The high priests of austerity

To an EU elite determined to push harmful economic policies, democracy is an inconvenience.

Jean-Claude Trichet could have enjoyed a comfortable retirement after stepping down as president of the European Central Bank in 2011.  Commanding an annual salary of €370,000 in his old job, the Frenchman is now paid a pension of up to 70 per cent that amount.

Instead, Trichet has been kept busy playing a game of musical chairs with Italy's technocrat former prime minister Mario Monti. In one of his final acts as ECB chief, Trichet spearheaded the downfall of Silvio Berlusconi by insisting that the lascivious rogue introduce unpalatable economic "reforms" in Italy as a condition of emergency "assistance". 

The diktat helped Monti replace Berlusconi as prime minister (without an election). It also allowed Trichet to fill two posts that Monti had to vacate: those of European chairman with the Trilateral Commission, that secretive club for political and business leaders, and chairman of Bruegel, a think tank based in Brussels.  Trichet combines these responsibilities with overseeing the Group of 30, a Washington-based institution dominated by bankers.  

All this hyper-activity might explain why Trichet has been sending out some muddled messages.  During an interview on French television earlier this month, he blamed mass unemployment for the killing of a far-left activist by skinheads before advocating deep cuts to public expenditure: a recipe for mass unemployment.

Suave and confident,  Trichet probably didn't realise he was contradicting himself.  So I'd recommend that he reads a paper published by his minions at Bruegel in May.  An assessment of measures taken in embattled eurozone economies, it stated that austerity has caused "very high unemployment" in Greece and "record unemployment levels" in Portugal.

This was a rare admission from Bruegel that its preferred prescriptions are counterproductive.

Funded by Goldman Sachs (another one-time Monti employer), Deutsche Bank, Pfizer and Microsoft, the think tank has helped cloak the crude politics of austerity with intellectual gravitas. It is treated with reverence among the elite in Brussels and beyond. Top-ranking EU officials regularly attend its events, while opinion pieces by its staff grace such newspapers as Le Monde and The Financial Times.

Bruegel was established by Jean Pisani-Ferry, who was hired as an economic adviser by François Hollande, the French president, in April. The appointment indicates that Hollande, nominally a socialist, is shifting  to the right. In a syndicated column from December 2012, Pisani-Ferry parroted Margaret Thatcher's argument that "there is no alternative" to eviscerating the welfare state. "Rather than flirting with illusions, governments should confront the hard choices ahead of them," he stated.

Pisani-Ferry's new responsibilities have not caused him to be more reticent. When flaws were recently pinpointed in a by now infamous paper from the economists Carmen Reinhart and Kenneth Rogoff, he claimed it was "never a celebrated piece of economic research". The shortcomings did not undermine the case for austerity, he suggested.

One common misperception is that the EU's most powerful figures have made up their response to the economic crisis as it went along. The truth is that they have exploited the situation to dust down plans hatched earlier but which would have been difficult to implement under less straitened circumstances.

André Sapir, a senior fellow at Bruegel, was tasked with drawing up a series of recommendations for the European Commission nearly a decade ago.  The 2004 Sapir report advocated that the Brussels authorities be given greater powers to monitor the budgets of EU countries. 

Known to policy wonks as the "European semester", his proposal urged meddling in areas of responsibility that national governments guarded jealously.  The concept has been turned into reality over the past few years, leading to a situation where details of Ireland's budgets are sent to other European capitals before law-makers in Dublin get to see them.

Bruegel is part of a mushrooming network of corporate-financed think tanks dedicated to influencing debate.  A video posted on Bruegel's website about Latvia's bid to join the euro illustrates this point.  It tells the viewer that there is "wide consensus" that signing up to the single currency would be "the right move for the country". 

That must be news to the people of Latvia, most of whom don't want the euro, according to opinion polls. Such inconvenient details can, of course, be glossed over. More than likely, the Riga government won't be calling a referendum on this matter.

Democracy does not gatecrash the cheese and wine receptions that happen almost nightly in the world of think tanks. Without scrutiny, their "experts" can mould the outside world in the way that the wealthy and influential want. 

David Cronin's "Corporate Europe: How Big Business Sets Policies on Food, Climate and War" will be published by Pluto in August. Follow him on Twitter @dvcronin

A recent debate at the European Parliament in Strasbourg. (Photo: Getty.)
Olivia Acland
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The closure of small businesses in Calais is punishing entrepreneurial refugees like Wakil

We meet the Afghan refugee who purchased a plywood shelter, painted it with blue hearts and green flowers, and stocked it with basic supplies. The police have just destroyed his makeshift shop.

French police have returned to the Calais migrant camp, known as the “Jungle”, to continue dismantling the businesses there. Last Friday was the fourth consecutive day that they had been in the camp seizing stock from shops, restaurants and barbers.

They have arrested at least 13 proprietors and accused them of running illegal businesses without authorisation, sustaining an underground economy, and not having the required health and safety measures in place. The majority of the “Jungle” businesses have now been dismantled.

Many small enterprises have cropped up in the Calais camp over the last year, and a mud road lined with plywood shacks has been nicknamed “the high street”. Here you can find Afghan restaurants, Pakistani cafes, hairdressing salons and small convenience shops. 

The Mayor of Calais, Natacha Boucher, recently announced that the camp is to be demolished imminently, and closing down its micro-economy seems to be the first step in realising this plan.


The authorities enter the Calais camp. Photo: Juliette Lyons​

The makeshift town – which is home to more than 4,000 people – has been cowering under the threat of demolition since January, when attempts were made to bulldoze its southern stretch. Most of the people living here have come from war-torn Afghanistan, Sudan, Iraq and Syria, and a lot of them have been on the move for years. The shops and restaurants were bringing a degree of normality back to their lives.

The businesses were mainly run by refugees who had given up trying to cross the border into Britain and were seeking some stability within the makeshift world.

Wakil, the owner of a small convenience store, was one of these people. He left Afghanistan four years ago, where he worked first as a journalist, and then as lorry driver for the US military. He tells me that he misses his old life and job greatly: “I studied at university for four years in order to become a journalist, I am passionate about that work and I dream of doing it again.”

Forced out of his hometown after writing articles that criticised the Taliban, he moved to Kabul and found work as a lorry driver for the US Army. When the US pulled out of Afghanistan, Wakil deemed it too dangerous to stay and set off on a journey to Europe.

He travelled over land through Iran, Turkey, and Greece, and then made it to Italy in a flimsy boat. With very little money, he was forced to sleep rough until he managed to find work in a restaurant where the owner was willing to overlook the fact that he did not have the right papers.

He started to establish a life in northern Italy, taking classes to learn the language and renting. Then, when the restaurant changed hands and the new owner refused to employ anyone without a work permit, he was once again jobless and without prospects. 

“After this happened, I decided to go to England,” he says. “Back home I had met some English people and they told me that life is good over there.”

Wakil then travelled by bus through France, and ended up stuck in Calais. He says: “I tried to cross the border but a policeman caught me in the back of a lorry – he beat me and sprayed me with pepper spray. After that I was frightened and I stopped trying. I decided to stay here for a while, and I set up this business to give me something to do.”


A view of tents in the camp. Photo: Olivia Acland

After just ten days in the Jungle, Wakil managed to purchase a plywood shelter off another Afghan refugee for €370. Smuggling building supplies into the camp had become very difficult, so “property prices” within the micro-economy were on the rise.

He painted the shack with blue hearts and green flowers, and stencilled the words “Jungle Shop” onto the side in mauve. When his improvised store was ready, he borrowed a bicycle and headed into Calais to buy basic supplies from cheap supermarkets.

He filled the shelves with tomatoes, fizzy drinks, milk cartons and biscuits. Each time a customer came asking for something that he didn’t have, he’d note it down and incorporate it into his next shop. In this way, his business grew and although the profits were small (around €250 a month), Wakil was relieved to be busy and working again.

Wakil’s business wasn’t raided the first day that the police came in, but after watching other shops being emptied of stock and the owners being taken to prison, he became extremely anxious. On the evening of the first raid, he invited friends to his shop to eat or take away as much of his supplies as they wanted.

“I was too worried to eat,” he says. “But I knew that the police would come for my shop in the next days and I didn’t want everything I’d bought to be wasted.”

Fearing arrest, Wakil then went to hide in Calais and returned at the end of last week to find his shop empty. 

“The police took everything,” he tells me. “When I came back and saw it all gone I felt terrible. Many more of my friends had also disappeared – I’m told they were taken to prison.”

When I express my sympathies, he replies: “Don’t worry about me; others from the Jungle are in worse situations. This has happened to many of us.”

Most of the businesses that were providing some kind of stability for displaced people like Wakil are now just empty shells. A volunteer at Care 4 Calais (a charity distributing aid in the camp) Alexandra Simmons says, “the businesses were giving independence to refugees who had lost everything. They were extremely good for people’s mental health.”

The bare shops now serve as stark reminders that it is just a matter of time before the camp is emptied of its people too.