NEWSMAKERS

• Branching Out
• Trichet Left Clutching At Straws
• Fazio Stands Strong
• No Nepotism In Peru
• Klein Not To Be Pushed About
• Yamaguchi Deflates Expectations
• Who Cares For Accountability Anyway?
• Martian Madness
• Lean Times For Norway's Treasury

Branching Out
It finally looks as though something might be done about the bloated Banque de France. As the Eurosystem is pelted with criticism of its startling surfeit of central bankers, France is surely the chief culprit, riddled with 211 regional branches (compare that with the Bank of England’s 14). The BdF of course knows this, but runs up against dogged resistance from the unions when it has actually tried to do anything about it. But now Jean-Claude Trichet, France’s governor, has in his possession a new report recommending the eventual closure of the bulk of the bank’s largely superfluous branches. And it’s a report he commissioned!

Trichet should be congratulated for consistently attempting to point out the impossibilities of justifying the existence of the ubiquitous branches, which are a hangover from the nineteenth century when such ubiquity was deemed necessary to provide local discounting facilities, distribute notes and coins, arbitrate in local disputes and ensure the solvency of banks. He recently said that it was “imperative to pursue efforts made in recent years to modernise the BdF, rationalise its structures and adapt its activities and operating conditions to new developments.”

Over the past decade he has managed to cut about 2,500 employees through a policy of non-replacement. But his talk about adapting the structures of the bank to “allow it to perform its duties more satisfactorily and more efficiently” implies that the current structure is still far from efficient. The report looks at four ways of improving the BdF’s structure and in the end plumps for maintaining a network of 62 permanent sites (37 fully-fledged branches, 8 branches without cash activities and 17 currency circulation centres), supplemented by 51 customer service and information offices.

Indeed, with the introduction of the euro, and the transfer of many responsibilities to the ECB, most people would agree that a shake-up is needed. But already the indignant French unions, together with the national association of mayors, are digging in their heels. They say that 3,200 jobs will be lost, and they encouraged some 62% of the 8,000 branch employees to go on strike last week. In an attempt to soothe worker worries, the BdF has insisted that it has “no intention of making any employees redundant” and in any case that “no decision has as yet been taken”. Leaving no doubt that it is in no rush to do anything rash, the central bank assured that there will first be an “extended period of consultation with trade unions and the relevant elected representatives” before even a “preliminary” decision is taken.

Let’s hope these are just evasive tactics to get the unions off its back: the sooner something is done about the Eurosystem’s legions of central bankers, the better. Click here to find out more about the report on the BdF’s website: http://www.banque-france.fr/gb/actu/main.htm?menu2=menu_m1.htm&page=discours/24.htm

Trichet Left Clutching At Straws
A further blow was delivered to Jean-Claude Trichet’s claims to the ECB throne when it was announced that the verdict on his trial will not be made known for another four months, on 18 June. Newsmakers’ sympathies go out to the poor man. The state prosecutor would even have Trichet serve a ten-month suspended jail sentence for his alleged misdemeanours. French courts attribute this uncommon delay in reaching a verdict (it had been assumed they would ask for two months or so) to the so-called “complexity” of the evidence they are grappling with: it seems more like water-torture to us. And this verdict is merely three weeks before Wim Duisenberg has promised to bid adieu to his ECB comrades, on 9 July.

Even if Trichet’s name is cleared, if the wayward and troublesome French lawyers acting against Trichet are to remain true to form, they will appeal the verdict. This could spell the end to Trichet’s dreams, and even if they don’t appeal, Christa Randzio-Plath, head of the European Parliament’s economic and monetary committee, thinks it won’t be until September that the parliament will be able to confirm a successor to Duisenberg. She told the FT, “It’s really necessary for Duisenberg to prolong his tenure… The approval of the committee takes some time.” A number of hurdles must be cleared before a president of the ECB can be confirmed: first unanimous approval from EU heads of government, then a grilling by Randzio-Plath's committee, before the European Parliament casts a deciding vote.

Whatever happens to Jean-Claude, the French are going to insist on one of their own assuming the ECB presidency. Already French lawyers are desperately scrutinising the legal viability of Christian Noyer (previously vice-president of the ECB) taking the job instead, the problem being that top ECB executives are not supposed to be reappointed. Nervous times lie ahead for the ECB, and veteran Wim Duisenberg may find himself mooching around in Frankfurt for a little longer than he bargained for.

No Nepotism In Peru
While the problems in the BdF are all too real, the president of Peru’s central bank, Richard Webb, has come under fire for criticisms that seem to have rather less substance. The harried president admitted to Newsmakers, “it’s been a hectic time, courtesy in part of newspaper and congressional attacks on the bank.”

Webb has had the tedious task of explaining why, just because it may be true that about 20% (or 200) of the bank’s 1,027 employees are indeed related, the bank has not been violating nepotism laws. Firstly, exactly half of that group consists of marriages that occurred after joining the bank, which, he quipped, “says something about the stability of the bank's employment relationships”. The rest of them, most of whom are manual workers or lower level clerks, were hired more than 10 years ago and aren’t affected by the laws in question. In any case, Webb observes that most of these were hired when “the family link was considered a basis for trust when hiring a manual or lower-level worker, in an age when neither experience (most were hired very young) nor educational achievement played major roles.”

In fact, Webb says it was him that introduced meritocratic hiring in the bank in the first place, back in the 60s when he was head of the research department and would run graduate schemes. At the time this was seen to be pretty “revolutionary”, and Webb recalls the “aristocratic” head of personnel sneering at the “‘lower-class’ type of person” that was resultantly beginning to join the bank. Apparently this particular character has since been locked up for running a cheque carrousel with the bank's chief cashier…

Webb explained that this little matter has reared its head repeatedly over the last decade, owing to inquiries from congress that are “invariably motivated by disgruntled former employees”. And doubtless there will be more. As Webb said, for the moment, “everything suggests that the smear campaign regarding nepotism is running out of steam, but, like Old Faithful, it will probably crop up again in a few years time.”