Deputy's resignation threat weakens Attali

THE position of Jacques Attali, the beleaguered president of the European Bank for Reconstruction and Development, looks increasingly unstable this weekend following a resignation threat by his deputy, Ronald Freeman.

Mr Freeman, who is in charge of merchant banking at the EBRD, is understood to be 'considering his position' at the bank in protest at an approach by Group of Seven shareholders to Ernie Stern, the deputy head of the World Bank.

Two weeks ago, shareholders approached Mr Stern to see if he would take over the number two position at the EBRD. The move is understood to be part of wider plans to restructure the bank following criticisms over its expenses and its lending policy. Mr Stern turned down the offer on the grounds that he was unwilling to join the bank while Mr Attali was president.

A reorganisation at the bank is also expected to promote Mario Sarcinelli, head of development banking, to senior vice-president, which would be seen within the EBRD as a demotion for Mr Freeman.

The departure of Mr Freeman, who was appointed by Mr Attali, would leave the EBRD president even more exposed to criticism from the G7 shareholders, who are deeply unhappy with Mr Attali's running of the bank. Some are understood to want his removal.

Mr Attali's fate will be decided by G7 leaders in Tokyo next month. A draft of the forthcoming audit report on the lavish spending practices of the bank will be sent to the leaders a week before publication.

It is understood to contain damning new evidence of expenses put through EBRD accounts by Mr Attali. The bank is already under fire for spending pounds 55m on refurbishing its London headquarters and dollars 600,000 on hiring private jets.

The US, a 10 per cent shareholder in the bank, is the leading critic of Mr Attali's performance. It has already said it will hand over no more money until management has been shaken up.

Mr Attali's plans for reorganising the bank into three regional arms to improve efficiency will almost certainly not deter G7 plans to appoint a top official to a new bank position to break the logjam delaying EBRD loans to Eastern Europe.

(Photograph omitted)