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.)
Getty
Show Hide image

Turkey's turmoil should worry David Cameron

Splits in the Turkish government could play into the Brexiteers' hands.

While Britain focused on Sadiq v Zac and Cameron v Corbyn, in Turkey an even more dramatic contest was coming to a head. For weeks there has been growing speculation about a split between Ahmet Davutoğlu, the wonkish prime minster, and President Recep Tayyip Erdoğan, the macho, mercurial kingpin of Turkish politics. The two men have differed over a growing crackdown on freedom of expression, the conflict with Kurdish militants in Turkey’s south east and Erdoğan’s ambitions to strengthen his own power. Yesterday, a nervous-sounding Davutoğlu confirmed on live television that he would leave his post.

To outside observers, this might seem like a faraway power struggle between two men with unpronounceable names. But it matters for Britain and the impending EU referendum in two crucial ways.

1. It throws the EU-Turkey refugee deal into doubt

The controversial €6bn agreement to stem the flows to Europe was born of the strong relationship between Davutoğlu and German Chancellor Angela Merkel. Not only does President Erdoğan have a far more ambivalent attitude towards the EU. He has also made Merkel’s life difficult by demanding the prosecution of a German comedian who penned a crude poem about him.

Though much criticised, the EU-Turkey deal has dramatically reduced the numbers being smuggled by sea to Greece. If it collapses, Europe could be heading for a repeat of last year’s crisis, when more than 800,000 people arrived on Greek shores. In Britain, such scenes will only fuel concern about migration - a key driver of anti-EU sentiment.

2. It plays into the narrative of the Brexit camp

Brexiteers have already sought to use Erdoğan’s growing illiberalism - and Turkey’s aspirations to join the EU - to win people over to their side. Turkey’s “palace coup” (as the opposition newspaper Cumhuriyet called it) cements the image of Erdoğan as an all-powerful leader who will not tolerate dissent. The accusations against Turkey are often ill-informed and tinged with Islamophobia. But they are clearly seen as effective by both sides in the referendum campaign. Only this week, David Cameron was forced to distance himself from his previous enthusiasm for Turkish accession, insisting that the prospect would not be on the cards “for decades.”

For now, Erdoğan’s intentions towards the EU deal are unclear. Perhaps he would like to take credit for visa-free travel for Turkish citizens to the Schengen Zone (but not the UK) - an attractive perk promised in return for Turkey’s cooperation. But it is just as easy to imagine him watching it collapse before railing against the perfidious west.

Either way, there will be nerves in Brussels, Berlin and London. Diplomats see the president as a much more difficult partner than Davutoğlu. “Erdoğan has to be handled very carefully,” said one official. “If Jean-Claude Juncker says something too blunt, who knows what will happen?”

Turkey still has several hurdles to clear before visa-free travel is approved. Ankara has made clear that it will not hold up its end of the bargain if the promise is not fulfilled. With the deadline for implementation set for the last day in June, the deal could begin imploding towards the end of next month. That, David Cameron will surely note with a gulp, would be just in time for the EU referendum.