REFILE-PROFILE-Dallara the helmsman for banks on Greek rocks

Wed Jan 25, 2012 12:04pm EST

Related Topics

By Steve Slater and Sophie Sassard

LONDON Jan 25 (Reuters) - Charles Dallara spent two years in Greece with the U.S. Navy in the early 1970s. Four decades later he is a regular visitor again, representing the banks owed money by a near-bankrupt Athens government.

The 62-year old American who still sails, swims and plays baseball was once a managing director of U.S. investment bank JPMorgan. He also held positions in the Bush and Reagan administrations and is a veteran of the sovereign debt crises of the 1980s and 90s.

Now, many years after the Institute of International Finance (IIF) he heads last faced a crisis on such a scale, he is back in the spotlight, representing creditors that stand to lose 100 billion euros ($130 billion) or more in a Greek debt restructuring.

He helped devise the new bonds for Latin American countries that defaulted in the 1980s during his years with the U.S. Treasury, but has acknowledged that he is finding Greece's current debt crisis much harder to crack.

Euro zone finance ministers now want creditors to lower their demands. They announced that position just two days after Dallara, Managing Director of the IIF since 1993, said his best offer was on the table.

Dallara, who is married with three children, has had his commitment to the task questioned since he left Athens talks on Saturday to go to Paris for long-standing family commitments.

And last week's tension in talks among creditors was broken by occasional laughter: some of those gathered were amused at a blog comment that had described Dallara as an "amiable buffoon", according to one of the people present.

But he shows signs of a competitive streak too.

The New York Yankees fan and senior league baseball player has ratcheted up the pressure on the Greek government, and the bondholders will discuss their next move in Paris on Wednesday.

Nevertheless it is unclear just how much clout Dallara wields in talks representing such a complex group of banks, insurers, hedge funds and other investors.

He brings an impressive contact book and represents more than 450 firms, but critics say the very diversity of that group may undermine his position, and that there are other more important figures in the background.

Dallara is flanked at the talks by Jean Lemierre, an adviser at BNP Paribas, one of Greece's biggest creditors and also wielding power behind the scenes. Absent from the talks themselves but probably the key player, is Josef Ackermann, the Deutsche Bank chief boss who chairs the IIF.

Ackermann has close links with Berlin and German Chancellor Angela Merkel, who effectively holds the euro zone's purse strings.

"Dallara's mission is to pave the way for a PSI deal, but he can't decide on his own. If negotiations arrive at a crucial point, he regularly calls IIF Chairman (Josef) Ackermann to get his view," said a person familiar with the process.

"Ackermann is the invisible man at the negotiation table."

Another person close to the talks said there was little Dallara could do. "Creditors are those to decide in last resort. No one can be blamed, it is a very complex situation."

Fond of using naval metaphors after his four years in the U.S. Navy, Dallara has been head of the IIF for 18 years, arriving after two years at JPMorgan, where he ran its investment and commercial banking in Eastern Europe and the former Soviet Union, the Middle East, Africa and India, and oversaw its emerging markets risk.

RED TAPE AVERSE

Washington, D.C.-based IIF, now in its 30th year, lobbies on a range of regulatory, financial and economic issues, which in the past year has drawn in bankers' pay and the need for better coordination of industry reforms.

Dallara last year warned the raft of new regulations need to be halted to prevent a sharp contraction in credit in Europe and other major economies that would hammer growth and jobs.

But Greece has dominated the agenda, and debt restructuring has always been a key focus for the IIF since it was set up in response to the Latin American debt crisis.

It was during that turmoil that Dallara moved up the ranks at the U.S. Treasury -- after an economics degree from the University of South Carolina and a Master of Arts in Law and Diplomacy from the Fletcher School at Boston's Tufts University, highly regarded for international affairs.

He held a number of senior positions at the IMF and in Ronald Reagan's and George Bush Sr.'s administrations, and was assistant Treasury secretary for International Affairs for two years to June 1991.

That included work on the Plaza and Louvre Accords between leading countries to intervene in currency markets to depreciate the U.S. dollar (and then two years later to put the brakes on the greenback's decline), and then helping fix Latin America after several countries defaulted in the 1980s.

That included the launch of new "Brady bonds" in 1989, named after Treasury Secretary Nicholas Brady and seen as a milestone in sovereign debt restructurings.

Nailing down a plan for Greek bonds, seen as essential to put the country on a stable footing, is proving tough, as Dallara warned last June: "This is the most complex sovereign debt crisis I have ever been connected with, because there are so many players, no unified European view, and the weaknesses of the Greek economy are extraordinarily serious," he said.

German Finance Minister Wolfgang Schaeuble, for one, was dismissive of the latest poker game. "That happens in every bazaar ... You do not need to be impressed by that," he said.

FILED UNDER: