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Dáil Éireann díospóireacht -
Tuesday, 11 May 1993

Vol. 430 No. 5

Ceisteanna—Questions. Oral Answers. - European Institution Funding.

Pat Rabbitte

Ceist:

14 Mr. Rabbitte asked the Minister for Finance the total money paid from the Irish Exchequer to the European Bank for Reconstruction and Development and the total amount pledged; if he will consider withholding further money from the Irish Exchequer until such time as guarantees are given that the money will be used for the purposes intended; the number of meetings of the Board of Governors he has attended in his capacity as Governor; and if he will make a statement on the matter.

Jim O'Keeffe

Ceist:

42 Mr. J. O'Keeffe asked the Minister for Finance the amount of money spent by the European Bank for Reconstruction Development on itself; and if he will make a statement on the matter.

I propose to answer Questions Nos. 14 and 42 together.

Deputies will already be aware of my position on certain administrative expenditures of the European Bank for Reconstruction and Development from my reply to a question from Deputy Bruton last week.

I am informed by the EBRD that, from April 1991 to the end of 1992, a total of £200 million sterling was spent on the bank itself; this includes staff costs, overheads, fitting out the headquarters and travel. I would mention that the UK Government has given the bank a subsidy of £40 million sterling to be spent on the headquarters.

I have attended all the annual meetings of the governors. The first was in Budapest in April 1992 and the second in London in April 1993. The inaugural meeting of the governors was attended by my predecessor in London in 1991.

The bank's authorised capital to ECU 10 billion of which Ireland accounts for 0.3 per cent. Our total liability to the bank is therefore ECU 30 million — or approximately 23 million Irish pounds. Only 30 per cent of the authorised capital needs to be paid in and this over a period of five years from 1991. Ireland is therefore required to pay in some ECU 9 million, or ECU 1.8 million a year — 1.4 million Irish pounds. To date we have contributed ECU 3.6 million — or about 2.8 million Irish pounds. Some of this is in promissory notes which have yet to be encashed by the bank according to a pre-agreed schedule.

I am asked to consider withholding any further subscription to the bank. Ireland's next capital contribution is due later this month. I do not propose to withhold this as I do not believe that this would be in the interest of the bank or the bank's countries of operation for whom the funds are intended.

The bank has a serious task in hands in the countries of Central and Eastern Europe and the former Soviet Union. It has already made significant progress in committing ECU 2 billion to projects involving total investment of some 8 billion ECU in the area. Actual disbursements to date have been slow and I would like to see them speeded up. I am informed that the board of directors is addressing this problem.

Deputies will be aware, from an earlier reply to the House, that the audit committee of the board of directors is conducting a comprehensive inquiry into the administrative expenditures of the bank. I expect to be informed of the outcome of this inquiry and I will fully support any appropriate action which may be called for as a result.

It would appear that there is a role for the NTMA to examine the EBRD. How have the Minister and his fellow governors allowed a situation to materialise whereby the people responsible for this bank, which is charged with reconstruction in Eastern Europe, spent £200 million in equipping palatial offices for themselves, which is twice as much as that spent on the purpose for which the bank was established? A sum of £600,000 was spent on hiring planes and £52,000 on a birthday party for the staff.

The Deputy should ask a question, not make statements.

How did the Minister and his fellow directors allow such outrageous and obscene actions to be carried out by the people responsible for running the European Bank for Reconstruction and Development?

He is almost eligible to become a director of a building society in Ireland.

Detailed statements were given at recent meetings by the chairman of the governors, Mr. Waigel, regarding the attitude of the board of governors to the expenditure entered into by the president of the bank, Jacques Attali. There was an extraordinary list of abuses of expenditure on some of the items mentioned by Deputy Rabbitte and other items, such as marble, lifts, special aircraft to take people to meetings which were totally unnecessary, and so on. The president made the decisions and entered into the expenditures involved. The controls, mechanisms and audits were brought forward by the governors but the president used the £40 million put forward by the United Kingdom Government and contributions from other members for an elaborate office. While the board of directors was satisfied that the president would enter into certain expenditures, it did not believe that he would undertake such large expenditure. The bank was set up in 1991. When the building was under construction a bomb exploded outside it in April last year and practically destroyed the building. Another bomb went off in the same area more recently, but did not have the same effect.

The marble is obviously resilient.

Only the marble.

It is the marble in the people's heads that does not seem to be resilient.

The chairman, Mr. Waigel, and my colleagues as governors have introduced a series of strict budgetary controls. The audit committee has commenced investigating the activities the president engaged in. The existing three board committees will play a stronger role in the preparation and monitoring of the budget and consideration is being given to establishing a separate budget committee. More structured and detailed budget documentation is to be supplied to the board in the future. The senior management post of director of corporate planning and budgeting is to be filled on a full-time basis, with a clear and exclusive line of responsibility. Up to now the president had responsibilities to keep down overheads. He was given a broad range of responsibilities and was able to deal with matters without checking with the committees. The board's audit committee, with external support if necessary, is to conduct a detailed and comprehensive inquiry into the procedures followed and the costs incurred in fitting out the bank's headquarters. As soon as the expenditures and the procedures followed by President Attali came to light, a full investigation took place.

Is the Minister aware that this bank was set up to help the poorest of the poor in Europe, people who have to queue to get the basic necessities in life? Will he agree that nobody is prepared to be accountable for this gross extravagence——

Not even the Irish Government.

——of taxpayers' money which was subscribed to help starving people and was used instead to build cushy offices for people who should be now out of a job, but are still all in employment? Why is Jacques Attali still running this bank after what has happened? Surely the Minister should insist that Monsieur Attali return to France, where I am sure he will have many opportunities for other employment. There should be a clear accountability, either by the Ministers or by the management, for what has happened. An appalling example is being set to the countries of Eastern Europe in the way in which a bank, set up to help them, is being run. This level of extravagance would do credit to the Kremlin at its worst, yet this is an institution set up, supposedly, to reconstruct post-communist Eastern Europe.

In regard to the general drift of Deputy Bruton's remarks, I made similar statements which were published widely over two weeks ago. The decision of the board of directors and the 57 member countries, having fully examined the report and the expenditures, was to allow the audit committee to proceed with its investigation. Monsieur Attali is employed on a contract basis and they have set up new arrangements and are appointing new people, as I have outlined, to deal with various aspects of the bank. There is no doubt that the expenditure, in my view and that of my colleagues, was an abuse. The role of the bank is to help countries who are in grave difficulty and all of these matters were investigated. Governor Waigel, as chairman, has spelt out publicly what has happened and the plans for the future.

The Minister and his colleagues are governors of this bank and I understand they have periodic meetings. Did the Minister, as one of the governors of a bank, insist that management accounts be furnished? Did the Minister ever have those management accounts examined in his Department to see whether this problem was emerging or was it the case that no management accounts, from which all these problems could be divined, were ever made available to the governors and that the governors, including the Minister, never insisted on seeing them?

As I outlined earlier, reports of what was taking place were submitted a year ago but when the building was completely destroyed the UK Government and other member states put large resources into the bank in order to reconstruct it quickly. It did not arise until later in the year precisely what expenditure went into the bank. The building was totally destroyed in April of last year and it was the end of the year——

Were the management accounts destroyed in the bomb?

——when they became aware of the full position.

Was the building insured?

As I have outlined, a total of Stg£200 million was spent on the bank, not all of which was on the reconstruction.

Did the Minister and the governors not insist that the building was insured?

The buildings were insured.

Is it not the case that this bank was established in London at a time when office property was at rock bottom prices in 1991 and that it would have made far more sense for them to locate the bank headquarters in an existing office building, of which there were many available in the London docklands, rather than going to the expense of building this monstrous headquarters which sets an example to Eastern Europe of the worst possible kind in terms of the optimum use of resources?

That certainly may have been an easier decision at the time. It is not what occurred. In December 1991, when the general budget of the bank's operation was approved for 1992, the board of directors approved a global provision for the new premises. The fitting out of the new offices was entrusted to the management to be carried out within an overall figure. As time went on it became clear that that did not happen. The type of refurbishment that was foreseen in December 1991 did not envisage a 200 lbs bomb being placed at the front door which would destroy the building. That changed the budget position and as soon as it became clear what had happened in the reconstruction of the building, the investigations took place.

There was a 200 lbs bomb, but there was also a Stg£200 million bomb about which the Minister seems very complacent.

The description of it in the Financial Times reads like the last days of the Roman Empire. I notice that the name of the budget director is Monsieur Pissaloux. Is it good enough for the Minister and his fellow governors to tell the respective Governments who established this bank and whose taxpayers are paying for the costs of the reconstruction programme that an investigation has been conducted and the man responsible, while changing into his natty knitted pyjamas on his private flights, is still in office? Surely any governors worth their salt would have sacked Monsieur Attali at this stage and moved on to the next stage of the bank's business?

He is a good socialist.

I have fully examined this matter and put forward our views, as did other countries at a meeting two weeks ago. Representatives of the countries who contributed the major resources for this project — we contributed 0.3 per cent of the authorised capital — put forward views and I put forward our views, more strongly than most. Procedures, and an audit structure have been put in place and warnings have been issued to members of management. Chairman Waigel, on behalf of the board of governors, agreed that the procedures would be amended but for the moment Monsieur Attali would be allowed to complete his contract before there would be a review. In regard to Deputy Rabbitte's point, the figure of Stg£200 million represents the total cost although there are many abuses, as in the case of the aircraft.

Total expenditure in Eastern Europe is £100 million.

I would not like to give a one-sided view; of the two billion ECU the bank has committed to projects, it has raised a further £6 billion in the area of private investment. There is clearly a role for the bank but there were no satisfactory reasons the bank should have spent the amount of money it did, apart from the costs related to the major explosion.

Is there a role for Mr. Attali?

The time for ordinary questions is almost exhausted. I will move to Question No. 15 in the name of Deputy Derek McDowell.

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