EBRD officials set to quit: Uncertainty over Attali's future 'bringing work to a standstill'

THE CONTROVERSY over Jacques Attali, the beleaguered president of the European Bank for Reconstruction and Development, has brought bank morale to an all-time low and large numbers of key officials are ready to quit unless the Group of Seven moves swiftly to replace him.

According to sources at the EBRD, the uncertainty over Mr Attali's future and the prospect of a damning report on the bank's spending next month are threatening to bring work to a standstill.

Professionals are becoming embroiled in political feuding. Many feel betrayed at the controversy over spending and by Mr Attali, whose controversial behaviour they believe is risking permanent harm to the institution.

Numbers of EBRD bankers are already circulating their CVs in the market, taking the pessimistic view that the Group of Seven has failed to realise the seriousness of the crisis.

'The bank will never cease to function, but if people of extremely high calibre do decide to leave it will be very difficult if not impossible to replace them,' one bank source said. 'There is a serious risk that the bank will never recover if this drags on, and new work will grind to a halt.'

There is a growing consensus at the bank that Mr Attali should go, regardless of the conclusions of the report on EBRD spending commissioned by the main industrial country shareholders. The audit committee is due to publish its report on 15 July, but a draft will go the World Economic Summit in Tokyo the week before.

It is felt that, despite Mr Attali's pioneering work in setting up the institution to assist the economic transition in the former Soviet bloc, he has become a permanent liability.

Earlier this week Mr Attali's prospects of holding on to his job were eroded further after shareholder support for a reorganisation plan for the bank collapsed.

That has also in effect frozen the offer by Mr Attali to Ernie Stern, number two at the World Bank, to become chief operating officer.

A Stern appointment would have downgraded the emphasis on merchant banking and assisting the private sector in favour of development banking, with its traditional bias towards the public sector.

The proposal was intended to distance Mr Attali from day-to-day management of the bank and won his strong endorsement because it would have kept him in his job.