Hard Questions for EBRD After President Resigns
EUROPEAN BANK SHAKE-UP
THE sudden resignation of Jacques Attali from the presidency of the fledgling European Bank for Reconstruction and Development is posing tough choices for EBRD's multinational board of directors.
The directors' first problem is choosing a successor to Mr. Attali, who quit June 25 amid allegations of lax management and overspending on foreign travel and unnecessary frills at the bank's London headquarters.
EBRD's so-far sluggish performance as a lender to the former communist states of Eastern Europe also is under critical scrutiny, only three years after it came into existence. Banking analysts forecast that the 23-member board will appoint an interim president while questions about EBRD's past and future activities are asked and answered.
The battle over who will succeed Attali as long-term head of EBRD, the analysts say, will be fought between the governments of Britain, France, and other European countries, with the United States (the bank's biggest shareholder) an active participant.
When EBRD was launched in 1990, there were high hopes that it could play a vigorous role in providing funds to European countries emerging from communist control into an era of free enterprise. Attali, a former aide to French President Francois Mitterrand, with no banking experience, was asked to channel 60 percent of the bank's 7 billion British pounds (US$10.45 billion) loan fund into private-sector schemes. A slow start
Under its flamboyant head, EBRD got off to a slow start. Earlier this year, an internal report complained that the bank had "failed to make a coherent contribution" to economic transition in Eastern Europe. Attali told the bank's directors that identifying suitable private enterprise projects in Eastern Europe was proving difficult.
In April, he came under heavy criticism when it was revealed that EBRD had disbursed only 100 million British pounds in loans and equity, but had spent twice that amount on its London headquarters, including 750,000 British pounds on a marble entrance hall. Money also was spent on luxurious office furnishings and flights by private jet taken by the president and his staff. Stung by the criticisms, Attali ordered that in the future his staff should travel by scheduled airliner. He resigned last week after
admitting that he had been reimbursed twice for a first-class air fare to Tokyo.
Henning Christophersen, the European Community's economics commissioner and former Danish finance minister, is a leading contender to succeed Attali long term. Mr. Christophersen has told friends that he wants the job. Another possibility is Otto Pohl, former president of Germany's Bundesbank.
Last weekend, however, Alain Juppe, the French finance minister, said France had a "moral right" to hold the presidency. Other French politicians said Attali had been a victim of an Anglo-Saxon conspiracy.
Anne Wibble, Sweden's finance minister and chairman of EBRD's board of governors, has started looking for a temporary president. Her preference was reported on June 29 to be Claes de Neergaard, the bank's Swedish director. But he was said to be unacceptable to EBRD executives who want Italy's Mario Sarcinelli to play the interim role. Overly cautious
Michael Hodges, an international banking specialist at the London School of Economics, says that Attali and his management team were "a bit too careful" in the bank's start-up phase and should have been prepared to take more risks in disbursing funds. Mr. Hodges is critical of Attali's management style, which he calls "pseudo-intellectual" and "abrasive." "What is needed is an experienced, practical banker who can get on with people," Hodges says.
A major problem facing the new EBRD president, one of the bank's executives says, will be identifying suitable projects in the 25 countries in the bank's target area. Of 95 projects approved since EBRD's launch, more than half have been in Poland, Hungary, and the Czech and Slovak republics.
Attali himself correctly analyzed part of the problem, the EBRD executive says. "Too many of the target countries need infrastructure development before private investment can flourish," he says. "Attali wanted more money to go into infrastructure, but met resistance from the US, Britain, and other countries." EBRD sources say Attali's personal style did not help him when he had to argue a case with hard-headed government ministers.
There is, however, a problem about paying more attention to infrastructure projects. EBRD was conceived as a "niche" lending institution. Its 7 billion British pounds available for lending seems minute compared with the 2,800 billion British pounds investment Attali has said will be needed to put the former communist economies on their feet. In 1990, most of the founder nations argued against heavy concentration on infrastructure, which is a feature of World Bank activities.
Before Attali resigned, he proposed a management shake-up, including the appointment of Ernest Stern, deputy head of the World Bank, to a new post of chief executive.
If Mr. Stern's appointment goes through, EBRD insiders say, it will be a sign that the bank will begin concentrating more heavily on infrastructure projects, particularly in Russia.