Exclusive: New euro bailout fund may not have sufficient staff

Wed May 23, 2012 7:37am EDT
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By Matthias Sobolewski

BERLIN (Reuters) - An external consulting firm charged with evaluating the structure of Europe's new permanent rescue facility has raised questions about whether it will have enough staff to function effectively, according to documents seen by Reuters.

In a May 12 letter addressed to Klaus Regling, the head of the bloc's temporary rescue fund, partners at A.T. Kearney warn that the approved staff of 75 for the European Stability Mechanism (ESM) may prove "too small" if the debt crisis rumbles on for several years.

The opinion comes less than six weeks before the ESM is due to come into force and as worries mount that Greece could be forced out of the currency bloc, a step that could fuel contagion to other member states, forcing the new facility into immediate action.

"With 75 people, the team will manage a balance sheet which is potentially 50 percent larger than the largest Sovereign Wealth Funds (Norway and Abu Dhabi), but with a fraction of the people employed," the letter from A.T. Kearney reads.

"Equally, the size is roughly twice the one of the APG Group, the largest European pension fund, which has roughly 700 people in financial operations alone."

A.T. Kearney notes that unlike such funds, the ESM will have little or no freedom to choose the majority of its assets, as these will depend on which euro zone countries require financial assistance. Because of this, it says an argument can be made for having a small team that is of very high quality.

But the consultants add: "Finally, as a market practitioner, we also observe that the current team size, as approved may be too small in size to operate effectively should the current crisis mode continue over a number of years."

The consulting firm says in its letter to Regling that it has been helping his team develop the ESM framework since December 2011.   Continued...