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.)
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After Article 50 is triggered, what happens next?

Theresa May says Article 50 will be triggered on 29 March. The UK must prepare for years, if not decades, of negotiating. 

Back in June, when Europe woke to the news of Brexit, the response was muted. “When I first emerged from my haze to go to the European Parliament there was a big sign saying ‘We will miss you’, which was sweet,” Labour MEP Seb Dance remembered at a European Parliament event in London. “The German car industry said we don’t want any disruption of trade.”

But according to Dance – best known for holding up a “He’s Lying” sign behind Nigel Farage’s head – the mood has hardened with the passing months.

The UK is seen as demanding. The Prime Minister’s repeated refusal to guarantee EU citizens’ rights is viewed as toxic. The German car manufacturers now say the EU is more important than British trade. “I am afraid that bonhomie has evaporated,” Dance said. 

On Wednesday 29 March the UK will trigger Article 50. Doing so will end our period of national soul-searching and begin the formal process of divorce. So what next?

The European Parliament will have its say

In the EU, just as in the UK, the European Parliament will not be the lead negotiator. But it is nevertheless very powerful, because MEPs can vote on the final Brexit deal, and wield, in effect, a veto.

The Parliament’s chief negotiator is Guy Verhofstadt, a committed European who has previously given Remoaners hope with a plan to offer them EU passports. Expect them to tune in en masse to watch when this idea is revived in April (it’s unlikely to succeed, but MEPs want to discuss the principle). 

After Article 50 is triggered, Dance expects MEPs to draw up a resolution setting out its red lines in the Brexit negotiations, and present this to the European Commission.

The European Commission will spearhead negotiations

Although the Parliament may provide the most drama, it is the European Commission, which manages the day-to-day business of the EU, which will lead negotiations. The EU’s chief negotiator is Michel Barnier. 

Barnier is a member of the pan-EU European People’s Party, like Jean-Claude Juncker and German Chancellor Angela Merkel. He has said of the negotiations: “We are ready. Keep calm and negotiate.”

This will be a “deal” of two halves

The Brexit divorce is expected to take 16 to 18 months from March (although this is simply guesswork), which could mean Britain officially Brexits at the start of 2019.

But here’s the thing. The divorce is likely to focus on settling up bills and – hopefully – agreeing a transitional arrangement. This is because the real deal that will shape Britain’s future outside the EU is the trade deal. And there’s no deadline on that. 

As Dance put it: “The duration of that trade agreement will exceed the life of the current Parliament, and might exceed the life of the next as well.”

The trade agreement may look a bit like Ceta

The European Parliament has just approved the Comprehensive Economic and Trade Agreement (Ceta) with Canada, a mammoth trade deal which has taken eight years to negotiate. 

One of the main stumbling points in trade deals is agreeing on similar regulatory standards. The UK currently shares regulations with the rest of the UK, so this should speed up the process.

But another obstacle is that national or regional parliaments can vote against a trade deal. In October, the rebellious Belgian region of Wallonia nearly destroyed Ceta. An EU-UK deal would be far more politically sensitive. 

The only way is forward

Lawyers working for the campaign group The People’s Challenge have argued that it will legally be possible for the UK Parliament to revoke Article 50 if the choice is between a terrible deal and no deal at all. 

But other constitutional experts think this is highly unlikely to work – unless a penitent Britain can persuade the rest of the EU to agree to turn back the clock. 

Davor Jancic, who lectures on EU law at Queen Mary University of London, believes Article 50 is irrevocable. 

Jeff King, a professor of law at University College London, is also doubtful, but has this kernel of hope for all the Remainers out there:

“No EU law scholar has suggested that with the agreement of the other 27 member states you cannot allow a member state to withdraw its notice.”

Good luck chanting that at a march. 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.