Can Europe Make It?

The damage done by the EU’s revolving doors

José Manuel Barroso is not the only senior European official to go through the 'revolving door' into the corporate and financial world.

Harry Blain
26 September 2016
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Jose Manuel Barroso, and other EU leaders. Paimages/Geert Vanden Wijngaert. All rights reserved.José Manuel Barroso, the former president of the European Commission, has recently accused his former employers of being “discriminatory.” 

This is not an issue about his pension or the generous “transitional allowance” that other commissioners have been able to claim, but about his referral to an ad hoc ethics committee tasked with investigating his new role as Chairman of Goldman Sachs International.

The former Portuguese Prime Minister insists he has been unfairly singled out. “I have not been engaged to lobby on behalf of Goldman Sachs and I do not intend to do so”, he told the current Commission president, Jean-Claude Juncker. He has also pointed to the fact that he has not taken up the Goldman role within the 18-month “cooling off” period that EU rules demand – instead he held out for 20.

These arguments have not proved convincing. A petition started by EU employees “for strong exemplary measures to be taken against José Manuel Barroso for joining Goldman Sachs” has gained over 140,000 signatures, forcing EU officials to respond.

Mr Juncker described Goldman Sachs as “one of the organisations that knowingly or unknowingly contributed to the enormous financial crisis between 2007 and 2009,” adding “one does wonder about this particular bank [Barroso] has ended up working for.” The French president used stronger language: “Mr Barroso is joining Goldman Sachs?” he said. “Legally, it’s possible. But morally, and this is about the person, it’s unacceptable.”

“Maybe not this bank”

However, Mr Barroso is not the only senior European official to go through the “revolving door” into the corporate and financial world. Indeed, one in three of the commissioners from his second administration took this path; ending up with organisations like Bank of America Merrill Lynch or the private equity firm CVC.*

When Barroso’s first administration left office in 2010, six out of the thirteen departing commissioners went almost immediately into the corporate sector or lobby jobs. The tendency, if anything, is accelerating: the Corporate Europe Observatory’s revolving door database is constantly adding new faces – both revolving “in” from lobbying to public service, or revolving “out” like Barroso.

Jean-Claude Juncker did not appear to criticise Barroso because of a fundamental concern with “revolving doors.” “Personally I do not have a problem with him working for a private bank”, he said. “But maybe not this bank.”

In this view, the issue is the questionable judgement of one individual, not a deeper culture within the EU’s institutions. But given the extent of the revolving door between European public service and the private sector, these more serious questions cannot be overlooked.

Finance

One of the reasons for the particular concern over Goldman Sachs is the bank’s controversial role in Greece’s debt crisis. As Robert Reich describes, in 2001, as Greece searched for ways to conceal the full extent of its public debt in order to join the Eurozone, “Goldman Sachs came to the rescue, arranging a secret loan of 2.8 billion euros for Greece, disguised as an off-the-books ‘cross-currency swap’.”  Greece was able to hide a huge proportion of its debt, Goldman received a generous fee, while Greece’s “off-the-books” debt mounted.

Yet despite Goldman Sachs’ role in enabling Greece’s dodgy accounting methods, the bank has provided recruits for powerful EU positions, and hired prominent European officials. The president of the European Central Bank, Mario Draghi, was Managing Director at Goldman Sachs International from 2002-2005; former EU Competition Commissioner Peter Sutherland was their non-executive chairman for nearly ten years; while Mario Monti, Italy’s former unelected “technocratic” Prime Minister, had previously gone from the European Commission to a role as “international advisor to Goldman Sachs.”

Goldman is not alone. Edgar Meister joined the ECB’s Administrative Board of Review “just days” after leaving Deutsche Bank’s asset management branch DWS, while Sharon Bowles, a Liberal Democrat MEP for nine years, joined the London Stock Exchange Group after leaving Brussels. Eddy Wymeersch, former chairman of the Committee of European Securities Regulators (CESR), subsequently moved to the Association for Financial Markets in Europe (AFME), one of Europe’s “biggest finance industry lobby platforms.”

Indeed, Jonathan Hill, until recently Britain’s EU commissioner, in charge of Financial Services, was formerly a prominent lobbyist catering to a variety of financial sector clients, such as HSBC. His push for an EU “Capital Markets Union” was enthusiastically supported by groups like AFME, which has praised the Commission’s plans for “relaunching sound securitisation markets” and “pursuing pension reform.”

The environment

The fossil fuel industry is also well-connected in Brussels. Marcus Lippold, for example, has gone from coordinator for international energy relations with the European Commission’s Energy Directorate to “Principal Representative for Europe and Russia” at the world’s biggest oil company, Saudi Aramco. Prior to his Commission job, he was employed by ExxonMobil.

The revolving door swung in the other direction in early 2015, as Aleksandra Tomczak, formerly of the World Coal Association, became the EU’s coal policy coordinator. Months before, Spain’s Miguel Arias Cañete was appointed the European Commissioner for Climate Action and Energy in November 2014 – he previously chaired and held shares in two oil companies. In the run-up to the Paris Climate Conference, Cañete held one meeting with the renewables sector for every 22 with the fossil fuel industry.

Unsurprisingly, the EU’s “climate action” agenda after Paris has disappointed many green campaigners. In February, Green MEP Claude Turmes was amazed that the European Commission’s “first initiative after COP21” included “a fossil fuel package on EU Energy Security.” “Is it a bad joke?” he asked.

Friends of the Earth also criticised the EU for giving the “green light” to fracked gas imports from the United States, while the European Investment Bank has been questioned for supporting the proposed 3500km Southern Gas Corridor , “Europe’s Keystone XL.” The now-dying Trans-Atlantic Trade and Investment Partnership (TTIP) has also raised alarm, particularly EU proposals aimed at free energy trade across the Atlantic and expanding the ability of corporations (often fossil fuel companies) to sue national governments.

“Nothing surprising”

There are many more examples of the revolving door in other areas of EU responsibility. The new head of the European Food Safety Authority’s (EFSA’s) Communications and External Relations Department has moved directly from a senior role with the UK’s largest food industry lobbyist; in 2013, a former deputy director-general at the Commission’s Agriculture Directorate went on to “provide consulting for agribusiness firms and associations”; and a former head of the European Medicines Agency moved, in 2011, to a consultancy advising “pharmaceutical companies whose products his previous role would have evaluated and authorised.”

“Barrosogate”, then, should be seen in this context. But do the EU’s revolving doors actually matter?  EU rules have not been broken and the law certainly hasn’t. No one has been bribed and – in a phrase that defenders of the Clinton Foundation will be familiar with – there is no evidence of any “quid pro quos.”

Nonetheless, the appearance of conflicts of interest in public office has mattered for centuries. Tom Paine conveyed this view in the Rights of Man, describing how “the manner in which the English Parliament [sic] is constructed, it is like a man being both mortgagor and mortgagee… it is the criminal sitting in judgement upon himself.” In more modern terms, it is like banks being regulated by former bankers, or food safety standards being set by former food lobbyists.

If José Manuel Barroso were the only one to move from being “mortgagor” to “mortgagee”, there wouldn’t be a problem. The problem is that many would now agree with the European politician who said Barroso’s move was “nothing surprising”, because “the EU does not serve people but high finance.” These words came from Marine le Pen, whose movement – and others like it – will continue to benefit from the revolving doors that are increasingly part of the European Union’s political culture. 

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* This paragraph originally included reference to a commissioner moving to the mining firm Nyrstar. Although she received EU permission for this role she did not, in the end, take it up. Reference to it has therefore been removed

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