IMF's Strauss-Kahn resigns amid sex charges

Dominique Strauss-Kahn, the embattled managing director of International Monetary Fund, has resigned, saying he wanted to devote "all his energy" to battle the sexual assault charges he faces in New York.

The IMF's executive board released a letter from the French executive Wednesday in which he denied the allegations lodged against him but said that with "sadness" he felt he must resign. He said he was thinking of his family and he wanted to protect the IMF.

"It is with infinite sadness that I feel compelled today to present to the executive board my resignation from my post of managing director of the IMF," the five-paragraph letter said. "I think at this time first of my wife - whom I love more than anything - of my children, of my family, of my friends. I think also of my colleagues at the Fund. Together we have accomplished such great things over the last three years and more.

"To all, I want to say that I deny with the greatest possible firmness all of the allegations that have been made against me. I want to protect this institution which I have served with honor and devotion, and especially - especially - I want to devote all my strength, all my time and all my energy to proving my innocence."

Strauss-Kahn, who faced increasing international pressure to quit, announced his decision on the eve of a bail hearing Thursday that could have spelled the end of his leadership of the IMF anyway. He faces charges of assaulting a maid in a New York hotel room.

The maid, a 32-year-old immigrant from the West African nation of Guinea, told police that the 62-year-old Strauss-Kahn came out of the bathroom naked, chased her down, forced her to perform oral sex on him and tried to remove her underwear before she broke free and fled the room.

Strauss-Kahn is jailed in New York City.

The IMF's statement late Wednesday said the process of choosing a new leader would begin, but in the meantime John Lipsky would remain acting managing director.

The dividing lines are sharpening in a dispute over whether someone from a rich or an emerging economy should lead the IMF.

Europe is aggressively staking its traditional claim to the top position. But fast-growing nations such as China, Brazil and South Africa are trying to break Europe's grip on an organization empowered to direct billions of dollars to stabilize the global economy.

Europeans have led the IMF since its inception after World War II. Americans have occupied both the No. 2 position at the IMF and the top post at its sister institution, the World Bank. The World Bank funds projects in developing countries.

Europe has "an abundance of highly qualified candidates" to lead the IMF, German government spokesman Christoph Steegmans declared Wednesday. He also noted the relevance of having a European at the helm, to deal with the debt problems that have racked the eurozone.

France's European affairs minister signaled backing for Steegmans' position on Wednesday.

"The big question now is: what role for Europe at the IMF, and the (German) chancellor has expressed that very clearly," Laurent Wauquiez told Germany's ZDF television. "Who is the biggest contributor? Europe. So we should still play an important role."

Steegmans didn't name any potential candidates or say whether Germany might propose one. But German Chancellor Angela Merkel, along with the finance ministers of Sweden and the Netherlands, have pressed Europe's case for the IMF leadership.

Still, developing nations see Europe's stranglehold on the position as increasingly out of touch with the world economy. China's is now the world's second largest economy. India's and Brazil's have cracked the top 10. Many emerging economies are sitting on stockpiles of cash and have become forces of financial stability, while rich countries have become weighed down by debt.

"We must establish meritocracy, so that the person leading the IMF is selected for their merits and not for being European," Brazilian Finance Minister Guido Mantega said, calling for a "new criteria" for leadership. "You can have a competent European ... but you can have a representative from an emerging nation who is competent as well."

China suggested it was time to shake things up at the IMF, with Foreign Ministry spokeswoman Jiang Yu saying the leadership "should be based on fairness, transparency and merit."

It remains unclear which way the United States is leaning. Treasury Secretary Timothy Geithner had said Tuesday that Strauss-Kahn is "obviously not in a position" to run the IMF, escalating pressure on the 62-year-old economist.

The United States has a major say in determining who will head the fund, in part because it holds the largest number of votes. The prevailing view among analysts and former Treasury officials appears to be that Washington would back a strong European candidate who could be approved in a smooth process.

"It's kind of not our fight," said Phillip Swagel, a Treasury official in the George W. Bush administration. "There are very good reasons to have a forceful, prominent European head of IMF."

Potential European candidates include French Finance Minister Christine Lagarde; Germany's former central bank chief, Axel Weber; the head of Europe's bailout fund, Klaus Regling; and Peer Steinbrueck, a former German finance minister.

Candidates from elsewhere include Turkey's former finance minister, Kemal Dervis; Singapore's finance chief, Tharman Shanmugaratnam; and Indian economist Montek Singh Ahluwalia.

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McHugh reported from Frankfurt. Associated Press writers Christopher S. Rugaber in Washington, Geir Moulson in Berlin, Charles Hutzler in Beijing, Bradley Brooks in Sao Paulo and Anita Powell in Johannesburg contributed to this report.