After initial excitement that the resignation of Dominique Strauss-Kahn might lead to an emerging market candidate to follow him as head of the IMF, Europe has placed its seal firmly upon a successor – Strauss-Kahn’s own distant replacement as French Minister of Finance, Christine Lagarde.

At first glance, the insistence on a European candidate may seem odd. After all, even if the shareholders of a major company, such as Louis Vuitton, all come from a particular area – say, the western suburbs of Paris – they would be crazy to insist on having a CEO from the same neighbourhood. Their interest lies in finding the most competent person for the job. They are likely to search far and wide to find that person.

A similar logic may apply to the IMF, where European countries already have the lion’s share of the votes. Whoever becomes managing director will be responsible to Europe’s directors on the Board, so why insist on having a European to serve them?

The real reason, of course, is political. Europe needs a European to run the IMF, because in the absence of easy credit from the International Monetary Fund, the euro area is politically incapable of arranging and taking responsibility for its own eurozone rescue package. Moreover, even if it were thus capable, many believe that it is not in the best interests of the eurozone to do so.

Let us unpack this a little further. The need for a European to shepherd through easy credit is simple enough: most of the IMF’s lending is now in the European neighbourhood, including also non-eurozone countries such as Hungary, Ukraine or Iceland. The IMF package for Greece, at €30bn, was already the largest in its history, and the package for Portugal, approved last week, added another €26bn. A similar package for Spain could add over €100bn. Italy could be twice as large still. These are vast amounts, and will be hugely controversial if and when they arise. A non-EU director might not be inclined to jeopardise such sums.

Yet why cannot the eurozone arrange its own bailout mechanism? After all, rather than rely on the IMF for financing, Europe could very well establish its own “European” monetary fund, funded by Germany, France, and the Netherlands. Indeed, this is in part what the EFSF and the future ESM are intended to accomplish. However, as I have discussed long ago, the reality of a “European” Monetary Fund would spell death for the project of European integration. It would mean core European nations taking direct responsibility for implementing austerity policies in the eurozone periphery, and taking the resultant political flak. EU nations simply do not have the ‘political capital’ to dictate harsh spending cuts in neighbouring countries, unlike the IMF, which does so as a matter of routine. By shifting surveillance of austerity packages during their most difficult period to the Fund, the core Eurozone countries are able to continue dictating the agenda, but via the front of an international organisation with greater credibility, manouverability, and anonymity.

But what about simply allowing Greece and Ireland to default? After all, under the present Eurogroup and IMF packages, Greece and Ireland can neither pay off their debts, nor default on them, and are thus maintained in permanent debt servitude. Is this not a terrible policy failure?

The answer is no, insofar as these packages were never designed to save Greece and Ireland in the first place. Rather, their purpose is to save the eurozone banking system from collapse. The key beneficiaries of this long, drawn-out process are Dexia, BNP Paribas, and Commerzbank, and behind them, the French and German governments who currently insure their losses. Everyone knows that eventually, Greece and Ireland will have to default, but if they do so in two years time rather than today, then this gives eurozone banks enough time to transfer their assets to the European Central Bank, while shoring up their capital base ahead of the impending haircut. Leaving aside the problem of ECB recapitalisation, this means the contagion effect will be minimised: at the very least, it will not least to the wholesale meltdown that would have occurred if a default were effected today, say, or last summer.

Europe therefore needs a European to run the IMF: but not for reasons of competency, or familiarity. Rather, it is because the eurozone is incapable of fixing its own problems, and requires a candidate pliant and willing enough to take the controversial decisions needed for the currency bloc’s survival. Even, one might add, if such decisions may be perilous for the IMF itself.