Attali fighting for his life: Ernie Stern of the World Bank is sounded out about taking the top job at the EBRD

JACQUES ATTALI, the beleaguered president of the European Bank for Reconstruction and Development, is fighting for his political life as finance ministers of the Group of Seven prepare to pin his fate on the outcome of an in-depth audit next month of lavish EBRD spending.

Despite a flood of adverse publicity, Mr Attali has remained at his post partly because the G7 is divided over whether and when to dismiss him. Britain, the embarrassed host country of the EBRD, believes the evidence of the audit report will be severe enough to secure French and German support for a decision to sack Mr Attali.

Britain has already begun to follow up the G7's decision to change the operating structure of the bank in what may be a post-Attali regime. During a trip to Washington last week, Baroness Chalker, head of the Overseas Development Administration, sounded out Ernie Stern, who is in effect number two at the World Bank, for a similar position in the European Bank.

Mr Stern was approached about a senior EBRD position in 1990 and made it clear he would not work for the EBRD while the Frenchman ran it. One World Bank insider said this weekend: 'Attali would have to leave before Ernie Stern went to the EBRD. They are planning a post-Attali regime.'

The EBRD president lost crucial political backing when the French Socialist government went down in a crushing electoral defeat last April. Banking sources suggest it was no accident that the rash of embarrassing disclosures about the EBRD erupted after Edouard Balladur became Prime Minister at the head of a centre-right government, and may have come from Mr Attali's enemies in the French establishment.

Even Mr Attali's patron, President Francois Mitterrand, is said to have cooled towards his former chief economic adviser.

The controversial Mr Attali came under fire after disclosures that the bank spent pounds 55.5m on the lavish refurbishment of its London headquarters, and pounds 750,000 on chartering private jets. That was in contrast to the sluggish pace of loan disbursements to the struggling countries of Eastern Europe.

Further damning revelations are set to emerge when the audit report is published on 15 July. One G7 source said last night: 'He's on a spit, there's no question. He's just getting roasted.'

The attack on Mr Attali came during the bank's annual meetings last April, but there were few signs then that his job was under immediate threat. Last week, however, Lloyd Bentsen, the US Treasury Secretary, made it plain that Mr Attali's future is now in jeopardy.

Washington has tried to oust Mr Attali by proposing a chief executive for the bank, in effect reducing Mr Attali's position to titular head. The EBRD president objected, and the US failed to win support from the European shareholders. After the US Congress subsequently refused to approve the latest dollars 70m capital tranche for the bank, Mr Bentsen said it was now up to Europe to decide Mr Attali's fate.

Despite European resistance to the US proposal for a chief executive, there is support for appointing a senior vice-president who would help the merchant banking and development banking arms of the EBRD work more effectively together.

The EBRD furore and pressure on Western budgets has prompted Mr Bentsen to institute a high-level US Treasury review of wages and benefits at all the international financial institutions. The report has UK backing and may lead to a new era of austerity.

(Photograph omitted)