minister, Didier Reynders, may harbor his own IMF ambitions, was among smaller countries that had queried whether Lagarde could be nominated before the Tapie case is cleared up.

"We must be absolutely certain that the candidate is able to serve until the end of the mandate this time," one diplomat said.

China and Japan called for a transparent process to choose a successor on merit, but a European source said Beijing was privately supportive of Lagarde.

Russia and other ex-Soviet states backed the Kazakh central bank chief, Grigory Marchenko.

Another possible candidate could be former Turkish Economy Minister Kemal Dervis, an economist with IMF experience.

But emerging countries appeared unlikely to unite behind a rival candidate.