De Larosiere takes his seat: Bank of France governor becomes EBRD chief tomorrow

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The Independent Online
JACQUES de Larosiere, governor of the Bank of France, will become president of the European Bank for Reconstruction and Development tomorrow.

Mr de Larosiere is the only contestant in the election of a new EBRD president, which takes place today. In the days leading up to the vote by the EBRD's 59 shareholding governments and institutions, his rivals Giuliano Amato, a former Italian prime minister, and Leszek Balcerowicz, former Polish finance minister, dropped out of the race.

Mr de Larosiere's election will represent a diplomatic coup for France, which suffered an embarrassing setback when the former president, Jacques Attali, was forced out over lavish spending practices, sluggish lending to cash-strapped Eastern European countries and improper use of EBRD funds. It also restores an Anglo- French agreement under which the bank's headquarters were in London in exchange for a French president. The election will also preserve French hegemony over international financial institutions; Frenchmen head the International Monetary Fund and the Organisation for Economic Co-operation and Development.

As a former head of the IMF Mr de Larosiere possessed considerable authority, enhanced by his key role in defusing the Third World debt crisis. His eight years at the IMF are expected to prove crucial in helping him to deal with problems facing the EBRD, set up two years ago to assist the transition to the free market in the east.

These include poor co-ordination between the bank's merchant and development banking arms, inadequate budgetary procedures, and frustration over the lending limits on public sector projects. The bank is also held in low regard by many private sector banks and companies doing business in the east.