The Manhattan arrest of IMF chief Dominique Strauss-Kahn on attempted rape charges comes at a critical time for the European economy. Key debt bailout negotiations were planned for this week just as Strauss-Kahn will be battling charges against him in New York, reports the Wall Street Journal. A meeting with German Chancellor Angela Merkel was canceled last night. Strauss-Kahn was also supposed to lead a further round of talks on debt restructuring for Greece. "This is going to make things more difficult in terms of Greece," said an IMF official. "It could delay action." The IMF has put up a quarter of Greece's $155 billion rescue package and a third of Portugal's $110 billion bailout.
The IMF's No. 2, John Lipsky, has been named acting managing director for the time being, but analysts say he lacks Strauss-Kahn's influence. As the IMF was already ramping up the process to find a successor to Strauss-Kahn, who was expected to resign his post to run for the French presidency, his arrest is not expected to increase politicking for the position. Experts say there are a large number of qualified candidates, but it will take some time to move them into place. (Read more IMF stories.)