Bailout talks in crisis as IMF chief charged with sex attack

Dominique Strauss-Kahn, the head of the IMF, has agreed to undergo medical tests over allegations of sexually assaulting a hotel maid in New York, in a case which has thrown European debt crisis talks into disarray.

Strauss-Kahn was taken from the first class cabin of a Paris-bound Air France flight at JFK airport yesterday before police formally arrested him on charges of a criminal sexual act, attempted rape and unlawful imprisonment during his stay at a Manhattan hotel.

He had been due to appear in court on Sunday but the hearing has been postponed until Monday to allow the forensic tests to be carried out, the BBC reports.

The charges threaten to create a leadership vacuum at the IMF, and throw open next year's French presidential election, ending the hopes of the French Socialist who was favourite to beat Nicolas Sarkozy.

The allegation is a major embarrassment to the IMF, which has authorised billions of dollars of lending to troubled countries and played a major role in the eurozone debt crisis.

The arrest will cast a cloud over the IMF's role in addressing the European bailout packages and is likely to have a major impact on stock markets as traders react to yet more uncertainty in Europe, according to the Guardian.

Strauss-Kahn had been flying to Europe to discuss the worsening European debt crisis. He had been scheduled to meet the German chancellor, Angela Merkel, on Sunday and European financial ministers on Monday and Tuesday.

The IMF leader was to have discussed how best to tackle Greece's worsening debt crisis and finalise Portugal's €78bn bailout package. A senior Greek government official said the arrest would not change the IMF's policy in Greece but could cause delays in the short term.

The IMF-led bailout has become increasingly unpopular with other IMF members amid growing doubts about the Greek government's ability and resolve to meet the commitments of the international aid package.

The IMF said on Sunday it "remains fully functioning and operational" and had no comment to make on the case.

Strauss-Kahn does not have diplomatic immunity as head of the IMF. His lawyer said he would plead not guilty to the charges.