Preaching austerity is easy, but the European Central Bank(ECB) has found that it can be difficult to put the virtue in the practice.
The ECB on Thursday announced a significant overrun in the cost of its new headquarters, due for completion in 2014. A series of mishaps—an inconclusive tender process and a failure to identify structural problems in the new site—has pushed the final bill to as much as 1.2 billion euros ($ 1.56 billion), up from an original estimate of 850 million euros.
The EBC has laid out less than half of the projected total cost, raising the possibility that the total bill could rise further. The new headquarters will accommodate a 40 percent expansion of current personnel. The ECB declined to comment on hiring plans, but any move to expand the ECB’s role in bank supervisionwould require staffing increases.
Funding for the new premises comes from the ECB’s profits on its investment earnings and interest income. That could include revenues earned through bond purchasesintended to dampen interest rates in highly-indebted euro zone countries.
Back in February, European finance ministers pledged to return profits on bond purchasesto member countries, but it is not clear whether those funds have been funneled back to sovereign nations.
The ECB recorded a profit of 728 million euros in 2011 and will retain eight percent of that this year. The remainder is distributed to euro member countries in accordance to their paid up capital. Greece accounts for just under two percent of the ECB’s shareholding.
The move to the new headquarters is actually intended to save money, said Andrea Jurges, communications officer at the ECB, pointing out the bank is currently housed in rented quarters. “Most of the reason [for the construction of new premises] is that its cost-prudent to build than to continue renting.”