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.)
Photo: Getty
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What does François Bayrou's endorsement of Emmanuel Macron mean for the French presidential race?

The support of the perennial candidate for President will boost Macron's morale but won't transform his electoral standing. 

François Bayrou, the leader of the centrist Democratic Movement and a candidate for the French presidency in 2007 and 2012, has endorsed Emmanuel Macron’s bid for the presidency.

What does it mean for the presidential race?  Under the rules of the French electoral system, if no candidate secures more than half the vote in the first round, the top two go through to a run-off.

Since 2013, Marine Le Pen has consistently led in the first round before going down to defeat in the second, regardless of the identity of her opponents, according to the polls.

However, national crises – such as terror attacks or the recent riots following the brutal arrest of a 22-year-old black man, who was sodomised with a police baton – do result in a boost for Le Pen’s standing, as does the ongoing “Penelopegate” scandal about the finances of the centre-right candidate, François Fillon.

Macron performs the most strongly of any candidate in the second round but struggles to make it into the top two in the first. Having eked out a clear lead in second place ahead of Fillon in the wake of Penelopegate, Macron’s lead has fallen back in recent polls after he said that France’s rule in Algeria was a “crime against humanity”.

Although polls show that the lion’s share of Bayrou’s supporters flow to Macron without his presence in the race, with the rest going to Fillon and Le Pen, Macron’s standing has remained unchanged regardless of whether or not Bayrou is in the race or not. So as far as the electoral battlefield is concerned, Bayrou’s decision is not a gamechanger.

But the institutional support of the Democratic Movement will add to the ability of Macron’s new party, En Marche, to get its voters to the polls on election day, though the Democratic Movement has never won a vast number of deputies or regional elections. It will further add to the good news for Macron following a successful visit to London this week, and, his supporters will hope, will transform the mood music around his campaign.

But hopes that a similar pact between Benoît Hamon, the Socialist Party candidate, and Jean-Luc Jean-Luc Mélenchon, the Left Front’s candidate, look increasingly slim, after Mélenchon said that joining up with the Socialists would be like “hanging himself to a hearse”. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.