ESM ‘may need more staff to tackle ongoing debt crisis’

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.

In a May 12 letter addressed to Klaus Regling, the head of the bloc’s temporary rescue fund, partners at AT 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% larger than the largest Sovereign Wealth Funds (Norway and Abu Dhabi), but with a fraction of the people employed,” AT Kearney said.

“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.”

AT Kearney notes that unlike such funds, the ESM will have little or no freedom to choose the majority of its assets and so an argument can be made for having a small team of very high quality.

But the consultants add: “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 mechanism is to have a lending capacity of €500bn. In a separate official document on the staff structure of the ESM prepared by Regling’s team and dated May 11, it is acknowledged that each staff member of the new facility will have responsibility for the equivalent of €6.6bn if the full lending capacity is exhausted.

“These are unique ratios infinancial services and a highly responsible working environment is needed to ensure errorless operations,” the document reads.

The existing European Financial Stability Facility (EFSF), which will run alongside the ESM for a year before being phased out, employs around 25 people, but it also uses the help of staff of the ECB for market operations and the German Debt Office for other tasks.

The EFSF runs financing programmes for Greece, Ireland and Portugal and officials say it is understaffed.

One EU official described the proposed size of the ESM staff as “fair”, and said it was based on the experience of the EFSF and an opinion of an external consultant.



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