Europe gets a taste of its own medicine

Through the IMF, Asian capital now has a stranglehold on European nations – just as Europe did durin

A fierce and profoundly important battle is under way to find a new leader for the IMF. Angela Merkel fired the starting gun on Monday last week when she insisted that the disgraced former head Dominique Strauss-Kahn must be followed by another European.

It seemed almost impolitic at the time – it wasn't entirely clear what had happened in New York – and there were more than a few prominent figures leaping to Strauss-Kahn's professional, if not his personal, defence. But Merkel had good reason to come out of the blocks so quickly.

The IMF has historically been Europe's toy to dispose of, just as the World Bank has always been led by an American. But the rest of the world would be only too happy to see a pair of non-European hands take hold of the top job at the IMF – a job that, after a few years in the doldrums, became once more a premier seat of global power under Strauss-Kahn .

In all likelihood, they willo be disappointed once again, and Merkel is likely to get her way. The French finance minister, Christine Lagarde, is the current strong favourite to replace her countryman as the IMF's next head. And if not her, then it will be one of the other Europeans – Turkey's Kemal Dervis and Germany's Axel Weber being my tips over and above the now slow-running Gordon Brown – who all already have the wind in their sail.

But it may yet prove to be a hollow victory for Europe, because of one of the legacies of Strauss-Kahn's leadership that is going to follow the IMF as surely and as doggedly as last week's rape allegations will follow him.

In order to reinvigorate the IMF and turn it into the decisive and powerful body it has become under his leadership, Strauss-Kahn retooled its whole approach and boosted its coffers by promising the rest of the world a greater say in the way that it was run, up to and including reform of the controversial quota system that has long distorted IMF politics in favour of Europe and America. He did this above all by opening the door to the might of Asian capital. That is a door it will now be impossible to close.

So Europe's leaders ought to beware. While they may in the very short term get what they are asking for, their demands are looking increasingly unjustifiable to the rest of the world. Latin America did not have one of its leaders as head of the IMF during its debt crisis of the 1980s. And nor, more to the point, did Asia during the Asian financial crisis of the late 1990s.

It is worth recognising that Europe is today living on political debt to Asia at least as much as it is living on economic debt to the IMF. And what sparked Latin America's lost decade? It was, in part, the US Federal Reserve's self-protecting interest-rate hikes that tipped Mexico over the edge in 1982.

Asian capital today is not so far away from having a similar silent stranglehold on European nations. So a Latin American-style crisis in Europe remains a distinct possibility.

And however much some politicians bay for the blood of austerity in Portugal, Ireland and Greece to avoid this, the truth is that the balance of our fate will be determined by those who are footing the bill from far away. That, after all, is what Europeans at the IMF used to tell the rest of world.

Simon Reid-Henry is a lecturer at Queen Mary, University of London.

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Who is the EU's chief Brexit negotiator Michel Barnier?

The former French foreign minister has shown signs that he will play hardball in negotiations.

The European Commission’s chief Brexit negotiator today set an October 2018 deadline for the terms of Britain’s divorce from the European Union to be agreed. Michel Barnier gave his first press conference since being appointed to head up what will be tough talks between the EU and UK.

Speaking in Brussels, he warned that UK-EU relations had entered “uncharted waters”. He used the conference to effectively shorten the time period for negotiations under Article 50 of the Lisbon Treaty, the legal process to take Britain out of the EU. The article sets out a two year period for a country to leave the bloc.

But Barnier, 65, warned that the period of actual negotiations would be shorter than two years and there would be less than 18 months to agree Brexit.  If the terms were set in October 2018, there would be five months for the European Parliament, European Council and UK Parliament to approve the deal before a March 2019 Brexit.

But who is the urbane Frenchman who was handpicked by Commission President Jean-Claude Juncker to steer the talks?

A centre-right career politician, Barnier is a member of the pan-EU European People’s Party, like Juncker and German Chancellor Angela Merkel.

A committed European and architect of closer eurozone banking integration, Barnier rose to prominence after being elected aged just 27 to the French National Assembly.  He is notorious in Brussels for his repeated references to the 1992 Winter Olympics he organised in Albertville with triple Olympic ski champion Jean-Claude Killy.

He first joined the French cabinet in 1993 as minister of the environment. In 1995, Jacques Chirac made him Secretary of State for European Affairs, teeing up a long and close relationship with Brussels.

Barnier has twice served as France’s European Commissioner, under the administrations of Romano Prodi and José Manuel BarrosoMost recently he was serving as an unpaid special advisor on European Defence Policy to Juncker until the former prime minister of Luxembourg made him Brexit boss.“I wanted an experienced politician for this difficult job,” Juncker said at the time of Barnier, who has supported moves towards an EU army.

 

Barnier and the Brits

Barnier’s appointment was controversial. Under Barroso, he was Internal Market commissioner. Responsible for financial services legislation at the height of the crisis, he clashed with the City of London.

During this period he was memorably described as a man who, in a hall of mirrors, would stop and check his reflection in every one.

Although his battles with London’s bankers were often exaggerated, the choice of Barnier was described as an “act of war” by some British journalists and was greeted with undisguised glee by Brussels europhiles.

Barnier moved to calm those fears today. At the press conference, he said, “I was 20 years old, a very long time ago, when I voted for the first time and it was in the French referendum on the accession of the UK to the EU.

“That time I campaigned for a yes vote. And I still think today that I made right choice.”

But Barnier, seen by some as aloof and arrogant, also showed a mischievous side.  It was reported during Theresa May’s first visit to Brussels as prime minister that he was demanding that all the Brexit talks be conducted in French.

While Barnier does speak English, he is far more comfortable talking in his native French. But the story, since denied, was seen as a snub to the notoriously monolingual Brits.

The long lens photo of a British Brexit strategy note that warned the EU team was “very French” may also have been on his mind as he took the podium in Brussels today.

Barnier asked, “In French or in English?” to laughter from the press.

He switched between English and French in his opening remarks but only answered questions in French, using translation to ensure he understood the questions.

Since his appointment Barnier has posted a series of tweets which could be seen as poking fun at Brexit. On a tour of Croatia to discuss the negotiations, he posed outside Zagreb’s Museum of Broken Relationships asking, “Guess where we are today?”

 

 

He also tweeted a picture of himself drinking prosecco after Boris Johnson sparked ridicule by telling an Italian economics minister his country would have to offer the UK tariff-free trade to sell the drink in Britain.

But Barnier can also be tough. He forced through laws to regulate every financial sector, 40 pieces of legislation in four years, when he was internal market commissioner, in the face of sustained opposition from industry and some governments.

He warned today, "Being a member of the EU comes with rights and benefits. Third countries [the UK] can never have the same rights and benefits since they are not subject to same obligations.”

On the possibility of Britain curbing free movement of EU citizens and keeping access to the single market, he was unequivocal.

“The single market and four freedoms are indivisible. Cherry-picking is not an option,” he said.

He stressed that his priority in the Brexit negotiations would be the interests of the remaining 27 member states of the European Union, not Britain.

“Unity is the strength of the EU and President Juncker and I are determined to preserve the unity and interest of the EU-27 in the Brexit negotiations.”

In a thinly veiled swipe at the British, again greeted with laughter in the press room, he told reporters, “It is much better to show solidarity than stand alone. I repeat, it is much better to show solidarity than stand alone”.

Referring to the iconic British poster that urged Brits to "Keep Calm and Carry On” during World War Two, he today told reporters, “We are ready. Keep calm and negotiate.”

But Barnier’s calm in the face of the unprecedented challenge to the EU posed by Brexit masks a cold determination to defend the European project at any cost.

James Crisp is the news editor at EurActiv, an online EU news service.