European Union President Herman Van Rompuy urged a quick decision on a new IMF leader, saying Strauss-Kahn's arrest has hurt efforts to tackle Greece's financial crisis.

"We can't lose time," Van Rompuy told a conference yesterday in Brussels. "We are feeling a lack of leadership in solving the Greek crisis."

Europeans have picked IMF heads for 65 years under a deal that also gives the U.S. control over the top World Bank post. The No. 2 person at the IMF has traditionally been chosen by the U.S.

Lipsky, 64, the No. 2 official at the fund, will remain acting leader, the fund said in a statement May 18. Lipsky, a former chief economist at JPMorgan Chase & Co., is scheduled to retire in August. He called Lagarde "very, very talented" and a "capable leader."

Five-Year Tenure

Strauss-Kahn's five-year term had 17 months remaining. In past successions, managing directors were appointed to fresh five-year tenures.

Strauss-Kahn earned an annual salary of $441,980 after taxes as of July 2009, plus an expense allowance of $79,120, also tax-free. The allowance would enable him to maintain "a scale of living appropriate to your position as managing director," according to his contract. In addition, he could be reimbursed for "reasonable" entertainment expenses as well as first-class travel.

Under the IMF's rules, its executive board selects the managing director and any member can make a nomination. Prior to appointing Strauss-Kahn in 2007, the board said candidates must have a "distinguished record in economic policy-making at senior levels" and "demonstrated the managerial and diplomatic skills needed to lead a global institution."

The 2007 nomination period ran from early July to the end of August. The board then met with each candidate and sought to make its choice through consensus rather than majority vote. The appointment was made three months to the date after the resignation of Rodrigo de Rato.

'European Candidate'

Lagarde "is an internationally recognized personality and is highly regarded also in Germany," Germany's Westerwelle said in an interview during a trip to Switzerland yesterday. "We Europeans have an interest in maintaining the European influence at the IMF."

German Chancellor Angela Merkel told reporters that Europe's sovereign-debt crisis "speaks for a European candidate" to head the IMF and that a decision must be made swiftly. Her chief spokesman Steffen Seibert said he couldn't confirm a Handelsblatt report that the government is preparing to throw its support behind Lagarde.

Lagarde, 55, declined to comment on her potential candidacy when questioned by reporters in Paris yesterday. She said that the successor to Strauss-Kahn should come from Europe.

'Lightning-Quick Wit'