The Political Commissioner: A European Ethnography 0192893971, 9780192893970

Citation preview

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 6/5/2021, SPi

The Political Commissioner

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 6/5/2021, SPi

TRANSFORMATIONS IN GOVERNANCE Transformations in Governance is a major academic book series from Oxford University Press. It is designed to accommodate the impressive growth of research in comparative politics, international relations, public policy, federalism, and environmental and urban studies concerned with the dispersion of authority from central states to supranational institutions, subnational governments, and public–private networks. It brings together work that advances our understanding of the organization, causes, and consequences of multilevel and complex governance. The series is selective, containing annually a small number of books of exceptionally high quality by leading and emerging scholars. The series is edited by Liesbet Hooghe and Gary Marks of the University of North Carolina, Chapel Hill, and Walter Mattli of the University of Oxford. Organizational Progeny: Why Governments are Losing Control over the Proliferating Structures of Global Governance Tana Johnson Democrats and Autocrats: Pathways of Subnational Undemocratic Regime Continuity within Democratic Countries Agustina Giraudy A Postfunctionalist Theory of Governance (5 Volumes) Liesbet Hooghe and Gary Marks et al Constitutional Policy in Multilevel Government: The Art of Keeping the Balance Arthur Benz With, Without, or Against the State? How European Regions Play the Brussels Game Michaël Tatham Territory and Ideology in Latin America: Policy Conflicts between National and Subnational Governments Kent Eaton Rules without Rights: Land, Labor, and Private Authority in the Global Economy Tim Bartley Voluntary Disruptions: International Soft Law, Finance, and Power Abraham L. Newman and Elliot Posner Managing Money and Discord in the UN: Budgeting and Bureaucracy Ronny Patz and Klaus H. Goetz The Rise of International Parliaments: Strategic Legitimation in International Organizations Frank Schimmelfennig, Thomas Winzen, Tobias Lenz, Jofre Rocabert, Loriana Crasnic, Cristina Gherasimov, Jana Lipps, and Densua Mumford

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 6/5/2021, SPi

The Political Commissioner A European Ethnography FRÉDÉRIC MÉRAND

1

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 6/5/2021, SPi

3

Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Frédéric Mérand 2021 The moral rights of the author have been asserted First Edition published in 2021 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2021937346 ISBN 978–0–19–289397–0 DOI: 10.1093/oso/9780192893970.001.0001 Printed and bound in the UK by TJ Books Limited Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 6/5/2021, SPi

Acknowledgments Despite its bad reputation, the European Commission is one of the most transparent and open institutions a sociologist can deal with in the political sphere. Still, it took an extra bit of daring, even recklessness, to agree to host me as an “atypical trainee” at the Berlaymont for more than four years. From the outset, it was agreed that I could write what I wanted to write from my observations, which would in part relate to sensitive or confidential matters pertaining to the institution or the individuals who populate it. I also knew that my presence would likely disrupt the routine of the cabinet of Pierre Moscovici and even worry some staffers. However, my scientific independence was never, in the course of this investigation, put to the test. I am grateful to Pierre Moscovici and Olivier Bailly who accepted this project, which entailed risks to their personal reputation as well as that of the Commission. I know that some people pleaded my case behind the scenes, and I thank them for that too. I am equally grateful to the staffers and the civil servants who spent dozens of hours of their busy professional lives explaining what they do, sharing their insights with me, introducing me to people, reassuring key people, fixing my faux pas, arranging my travel, calling IT services, helping me get my clearance badge, inviting me for coffee, making conversation, and so on. To write this book, I had the incredible luxury of twenty research assistants free of charge: cabinet staffers and former staffers who all read and commented on the manuscript, correcting errors, clarifying facts, making recommendations, and even suggesting how to improve the syntax. I wrote the manuscript for this book in 2018–19, during a sabbatical year at the Jean Monnet Centre and the Department of Political Science at McGill University. I would like to thank Juliet Johnson and Maria Popova for their hospitality, as well as Virginie Lasnier and Sasha Lleshaj for their company. I presented the first results at several institutions and conferences, including the European University Institute in Florence, McGill University, the University of Copenhagen, the University of Southern Denmark, CEVIPOF at Sciences Po Paris, the Réseau transatlantique sur l’Europe politique, and the European Union Studies Association (Denver, Colorado). Colleagues and friends read some chapters and offered valuable suggestions: Rebecca Adler-Nissen, Tassos Anastassiadis, Vincent Arel-Bundock, Anahita Arian, Laurie Beaudonnet, Michael Bauer, Christian Bueger, Peter Dietsch, Juliette Dupont, Kristin Eggeling, Clément Fontan, Martial Foucault, Philipp Genschel, Thomas Godreau, Catherine Hoeffler, Stephanie Hofmann, Maya Jegen, Hussein Kassim, Christian Kreuder-Sonnen,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 6/5/2021, SPi

vi



Dominika Kunertova, Zaki Laïdi, Romain Lecler, Marieke Louis, Lucile Maertens, Michel Mangenot, Yohann Morival, Johannes Müller-Gomez, Krzysztof Pelc, Vincent Pouliot, Sten Rynning, Olivier Schmitt, and Jonathan White. Poor George Ross, author of the classic Jacques Delors and European Integration (Oxford University Press, 1995), offered ten pages of detailed comments on a first draft of the manuscript. All he got in return was a pint of Guinness at the McCarold’s. During my years between Montreal and Brussels, a nice bunch of journalists and fixtures of the Brussels bubble shared their tips, contacts, and friendship with me. I would like to thank them, as well as my “regular” research assistants at the Université de Montréal: Johannes Müller Gomez, Imène Torkhani, and Camilla Thiffault, who did the fact-checking and organized the references. Ryan Perks, my copyeditor, worked his magic with the manuscript, and Oxford University Press’s Dominic Byatt found three amazing anonymous reviewers, proving once again that he is the best editor one can hope for. I am grateful to Liesbet Hooghe and Gary Marks who welcomed the book in the Transformations in Governance series with their usual enthusiasm and intellectual support. I wrote this book with my parents as the intended readers in mind, hoping that it would give them a better understanding of politics in general, and European politics in particular. The final result is dedicated to my Lebensmensch, Maya Jegen, who, after putting up with my many absences and, despite her environmental commitment, accepting my greenhouse gas emissions (three to four return trips to Brussels per year), read the manuscript carefully, and, as usual, deleted superfluous words and adverbs. I take full responsibility for the remaining clumsiness and inaccuracies. Frédéric Mérand Outremont September 30, 2020

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 6/5/2021, SPi

Contents List of figures

ix

Introduction

1

1. The Moscos

14

2. Facing Varoufakis: Greece, 2009–2015

40

3. “We have to build a success story”: Greece, 2015–2019

64

4. A socialist, French Commissioner

89

5. Discipline, not punish: Budget disputes with Spain and Portugal

105

6. Italian populists and the Pact

127

7. The failed reform of the eurozone

149

8. No representation without taxation: Fighting tax avoidance

176

9. Tax justice: The GAFAs and corporate taxation

197

Conclusion: Before the pandemic

215

Epilogue

230

Index

233

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 6/5/2021, SPi

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 6/5/2021, SPi

List of figures 1.1 Facing the elevators on the tenth floor: artwork at the entrance to the cabinet

15

1.2 The cafeteria on the eleventh floor, reserved for cabinets. The lait russe is cheap

20

1.3 Away Day on the Belgian coast

21

1.4 The boss and his chef de cabinet

28

1.5 In my embedded observation, I usually stayed close but in the background. Here in Alexis Tspiras’s office, I would stand behind Olivier, the chef de cabinet

35

3.1 A meeting with four ministers at the Greek Ministry of Finance

83

5.1 Simon, Reinhard, and Fabien discuss strategy while eating cookies in Yannick’s office (which is also my office) 10.1 At Forêt de Soignes

113 231

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 6/5/2021, SPi

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

Introduction In the summer of 2019, Ursula von der Leyen became president of the Commission after a night of haggling among the leaders of the European Union. Confirmed in Strasbourg by a narrow parliamentary majority on the basis of a program cobbled together at the last minute, her appointment is in line with the tradition of national and personal interest calculations, but also of the late-night corridor discussions that have shaped European leadership since the signing of the Treaty of Rome in 1957. On only one occasion, in 2014, a higher democratic requirement applied to the appointment of the European executive. Refusing the diktat of member-state governments, political parties nominated their own candidates for Commission president. During a transnational campaign, Spitzenkandidaten representing each major party submitted their electoral platform to the public. They held television debates in several languages. The European People’s Party (center-right) having won the largest number of seats in Parliament, its Spitzenkandidat, Jean-Claude Juncker, became the head of the Commission. While the “process” did not have the drama of national elections, with their political theater focusing citizens’ attention, it was a unique experience in the history of European politics. The idea that the winner of a real election would take over the presidency of the executive clashed with the diplomatic logic of international organizations.¹ Bolstered by his electoral legitimacy, Jean-Claude Juncker announced at his first appearance before the assembly in Strasbourg that he would lead a “more political” Commission. “The Commission,” he said, “is not a technical committee composed of brilliant senior officials at the behest of another institution. The Commission is political. I want it to be more political. It will be very political. Its composition must reflect the plurality of the majority of ideas that is being put in place.” A few months later, before the parliamentary endorsement of the so-called College of Commissioners, one from each member state, Juncker pressed the point: “The Commission is not a gathering of anonymous senior officials.” The vision he laid out stood in stark contrast with that of national leaders, who consider the Commission a technocratic instrument at their service. For them, a European commissioner is a technocrat, at best a diplomat; he or she is not supposed to become a political actor.² The “political Commission” advocated by President Juncker is the subject of this book. Through it, I explore the political—rather than the economic, legal, or The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0001

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

2

  

diplomatic—logics that govern the European Union and the effects, but also the limits, of Juncker’s “political” strategy. For more than four years, I shadowed the cabinet of French commissioner Pierre Moscovici, a key player in this strategy. My aim was to develop a sociology of political work in the context of the unique international organization that is the European Union. By focusing on a commissioner whose portfolio was mainly economic, I also shed light on the dynamics of economic policymaking in the EU. As we enter an economic depression deeper and wider than Europe has ever seen, I believe the experience of the Juncker Commission carries important lessons for the future. Jean-Claude Juncker was not the first to formulate the ambition of a political Commission. In 1954, Jean Monnet, the first president of the High Authority of the European Coal and Steel Community, the EU’s forerunner, resigned from his post on the grounds that member-state governments resisted that body’s political dimension. “I was concerned,” he wrote in his Mémoires, “about ways of ensuring that political forces would no longer be the brakes, but rather the engines of Europe.”³ Twenty-three years later, his successor, Roy Jenkins, a former British minister, also said he wanted to “introduce political content into the Commission, to be in direct contact with governments, with peoples, in a way that perhaps nonpoliticians have not been able to do.”⁴ The same Jenkins later referred to the Commission presidency as an “impossible job.” In part, Jacques Delors realized this political ambition during the 1980s by deepening European cooperation and introducing strong political symbols like “European citizenship.”⁵ Necessary for some, dangerous for others, a political Commission would be the executive arm of this political Europe, something that would resemble the government of a state, with real powers over and in direct contact with its citizens. Sovereigntists are opposed to such an idea. This is also the case for many Europhiles who fear that the politicization of Europe will cause a backlash in public opinion.

Jean-Claude Juncker’s gamble When, in November 2014, Jean-Claude Juncker moved into his office on the thirteenth floor of the Berlaymont, the Commission’s headquarters in Brussels, the EU was just emerging from the worst economic crisis in its history—that is, before the “Great Lockdown” of 2020.⁶ Started in the United States, the “Great Recession” hit the Continent hard. In a few months, the Irish, Portuguese, and Greek governments were ruined, Spain and Italy were on the brink, and France did not seem far behind. From the Baltic countries to the United Kingdom, governments imposed an austerity cure to purge their public accounts, which had been wiped out by bank rescue plans. In a climate of panic, the EU cobbled together new rules to seal off economic governance structures damaged by the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



3

crisis. While the European Council, representing national leaders, sought to coordinate a macroeconomic response, the European Central Bank became the guarantor of the eurozone banking system and the Commission the guardian of its public accounts. In this way, between 2010 and 2014, a new financial and budgetary architecture was built through emergency politics.⁷ Public opposition to the EU had never reached such heights. In spring 2014, 50 percent of the Italian, 48 percent of the Spanish, 46 percent of the French, and 65 percent of the Greek population had a negative opinion of the EU.⁸ The elections returned a sizable contingent (20 percent) of Eurosceptic MEPs (or members of the European Parliament). Describing his Commission as “the last chance,” President Juncker suggested that after the economic crisis, Europe was entering a political crisis. Indeed, Juncker linked the two when he spoke of a “polycrisis.” Two months after Juncker started his job, the election in Greece of Alexis Tsipras’s far-left government showed that many people, fed up with austerity, were ready to challenge the euro. In the summer 2015, the influx of a million refugees on the Continent highlighted the lack of solidarity between European nations, each of them passing the responsibility for welcoming migrants on to its neighbors. Throughout 2016, the Commission engaged in a battle with the Polish and Hungarian governments, which it accused of curtailing the rule of law and fundamental freedoms in their countries. Also in 2016, 52 percent of Britons voted to leave the Union; this was the first time since its foundation that the EU would lose a member, and a significant one at that. In 2018, it was the turn of the Italians to bring to power a coalition government made up of populist parties, one of them from the radical Right. In 2019, European elections confirmed the entrenchment of antisystem movements in the political landscape. Whether we like it or not, Europe became political during this decade. But what does a “political Commission” mean? This is the starting point of my investigation. During my regular visits to the Berlaymont, I often posed this question to my interlocutors. For some, the Juncker Commission was political because it included a large number of career politicians: out of twenty-eight commissioners, there were four former prime ministers, four former deputy prime ministers, and nineteen former ministers—almost all of them prominent figures in their national political parties or former candidates in European elections. For others, the political dimension of the Commission was rooted in a less technocratic communication strategy and Juncker’s ten-priority program, which included employment, growth and investment, digital union, energy union, a “more balanced trade policy,” and a “new migration policy.” When hearing the word “political,” some referred to streamlined, vertical operational planning, centered on vice president– led “project teams.” Others, finally, defined politics as the institutional ambition to shape one’s own agenda, even if this meant standing up to member-state governments.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

4

  

Even if my interlocutors denied it, it is obvious that a political Commission also evokes the prospect of a partisan Commission. According to the treaties by which it is constituted, the Commission has the responsibility to “defend the general interest” and to be the “guardian of the treaties.” Does politics undermine the putative neutrality on which these responsibilities are thought to depend? President Juncker never hid the fact that he based his legitimacy on a “grand coalition” between the center-right European People’s Party and the center-left Alliance of Socialists and Democrats. The Spitzenkandidaten process resulted from the progressive empowerment of the European Parliament, which, elected by universal suffrage since 1979, challenges national governments’ monopoly on political representation.⁹ Between 2014 and 2019, the authority of the Juncker Commission, invested by governments but “taking into account the results of the European elections,” was based on close collaboration with the center-right and center-left parties, with whom they had to forge compromises.

The most political commissioner of the political Commission? The lack of consensus among the Eurocrats I met in the Berlaymont is not surprising. Defining politics is one of the oldest and perhaps the most contested issue in the social sciences. From Max Weber to Marcel Gauchet and Hannah Arendt, scholars agree that politics is a particular sphere of human activity linked to the direction of collective affairs. To engage in politics is to reject cultural, legal, economic, scientific, or diplomatic determinism: politics is an attempt to escape the “evidence” of religion, law, the market, or social status. In politics, human beings are given the power to decide on the basis of their values and interests, which of course do not necessarily converge. According to French political scientist Maurice Duverger, politics therefore assumes that there is antagonism but presupposes the freedom to choose.¹⁰ Hannah Arendt rightly writes: “[T]he notion that politics exists always and everywhere human beings exist is itself a prejudice.”¹¹ If we follow this reasoning, things are not in themselves political; they require, instead, politicization. There is a rich sociological literature on this process.¹² Using the experience of the political Commission as a case study, this book likewise seeks to understand how issues become political. What does the “practice of politics” mean in an international organization like the European Union, where the “spectacle of power”¹³ is blurred by twenty-four official languages, twentyeight national histories, institutions hybridizing France’s majoritarian tradition with the constraints of Dutch consensus democracy, leaders whose names are rarely heard outside the borders of their native countries, and a cultural heterogeneity barely hidden by a “banal nationalism” made of functional banknotes and Beethoven’s symphony?¹⁴

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



5

In order to answer this question, this book puts the spotlight on a politician and his entourage, whose trajectory, strategies, successes, and failures I follow during a crucial period in the construction of Europe, that of the Juncker Commission. Commissioner Pierre Moscovici’s career embodies all the facets of Juncker’s political Commission. Elected to both the French National Assembly and to the European Parliament, several times a minister in France, former secretary of the French Socialist Party (PS, or Parti socialiste), a media-savvy social democrat who does not hesitate to cross swords with those he considers his populist enemies, Pierre Moscovici was one of the most prominent members of the Juncker Commission, where he was responsible for economic and financial affairs, taxation, and the customs union. In his trajectory, his communication, and his ambition, Moscovici was perhaps the most political commissioner in the political Commission. Between 2014 and 2019, the man I will most often refer to as “the commissioner” managed four strategic files. These are the Greek crisis (covered in chapters 2 and 3); budgetary surveillance of countries with excessive deficits (France, Spain, Portugal, and Italy—in chapters 4, 5, and 6); eurozone reform (chapter 7); and cooperation in the field of taxation (chapters 8 and 9). While the first two topics were more sensitive in terms of public opinion—the Commission being, rightly or wrongly, associated with the collapse of the Greek state and austerity measures in various southern countries—each of the issues was dealt with “politically,” with the commissioner, together with President Juncker, imposing his will on administrative services, deploying his continent-wide network of contacts, and developing a very personal communication style vis-à-vis the media and the European Parliament. In doing so, the commissioner always kept an eye on France, to which I devote chapter 4. Making himself available to the Parisian media, laying the groundwork during visits “at home” that were also encouraged by President Juncker, the commissioner remained involved in partisan debates, at the European level of course, but above all in the PS. The coming to power of Emmanuel Macron in 2017, following the collapse of the PS, pulled the rug from under the commissioner’s feet: with the PS sidelined, he longer enjoyed the same strategic depth in France. While remaining loyal to his political family, he started to adopt an increasingly critical stance on populism—a possible, if uncertain, point of convergence with President Macron. Presented as an ethnographic narrative, the story I am about to tell is situated in space, in time, and especially in the institution. Between the summer of 2015 and the fall of 2019, I had the privilege of being an embedded observer in the commissioner’s private office, or cabinet. Spending two months a year at the Berlaymont, I was able to follow the progress of each file almost in real time. I joined the cabinet as an academic with the aim of observing the commissioner and his team in situ and in action.¹⁵ I accompanied them in their meetings in

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

6

  

Brussels and in Strasbourg, in Washington and in Athens. In the canteen or in the corridors of the Berlaymont, I asked them about their strategies and their hopes. I also listened to their fears and disappointments. This investigation forms the empirical basis on which I base my exploration of how people “do politics.” In social science, we distinguish observation from participant observation. My approach falls between the two. As an observer rather than a collaborator, I did not participate in the cabinet’s work; at the same time, I had my office in the Berlaymont, I was present at meetings when I was in Brussels, and I shared moments of socialization with cabinet members, sometimes with the commissioner himself. In the years I spent in Brussels, I never became one of them; but I wasn’t quite a stranger either. Some members of the cabinet became friends, and there are none for whom I do not have a significant degree of professional admiration. Trying to get close to what Pierre Bourdieu calls the “mystery of the ministry”¹⁶—that is, speech acts embodying political authority—in what follows I hope to strike a tone that is neither hagiographic nor denunciatory. My scholarly objective is not to evaluate whether the policy they conducted was good or bad, but simply to understand how it was done. Because my vista point is situated institutionally, the investigation neglects several aspects of the political Commission. For example, I have followed very little of the migrant crisis, during which the Commission made bold proposals for the distribution of refugees across Europe. Nor have I been interested in trade negotiations around the Comprehensive Economic and Trade Agreement with Canada (CETA), conflicts with Poland and Hungary over the rule of law, or foreign policy toward Vladimir Putin or Donald Trump. Since the commissioner’s mandate covered the customs union, I deal with Brexit, but without devoting a whole chapter to it. These various aspects of the “polycrisis” were part of the cabinet’s political environment; they could occasionally influence a dossier, but apart from the commissioner and his chief of staff, who attend “college” meetings, no one had access to insider information. Brexit is an exception, and I discuss it at the end of chapter 8.

Political work under constraint My observation of the commissioner and his cabinet has helped me to develop a sociology of political work. I borrow that expression from Pierre Bourdieu, who devotes some passages to exploring the “political division of labor” through which “political professionals” are vested with the authority to “speak” on behalf of the group and, through their words, bring the group into existence.¹⁷ While Bourdieu writes mostly on the “fetishism” of political representation in the social world, I am rather more interested in the autonomy of political representatives, in their agency, in the conditions of possibility of their speech acts in the political field.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



7

These forms of political work have been studied in French sociology, where the emphasis is on the practices of legitimation, problematization, and instrumentation that contribute to institutional change and reproduction. In European studies, Andy Smith applied the concept to the case of Commissioner Leon Brittan.¹⁸ I do not approach politics from a theoretical point of view, but inductively, through the observation of practices in the “field of eurocracy.”¹⁹ By political work, I mean the practices that widen the space of freedom in which actors exercise their agency in the face of constraints imposed by institutions, law, economics, expertise, or diplomacy. Within this space of freedom, values and interests can be expressed and confronted: for example, solidarity between nations vis-à-vis the responsibility of individual states, European federalism vis-à-vis national sovereignty, the equality of citizens vis-à-vis personal freedom, or environmental protection vis-à-vis economic growth. That political agency is constrained is self-evident. But international political work is especially constrained, including in the EU, for five reasons. First, formal institutions set the rules from which, in principle, political actors can only break free with difficulty. Within the EU, the relative weight of the Council, the Parliament, and the Commission, and above all the competencies that these institutions have vis-à-vis member states, are set in stone by the treaties: in terms of legislation, the Commission has the “monopoly of legislative initiative,” but the Council, which represents member states, and Parliament, which represents the people, have the final say. Furthermore, in an international organization like the EU, the powers of Parliament and the Commission are particularly limited. Some legislative proposals are subject to qualified majority voting (55 percent of member states representing 65 percent of the population), while others require unanimity. The Treaty on European Union and the Treaty on the Functioning of the European Union are a solid edifice through which governments ensure mutual and collective control of supranational institutions. A second constraint on political work is EU law, the mass of legal texts that have the force of law in all the member states. As “guardian of the treaties,” the Commission must ensure that its decisions comply with all the laws and regulations in force. Some of these texts oblige the Commission to act, while others prevent it from acting—each according to “rules” that have been bitterly negotiated upstream by the member states. But the acquis communautaire, the legal foundation of the EU, remains complex and subject to review by the EU Court of Justice. Each political decision must therefore be based on a “legal basis,” generally a treaty article that justifies the Commission’s action. Beyond the institutions and the law, a third constraint must be recognized: diplomacy, which channels interactions between states of unequal rank, whether or not they are members of the Union. Regardless of the voting procedure in the Council, and notwithstanding the fact that, in principle, the Commission enjoys a monopoly of legislative initiative on so-called “Community” matters, some states

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

8

  

have a tacit power of proposal, or indeed to veto proposals. International political work cannot disregard diplomatic negotiation, which is of a different nature since it is based on the relative power of states. It has often been said that the “FrancoGerman engine” is at the heart of European decision-making. During the Juncker Commission, in the face of a weakened France, Germany alone exerted an influence that was out of all proportion to its relative weight in the Council. As we shall see, especially after 2017, the “German constraint” on the Commission’s agency became increasingly strong, sometimes by default. Other constraints, less codified or formal than the ones just listed, nevertheless weigh just as much on political decision-making. The EU is a capitalist economy. In terms of economic policy, the Commission’s room for maneuver is limited by the market. Even if the Commission wishes to help a bankrupt state such as Greece, it has to deal with the reaction of credit agencies and financial markets, which may amplify, diminish, or undermine its actions. While a few words from European Central Bank president Mario Draghi (“I will do whatever it takes to save the euro”) may have reassured the market in 2012, poorly calibrated political communication can also cause panic. A final constraint on political work is imposed by expertise and technocracy. Whether it is about climate change or public health, political actors ignore science at their own peril. In economic and financial affairs as well as in taxation, technical knowledge is essential: a politically attractive tax may not be technically feasible; conversely, a budgetary instrument that appeals to economists may be unacceptable to governments. The Commission’s administrative services, staffed by officials with degrees in law or economics, feed the political process with their own analyses and priorities, often developed in conjunction with a Brussels ecosystem of expert-packed Council working groups or independent think tanks. For some, a commissioner should only be the carrier of these priorities.

Political work and its effects Many believe that political agency is shrinking. This is especially the case with international organizations such as the European Union, which its critics describe as technocratic and soulless. While most research on European public opinion emphasizes that politicization is concomitant with the growth of Euroscepticism, writings on the Commission tend to focus on its depoliticization.²⁰ They show, for example, how the Commission tries to “mask,” “erase,” “repress,” and “depoliticize” by “mobilizing knowledge and technical know-how.” From this perspective, appearing apolitical would be the main source of legitimacy for a Commission that “does politics without appearing to do so.”²¹ Without a doubt, this conception of political work as a strategy of depoliticization describes some aspects of the Commission. When “science” is used to

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



9

authorize a pesticide such as Glyphosate, one is “playing politics without appearing to be playing politics.” But it is precisely this technocratic argumentation that Juncker and Moscovici opposed. Afraid of neither conflict nor ideology, they instead formulated a discourse that was openly political, by communicating directly with citizens or mobilizing allies in Parliament and in civil society. In this book, I show that while politics is constrained, it is not powerless. Political work consists precisely in mobilizing resources, alliances, and messages that give freedom back to the actors. This freedom is inseparable from conflict, which political work does not seek to avoid but rather embraces, including in its crudest partisan dimension. From this point of view, the Juncker Commission was, in many ways, political. But did its political work produce concrete results? Did political agency increase as a result of the intervention of the commissioner and his staff? In each of the files studied, I answer in the affirmative, with the limits and nuances that a rigorous analysis imposes. The case of taxation, which I discuss in chapters 8 and 9, is perhaps the most remarkable example of successful political work. In an institutional context constrained by the unanimity rule (according to which the agreement of all member states is necessary for the Council’s adoption of a tax-related law) and a diplomatic context shaped by the determined opposition of small members, which, like Cyprus or Malta, benefit from tax competition, the commissioner capitalized on widely publicized scandals and the support of the European Parliament to push through a series of robust laws. Today, the EU has a more powerful tax arsenal than it did in 2014. Conversely, as we shall see in chapter 7, the reform of the eurozone turned out to be a failure. During the eurozone crisis, member states’ willingness to provide the EU with stronger economic governance, capable of both reducing and sharing risk in the euro area, hinted at future institutional progress. It was one of the Juncker Commission’s “ten priorities.” However, even though they enjoyed widespread support among experts, almost none of the commissioner’s proposals were acted upon. Political work came up against growing reluctance on the part of Germany, but also against a coalition of northern countries, united under the banner of the so-called “New Hanseatic League,” which strongly opposed risk sharing with the South. In between these extremes, management of the Greek crisis and budgetary (or fiscal, in proper English) surveillance of the eurozone show that political work produces tangible effects, but that these effects are by no means miraculous. The commissioner is one of a handful of European policymakers who, together with French presidents, sought to prevent Greece’s exit from the euro, also known as “Grexit.” Emotionally committed to the cause, he gave Prime Minister Alexis Tsipras—who was elected on a radical left-wing program before moving toward social democracy—a helping hand at decisive moments, and he steered the conditions imposed on Athens in a more social direction (chapters 2 and 3). In

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

10

  

purely economic terms, Greece was in better shape in 2019 than in 2015. But in fiscal and social terms, the country will remain Europe’s sick child for quite some time. While the market’s extreme mistrust of the Greek government was the main obstacle to finding some flexibility, the stubbornness of some creditors, especially Germany, made the commissioner’s political work inside the Eurogroup, where finance ministers meet, difficult. As the most left-leaning player in a Brussels system where almost all the others were either liberal or conservative or suspicious of the South, the commissioner became complicit in an adjustment program of which few leftists are proud. The picture of budgetary surveillance (chapters 5 and 6) is equally mixed. Here, political work consisted of allowing eurozone members to free themselves, under certain conditions, from the Stability and Growth Pact, the system of budgetary and macroeconomic rules—part of EU law—that commands a steady reduction of public debt. From the outset, neither the commissioner nor President Juncker adhered to a rigorous interpretation of the Pact. They preferred a “smart,” more flexible, “political” interpretation of the rules laid down in the treaties. This produced results, since in five years no government was sanctioned for breaking the rules of the Pact, while the economy improved. At the same time, critics denounced a partisan compromise between conservatives and social democrats. This compromise was put to the test when populists, without friends in Brussels, took power in Rome (chapter 6). They wanted both to break the rules and to challenge the political work of the Commission. A force of constraint when it came to saving Greece, the market then ironically became an ally of the Commission in its strategy to bend Rome to the Pact.

The art of politics As these summary conclusions indicate, the relative strength of various constraints plays a fundamental role in limiting political work. Political work is part of a larger dynamic that includes institutional, legal, economic, diplomatic, and technocratic power. Like these, it is a form of influence, but one that seeks to expand the collective ability to make choices. It is not unlike political entrepreneurship, except it is based less on a specific project, strategically pursued, than on an inclination to do politics. To explain the ability of the commissioner and his entourage to partially erode such constraints, and thus make room for political agency, I identify three factors. First, political will: by his trajectory and his temperament, the commissioner was a career politician, with a passion for partisan politics and a readiness to shake up people and institutions. Before wanting to do something, he wanted to do something, preferably progressive since he was a socialist. In the beginning, many of his collaborators had neither the partisan experience nor the will to engage in

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



11

partisan games. For them, politics required an effort to conform to the identity of the Moscovici cabinet, to break free from a life of technocratic expertise shaped by legal and institutional boundaries, to learn to want to do politics—and to enjoy it. This, as we will see, created tensions inside the group, but the thirst for politics grew over time. Second, the support of influential figures and networks: especially in the first two years of his mandate, the commissioner enjoyed the cover offered by President Juncker and French president François Hollande, for whom he was the main interlocutor in Brussels. The election of Emmanuel Macron in France and the coalition government that emerged after 2017 in Germany made political work a lot more challenging. The commissioner kept a thick address book, which reflected his personal connections with historic leaders of European social democracy such as António Costa. At a lower level, the networks of certain cabinet members in Paris and Berlin made it possible to anticipate the wishes of member states and thus to pave the way for political work. But the network nevertheless shrunk. Finally, communication: throughout my time as an observer, I was struck by the extent to which cabinet discussions focused on language. The commissioner was media-savvy and at ease crafting effective sound bites. Formerly of the Commission Spokesperson’s Office, like a few other staffers he recruited, the chef de cabinet made a constant effort to remind his colleagues to frame the debate, to engage with the media and civil-society organizations, and to stay on message. Even in the most difficult moments, this collective ability to communicate was a determining factor in the effectiveness of the Commission’s political work. * *

*

This book is not an elegy for political work. Nor is it a vindication of the decisions or strategies of Commissioner Moscovici and his staff. Politics is a form of freedom, but it is also an exercise in disenchantment. Faced with such constraints as Germany’s power, the treaties, decision-making rules in the Council, economic doxa, the psychology of market actors, or the electoral cycle, political work cannot do everything. And because it is a question of deciding between values and interests, the values we cherish or the interests we defend may not always prevail. That is why this book does not offer a definitive judgment of the actions of the “Moscos,” as I call them. Drawing from a sociology that takes seriously the practices and motivations of the actors, I show how smart, professional, and well-meaning people engaged in politics; that they often succeeded; that they measured the limits of their actions; and that the results of this political work, while they were often not up to the protagonists’ own expectations, can, contrary to what a cynical reading might otherwise suggest, nonetheless be documented. But before we begin this ethnographic narrative, let us take the Berlaymont lift to the tenth floor, in the Charlemagne wing, and discover the small world of a European Commission cabinet. This is the subject of the first chapter.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

12

  

Notes 1. Nereo Peñalver and Julian Priestley, The Making of a European President (Houndmills, UK: Palgrave, 2015). 2. Jean Joana and Andy Smith, Les commissaires européens: Technocrates, diplomates ou politiques? (Paris: Presses de Sciences Po, 2002). 3. Jean Monnet, Mémoires (Paris: Plon, 1976), 468. Unless otherwise noted, all translations—of published material and spoken dialogue alike—are my own. 4. Cited in John Campbell, Roy Jenkins: A Well-Rounded Life (London: Jonathan Cape, 2014), 479. 5. George Ross, Jacques Delors and European Integration (Oxford: Oxford University Press, 1995). 6. In this book, I distinguish between the economic and financial crisis of 2008, which grew out of bank failures in the United States, and the eurozone debt crisis of 2010, which describes the fiscal consequences of the 2008 crisis in Europe. To these radical breaks in the politico-financial order, I must add the Greek crisis (2009–15), which is more circumscribed but also deeper in economic terms and more serious in social terms, and the Italian crisis caused by the ascension to power of an antisystem coalition in 2018. In all these crises, and unlike the refugee crisis of 2015, the economic dimension is fundamental. See Adam Tooze, Crashed: How a Decade of Financial Crises Changed the World (London: Penguin, 2018). 7. Jonathan White, Politics of Last Resort: Governing by Emergency in the European Union (Oxford: Oxford University Press, 2020); Luuk van Middelaar, Alarums and Excursions (New York: Columbia University Press, 2019). 8. Pew Research Center, Global Attitudes Survey 2014 (May 2014), 41–2; Catherine de Vries, Euroscepticism and the Future of European Integration (Cambridge: Cambridge University Press, 2018). 9. Berthold Rittberger, Building Europe’s Parliament: Democratic Representation Beyond the Nation State (Oxford: Oxford University Press, 2006); Olivier Costa and Florent Saint-Martin, Le Parlement européen (Paris: La Documentation française, 2011). 10. Maurice Duverger, Introduction à la politique (Paris: Gallimard, 1964). 11. Hannah Arendt, The Promise of Politics (New York: Shocken, 2005), 153. 12. Jacques Lagroye, ed., La politisation (Paris: Belin, 2003). 13. Marc Abélès, Le spectacle du pouvoir (Paris: L’Herne, 2007). 14. Kathleen McNamara, The Politics of Everyday Europe (Oxford: Oxford University Press, 2017). 15. Adrian Favell and Virginie Guiraudon, Sociology of the European Union (Houndmills, UK: Palgrave, 2009). 16. Pierre Bourdieu, “Le mystère du ministère,” Actes de la recherche en sciences sociales 140 (2001): 7–11. 17. Pierre Bourdieu, “La représentation politique: Éléments pour une théorie du champ politique,” Actes de la recherche en sciences sociales 36–7 (1981): 3–24; “Le travail politique,” special issue of Actes de la recherche en sciences sociales 52–3 (1984). I thank Florent Pouponneau for bringing these texts to my attention.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



13

18. Andy Smith, “Travail politique et changement institutionnel: une grille d’analyse,” Sociologie du travail 61, no. 1 (2019): 1–23. 19. Didier Georgakakis, Le champ de l’Eurocratie: Une sociologie politique du personnel de l’UE (Paris: Economica, 2012). On the study of practices, see Vincent Pouliot, “Practice Tracing,” in Process Tracing: From Metaphor to Analytic Tool, ed. Andrew Bennett and Jeffrey T. Checkel (Cambridge: Cambridge University Press, 2014), 237–59. For good illustrations of the use of ethnographic methods in the international arena, see Rebecca Adler-Nissen, Opting Out of the European Union (Cambridge: Cambridge University Press, 2014), and Iver Neumann, At Home with the Diplomats (Ithaca, NY: Cornell University Press, 2012). 20. Pieter de Wilde, “No Polity for Old Politics? A Framework for Analyzing the Politicization of European Integration,” Journal of European Integration 33, no. 5 (2011): 559–75. 21. Cécile Robert, “La Commission européenne dans son rapport au politique. Comment faire de la politique sans en avoir l’air?,” Pôle Sud 15 (2011): 62–4.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

1 The Moscos You’re going to watch us like tribes people in their mating strategies? —Anonymous staffer, the Berlaymont This investigation takes place in a cabinet. Originally, this word described a room where the king’s advisers would meet. In Brussels, it now refers to the people who assist the commissioner in the performance of his or her duties. Operationally, the cabinet is an interface with the administrative services, the media, and parliamentarians. On a personal level, it is an entourage of collaborators, more or less close to the commissioner, who share his or her working space. In English, it is more appropriate to speak of a “private office,” but, as is often the case with eurospeak, the French meaning of the word remains in use at the Commission. The cabinet is therefore a physical, a personal, and a political space. The upper floors of the Berlaymont building, the cruciform headquarters of the Commission built in 1967 on the site of a former convent, are divided into individual “cabinets,” clearly identified as soon as you exit the lift with color codes.¹ “Cabinet Vestager,” “Cabinet Hill,” “Cabinet Dombrovskis,” “Cabinet Moscovici”—so many long, slightly curved corridors on the tenth floor, just a few steps down the stairs leading from the inner sanctum, the thirteenth floor where the president’s cabinet, the secretary-general’s office, and the meeting room of the College of Commissioners, the executive of Europe, are located. Although the Berlaymont’s interior design is functionalist, each cabinet is decorated in the image of the commissioner, his mandate, or her nationality: photos of the Baltic tourist agency, say, or Scandinavian furniture. In the Moscovici cabinet, after two years during which the walls had remained bare, posters of films dealing with the theme of money and customs were chosen: Wall Street, Contraband, Freakonomics, Money Monster, The Abominable Man of Customs . . . In front of the lift, a work of art (shown in Figure 1.1) was posted that embodies the political leanings of the commissioner and of his entourage. In this chapter, I will describe the protagonists of my ethnographic narrative: the people I call “the Moscos,” whom I shadowed for a total of eight months between July 2015 and October 2019. In this cabinet I had my work space, which I shared first with the trainees (stagiaires) and then with the assistant to the economic advisers: a small, pleasant, and strategically located office, but not very conducive to discussion—hence the many hours and espressos I invested in the cafeteria on the eleventh floor, which was otherwise reserved for cabinet The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0002

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

15

Figure 1.1 Facing the elevators on the tenth floor: artwork at the entrance to the cabinet

members. Before introducing the protagonists, and then addressing critical methodological issues, let me explain what a Commission cabinet is, how it functions, and what are its customs and habits.

The Brussels cabinet In France, the ministerial cabinet, which describes a minister’s collaborators, appeared under Napoleon. In England, more traditionally, the word “cabinet” refers to the council of ministers, and not to the people around the minister.² If contemporary usage differs, since British cabinet ministers are elected while French cabinet members are not, the origin is the same: whether in the king’s palace or among the prince’s advisers, the idea is to assist the decision-maker in his or her executive functions. Inspired by the French tradition, like the rest of the Brussels administration, the model of the ministerial cabinet was imposed on the Commission as early as 1958. Over time, it adapted to the international organization that is the European Union. Smaller than the French or Belgian cabinet, which can include twenty members, but larger than the British private office (the closest Anglo equivalent), which has only five or six, the Brussels cabinet has only one head of cabinet, who acts both as director and as chief of staff, functions which are separate in the French tradition. The chef de cabinet is responsible for both the political orientation and the management of the cabinet. Although they may have a partisan affiliation, cabinet members’ careers also depend on the central administration.³

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

16

  

A final deviation from the French tradition is that the Brussels cabinet is, especially since the reforms enacted at the turn of the new millennium, multinational.⁴ Previously, commissioners surrounded themselves almost exclusively with compatriots. As we shall see, multinationalism is a distinguishing feature of political work in the Berlaymont. The cabinet plays several strategic roles inside the Commission.⁵ First, it filters, steers, or gives impetus to the proposals emanating from the administrative services, called directorates-general (DGs). It is like a control tower. For example, cabinet archivists initiate the “written procedures,” which will be formally adopted by the college of twenty-seven commissioners, each responsible for a specific portfolio (e.g., internal market, energy, agriculture, justice, and so on). Second, the cabinet is directly involved in negotiations between commissioners and with the presidency; this “inter-cabinet” coordination aims at strengthening collegial decision-making: according to this principle, commissioners participate equally, jointly, and loyally in the decision-making process, for which they collectively assume responsibility. Third, the cabinet promotes the commissioner’s agenda and person outside the institution, be it to national ministers in the Council, European or national parliamentarians, journalists, interest groups, or political figures. It also protects the “boss,” for whom the cabinet serves as a kind of personal staff. As early as the 1960s, the Commission established certain organizational practices, and these have not changed much since then. Probably the most important of these is the hebdo, the weekly meeting of heads of cabinet chaired by the secretary-general. Held every Monday, it adopts the agenda for the meeting of the College of Commissioners, which is held on Wednesday. During the week, cabinet members meet in special chefs. Convened by the member of the president’s cabinet responsible for a thematic dossier, these working meetings are an opportunity to confirm, or decide on, options prepared informally between cabinets. As I did not have access to these meetings, I had to rely on the accounts of participants from the Moscovici cabinet. Since the Delors era (1985–95), there has been a continuous centralization of power in the hands of the president and his (now her) own staff.⁶ This presidentialization means that commissioners’ cabinets are subject to the authority of the president’s cabinet (the “thirteenth floor”). In return, they are expected to be themselves more direct in their dealings with the administrative services.⁷ Under Juncker, presidentialization took a new form: the president surrounded himself with five vice presidents leading project teams that include several commissioners. In this matrix formation, a commissioner can be part of several teams. For example, Commissioner Moscovici, responsible for economic and financial affairs, contributed to the team of Vice President Valdis Dombrovskis, whose broad mandate covered the euro and social dialogue, along with Belgian commissioner Marianne Thyssen (employment) and British commissioner Jonathan Hill

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

17

(financial services). But he was also involved, to a lesser extent, in the teams of Finnish commissioner Jyrki Katainen on competitiveness and Estonian commissioner Andrus Ansip on the digital market. This system aims for upstream adjudication and to avoid visible conflicts between commissioners. They and their cabinets prepare procedures together under the guidance of a vice president, which facilitates their adoption by the College. In addition to jours fixes—more or less regular meetings that allow the commissioner to take stock with administrative services—“strategic” jours fixes have been added, which include the vice president. This, in principle, improves inter-cabinet coordination. In practice, the leadership of the vice presidents has strengthened the influence of the president’s and the secretary-general’s offices, the latter supporting the work of the vice presidents. Throughout my investigation, the name of Martin Selmayr, first Jean-Claude Juncker’s chef de cabinet and then appointed, in controversial circumstances, secretary-general of the Commission, was on everyone’s lips. The man who received unflattering names from the press was unquestionably the most influential official in the house.⁸ To defend their autonomy, the commissioners could rely on the administrative services that depended on their portfolios. In Pierre Moscovici’s case, these were DG ECFIN (Directorate-General for Economic and Financial Affairs) and DG TAXUD (Taxation and Customs Union). Each of these DGs, the former being one of the most powerful in the Brussels administrative apparatus, employs a few hundred officials and national experts on secondment. Some commissioners, including Moscovici, also relied on their personal relationships with the president to assert their influence.

The cabinet meeting In a cabinet’s week, Monday morning is crucial: it’s the “cab’ meeting.” Convened on the same day as the hebdo and lasting about an hour, it allows the chief of staff to take stock of the main dossiers. Seven members (the number is limited) and as many assistants are gathered around a rectangular table in the cabinet meeting room, adjacent to the commissioner’s office in the Charlemagne wing of the Berlaymont building. Among the Moscos, as in all EU institutions before eastern enlargement, French is the dominant language, even if there are interventions in English and a lot of Frenglish. Unlike some of his counterparts, the commissioner does not attend this meeting. The cab’ meeting, to which I will often refer in the following pages, sometimes begins with a distribution of sweets brought back by the person returning from a mission abroad or purchased for a birthday. After a resounding “bonjour,” the chef de cabinet asks the two press officers from the Spokesperson’s Service (SPP), the Commission’s central communication body, to outline the main elements of the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

18

  

media review they have prepared. If the commissioner has an important press conference or a media intervention that week, it is also an opportunity to discuss talking points that will appear in the commissioner’s briefing notes, called (with a French accent) speakings and defensives. Without going as far as organizing leaks, the possibility of sharing certain information with journalists beforehand is sometimes mentioned. Often, the chef de cabinet tests wording or rectifies messages prepared by the SPP. Going against my expectations as a political sociologist, polls are not used as a measure of public opinion. While they can be discussed in a general way or evoked as part of a particular communication strategy, in four years, I have never heard of Eurobarometer surveys (the regular polls conducted by the Commission) or focus groups being used as a decision-making tool. Rather, the emphasis is on international media with correspondents in Brussels: the Financial Times, the Economist, Frankfurter Allgemeine Zeitung, the BBC, Reuters, Le Monde and, more recently, the US outlet Politico. Also very popular, the gossipy but wellinformed blogs of Ryan Heath (Politico) and Jean Quatremer (Libération) often provoke exasperation. Faced with a media landscape that is closely linked to the “Brussels bubble,” some people sometimes complain that regional or social media are overlooked. After these preliminaries, the chef de cabinet informs his staff of the hebdo’s conclusions. He focuses on the points that concern the commissioner, distributing kudos when a proposal from the cabinet has gone through, issuing warnings if another cabinet seems to resist their ideas or if a problem has been raised. Recurring issues (for example, Hungarian prime minister Viktor Orbán’s authoritarian antics, Brexit, or the protection of bees against pesticides, which Green MEPs care much about) are discussed even if they do not directly affect the work of the cabinet: in an institution that aims to be collegial, members all deal with issues that are outside their portfolio, even when they are far away from their own. From the formation of the German government to the election of Donald Trump, certain topical issues are in the news, and staffers clearly enjoy the opportunity to discuss European and international politics together. The other cabinets are designated by the name of the commissioner in charge. Even if commissioners are never present at the hebdo or special chef meetings, people say “the Vestagers” or even “Vestager” in the singular when it is in fact the head or a member of her cabinet who took the floor. It is the same outside the cabinet, where one refers to Moscovici cabinet members as “the Moscos,” “the Moscovicis,” “Moscovici,” or even “the French cab.” At the Moscos, cabinet meetings are open to all staffers: the members and their assistants. Sometimes a fonctionnaire from the DG is even invited to attend as part of the “My day at the cabinet” initiative, which aims to improve understanding of the Commission’s political dimensions. In reality, assistants do not speak much and civil servants, perhaps intimidated by the use of the French language, do not

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

19

either. Some cabinet members, including the head, are fond of irony and puns, and all intervene at least once in a while to make a joke, to share a rumor, or to highlight a personal event like a birthday. The result is a rather relaxed atmosphere, except when the chef de cabinet corrects someone in front of colleagues, which does not happen very often. During the cabinet meeting, the most interesting information regards events that happened during the weekend. Perhaps, as is often the case, an emergency or a meeting between the commissioner and a given personality, be it the Greek prime minister or the president of the International Monetary Fund (IMF), mobilized a few cabinet members on the phone on Saturday or Sunday. The chief of staff may also have been involved in dealings with the president’s or vice president’s cabinet. The Monday meeting is an opportunity to bring everyone up to speed. European news—for example, an election—is also discussed. If a member or an assistant is well informed because he or she is from the country in question, that person speaks. The rest of the meeting is devoted to the main files within the cabinet. At the beginning, the chef de cabinet takes the floor and asks an adviser to give an update on Greece, or questions an assistant regarding the status of a logistical problem. Members summarize the conclusions or problems encountered in their special chefs meetings. The chef de cabinet concludes each intervention by recapping the “messages” that the commissioner wishes to convey. “At the cab’ meeting,” he tells me, “I try to get everyone to produce a line of communication on their topic. You have to explain why what we’re doing is important.” The closer we get to the end of the meeting, the more people raise their own questions, on which they want the chef de cabinet’s decision. Time speeds up and everyone is in a hurry to get back to a busy schedule. Often, these issues spill over into the commissioner’s communication and agenda, which are discussed in two separate meetings on Wednesday and Thursday. The communication meeting brings together a smaller group, the exact number determined by the issues of the day, while the agenda meeting deals with logistical matters: it reviews the commissioner’s schedule for the coming weeks and the chief of staff decides which events, of all the proposals that have been submitted as fiches jaunes, need to be held, moved, or canceled.

A week in the life of the French cabinet When I showed up on the first day, the cabinet’s press officer warned me: “You know, this is not a beehive.” It’s true that the cabinet is quieter than I expected. A row of individual offices does not lend itself easily to hallway conversations and most people spend their time typing on their computers. Here, as elsewhere, e-mail is the primary means of communication. A few times a day, the clerk in

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

20

  

charge of internal mail slips her head through the half-open door and says “bonjour.” Well-dressed as they are, cabinet members do not shy away from a business casual style: many men wear ties only for meetings with the president’s cabinet. The commissioner is an exception: even though he assures me that he walks around in blue jeans in his apartment, I have never seen him without a tie inside the Berlaymont. In the middle of the morning and after lunch, a few staffers meet in the cafeteria on the eleventh floor (pictured in Figure 1.2), where they greet colleagues from other cabinets and sit on the edge of the window overlooking Europa, the Council’s headquarters across the Rue de la Loi, to drink a small latte, which everyone, according to Belgian fashion, calls a lait russe. Smokers prefer the cafeteria on the ground floor. Open to all Berlaymont employees, it gives access to a small terrace outside. There is also a coffee machine shared with the Vestager cabinet, but it is little used. The cafeterias are interesting places where the twenty-four languages of the Union are spoken. In these informal settings, English is not even dominant, as people tend to gather by language affinity. Throughout my investigation, I find them a great place to chat with cabinet members, to be debriefed on the latest evolutions of their files, or to soak up the atmosphere of this place where the top of the Eurocracy is concentrated around an espresso.⁹ At lunchtime, many people eat in the large canteen on the ground floor or, if the weather cooperates, go and get something from the Exki counter opposite the Berlaymont and next to the Charlemagne building, where DG ECFIN officials work (DG TAXUD officials are housed a little further down Rue de la Loi). The

Figure 1.2 The cafeteria on the eleventh floor, reserved for cabinets. The lait russe is cheap

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

21

commissioner does not eat with cabinet members. If he is in his office, he makes do with takeaway sushi between meetings. If he needs to talk to the chef de cabinet or an outside guest, they meet in a steak house, the Meet Meat, around the corner. At least once a year, members and assistants leave the Berlaymont for an “away day,” which can take place in a seaside resort on the Belgian coast, or a teambuilding exercise in a Brussels bowling alley (see Figure 1.3). More often, a drink (the English word is used) is organized on short notice, either in the cabinet meeting room or in the commissioner’s office, which is larger and more convenient. Bottles of sparkling wine and chips are taken out to end a busy week or to mark the departure of a trainee; the commissioner or the head of cabinet makes a short speech. But most people don’t stay long or, if they do, are quickly caught up on their smartphones. In fact, a significant part of the social life of the cabinet takes place in a WhatsApp group conversation, where members exchange photos, lunch proposals, and so on. The commissioner, who has known several Paris cabinets before this one, ventures a comparison: In France, it’s not the same life at all. At Bercy, [the finance ministry] everyone is still up there at 11:00 p.m. They duplicate the administration. Here, we work with the services, there is less stress. The director-general has his own agenda. If

Figure 1.3 Away Day on the Belgian coast

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

22

   I summon him, he can tell me, “Sorry, I have a meeting, I can’t come!” But I don’t mind that. It’s more like a family. Here, we share the same corridor, they call me by my first name, not “Mr. Minister.”

The commissioner is not very present in the daily life of the cabinet. Living in Paris, he travels to and from Brussels almost every day by Thalys, the high-speed train. This can sometimes result in some unintentional comedy, such as when a cabinet member has to lend him his cufflinks (“Good thing he didn’t forget his boxer shorts . . . ”). In any case, the commissioner’s movements through the corridors of the Berlaymont always create a certain amount of trepidation. He greets, makes a joke, shakes hands. But rather reserved, not surrendering easily, he seems to intimidate some of the staff. After the birth of his son, which took place during the term of office, he started to banter a little more than usual. I remember a meal, organized to mark the fourth anniversary of the cabinet, at which he almost agreed to have his toddler cared for by the cabinet during a gala dinner. But I don’t think this collective babysitting ever took place. The chef de cabinet is in regular contact with the commissioner by phone or in person. But for the other staff members, a one-to-one meeting with the boss is a rare commodity. Missions in Strasbourg, elsewhere in France, or abroad are the exception. Once a month, the commissioner has to travel to the European Parliament in Strasbourg, where the meeting of the College is held, and he often appears before MEPs for a hearing. He is then accompanied by one or two assistants as well as his driver. On two occasions, I had the opportunity to make this journey. The commissioner is rarely accompanied on his return trips from Paris, except by the chef de cabinet if it is an important meeting. But he often travels to the French province for field visits or political meetings organized by his assistants. Finally, the commissioner represents his institution in several international forums, such as the G7, the G20, and the IMF, which requires travel abroad, from Bali to Beijing to the Davos Economic Forum in Switzerland. Usually, the adviser responsible for these files accompanies him. I’ve been on two such trips: to Washington for an IMF meeting and to Athens to meet with the government. Before I conclude this description of daily life at the cabinet, a final word on language. In principle, the working languages of the Commission are French, English, and German. Until the 1990s, French was dominant. Over the last twenty years, this language has receded in favor of English.¹⁰ At the midday press conference, spokespersons still use some French and several journalists—not only French, Luxembourgish, and Belgian, but also those from southern countries—are still more willing to use the language that is dominant in the city of Brussels. In the Berlaymont, security guards and technical staff are predominantly francophone. Thus, saying bonjour and bonne journée remains the norm at the reception desk and in the elevators.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

23

The Moscovici cabinet was, from this point of view, a village gaulois. It was the only cabinet where French remained the main working language. The internal meetings that I will describe were, for the most part, conducted in French, a language that all staffers mastered in addition to English. There were also many francophones in Juncker’s office, the president being himself trilingual, which partly explains a special bond between the tenth and thirteenth floors—that is, between Moscovici and Juncker. But the meetings with DG ECFIN officials, mostly economists, were held in English. With DG TAXUD, I heard more French, but that was less a reflection of some larger departmental culture than a coincidence of the individuals in place. Faced with this reality, many of the staffers whose words I will be reporting on spoke in a delightful Frenglish. Although in what follows I translate most of the quotes into English, I try to convey their speech with the use of French words in italics. It should be noted, however, that the commissioner did not speak Frenglish: in his public speeches, he would speak equally in French and in English, without mixing the two, whereas in private he adopted the language of his interlocutor.

The boss Before arriving in Brussels, Pierre Moscovici followed the classic path of a French politician. After studying at Sciences Po and the Ecole nationale d’administration, he was appointed adviser to the Court of Auditors. At the end of the 1980s, he joined the cabinet of Lionel Jospin, minister of education, before becoming secretary of the Socialist Party. He was elected member of the European Parliament in 1994, then member of the National Assembly for the Doubs region in 1997. In the Jospin government (1997–2002), he was minister for European affairs. Ideologically, Pierre Moscovici was a prominent figure of the moderate wing of the Socialist Party. Close to Michel Rocard and Dominique Strauss-Kahn, he led François Hollande’s 2012 presidential campaign. The latter, after his election, appointed him minister of the economy and finance, a position he left in 2014 before joining the European Commission a few months later. Coming from a family of academics of Romanian and Polish origin who fled Nazism, Pierre Moscovici is a “social democrat” in the French sense of the term, meaning he is a “moderate socialist.” He supports the ideas of progress, reform, and social justice, which he considers compatible with the market economy. His public interventions are cerebral and not couched in overly emphatic terms. Involved in the Socialist Party since he was young, he is less an orator or a militant (a term he sometimes claims) than a party cadre. He was, however, the long-time representative of a working-class region that has since switched to the Rassemblement National (ex-National Front).

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

24

  

An excellent communicator but little inclined to effusiveness, the commissioner spends a lot of time looking at his smartphone, a habit that some people make fun of. His political knowledge remains impressive. Every time we met, he asked me questions about Quebec politics, and I felt caught off guard when he quoted the results of the most recent polls in my own country. His curiosity about the political game, be it in Quebec or Spain, is boundless. His opinions are clearcut. Having served in every capacity at the national and European level, in Parliament as a deputy, in the Council as a minister, and in the Commission as a member, the man possesses considerable political instinct. In the cabinet, the commissioner is clearly on top. This is a trait that observers notice in most French politicians in Brussels. Even though everyone calls him “Pierre,” the indigenous vocabulary betrays the distance that most of his collaborators maintain with him. Everyone, including the chief of staff, uses the vous form with Pierre Moscovici. While other commissioners may eat with their staffers in the canteen, he remains the “boss.” Occasionally, however, the distance is shortened. At the end of the first year of my stay, I had a skiing accident. The commissioner then wrote me a solicitous text message and we began a correspondence about cinema, one of his passions. During a stay in Washington the following year, we spent some time in a museum and a bookstore, which allowed us to share reading recommendations. These two experiences, as well as his becoming a father in 2018, help to paint a more humane picture of the political animal. In their study of the EU executive, Jean Joana and Andy Smith distinguish the three “roles” of a commissioner, who is at once a diplomat, a technocrat, and a politician.¹¹ If one has to choose between these three roles, Pierre Moscovici is unquestionably a politician. Comfortable in the media, he likes to appear on morning radio shows. Not afraid to bash his opponents, he does not fit the profile of a negotiator who hides his game or seeks win–win solutions. While he knows his files, he is not someone who sees himself as a technician either. Always reading economic issues through a political lens, his vocabulary is simple and understandable; you can see this, for example, when he talks about budgetary surveillance in terms of “responsibility” or about taxation in terms of “social justice.” He particularly enjoys bilateral meetings where he can discuss current events and strategy with a personality he considers “interesting,” whether a CEO or a prime minister. In Brussels, the commissioner had three trump cards. First, his portfolio: economic and financial affairs, which he also handled as minister in France, is one of the most important files at the Commission, especially since the eurozone crisis led to an increase in the Commission’s powers of budgetary surveillance (see chapters 5 and 6). Taxation, seemingly less prestigious, also became a sensitive issue thanks to tax evasion scandals like LuxLeaks or the Panama Papers (chapters 8 and 9).

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

25

The commissioner’s political identity was his second asset. Although the socialdemocratic family has been losing ground in recent years, it remains the secondlargest political block in Europe. Along with Frans Timmermans, Martin Schulz, and Federica Mogherini, Pierre Moscovici was one of the main representatives of this party family in Brussels. This guaranteed him both an audience and some supporters. Finally, the personal relationship between the commissioner and President Juncker, who shares the same political codes and speaks the same language, was a considerable asset. Having known each other for twenty-five years, they both sat as ministers in the ECOFIN Council during the Greek crisis, where they supported the same positions. Above all, both defended a political vision of the European Union based on the social market economy. Moderate members of their respective (and rival) political families, they were the embodiment in the Commission of the “grand coalition” between conservatives from the European People’s Party (EPP) and social democrats from the Alliance of Socialists and Democrats (S&D). In principle, commissioners are nominated by their governments, before being selected by the president and approved by Parliament. In the case of Pierre Moscovici, it was Jean-Claude Juncker who urged François Hollande to appoint him to economic and financial affairs. “We set up the operation together in the spring of 2014,” the commissioner explains. The French president had just reshuffled his government, from which Moscovici had been ejected in exchange for a vague promise that he would be appointed commissioner. But the Elysée Palace was instead targeting the energy portfolio and, ignoring convention, it was Jean-Claude Juncker who announced that Pierre Moscovici would be France’s candidate for economic and financial affairs, customs union, and taxation. From this experience, the commissioner retained an unfailing loyalty to Juncker, whom I have never heard him criticize. Throughout my observation, I was captivated, and sometimes amused, by the changing political ambitions often attributed to the commissioner, either in his immediate entourage or in the larger Brussels bubble. In the summer of 2017, the media suggested that he may be a candidate to be Jean-Claude Juncker’s successor, who was rumored to be leaving office prematurely. A few months later, as Jeroen Dijsselbloem was on the verge of leaving the presidency of the Eurogroup (the finance ministers of the eurozone), the commissioner expressed the wish to merge this post with his own in the function of “European finance minister.” In autumn 2018, the commissioner was presented as a likely S&D Spitzenkandidat for the upcoming European elections. In the winter of 2019, the media reported that he would be appointed president of the French Court of Auditors. None of these trial balloons yielded conclusive results during his mandate. Every time I asked him, the commissioner assured me that he only wanted to become a university professor. In any case, he argued, there was no place for a French socialist in the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

26

  

European leadership during those years, characterized as they were by the collapse of the French Socialist Party (chapter 4). Nevertheless, from 2018 onwards, the question of his legacy assumed a collective dimension. Willful in his public interventions, the commissioner was more pessimistic in private. When I asked him about the main issues that have shaped his political career—the future of Europe and the Left writ large— his judgment was harsh. “We won’t be the last Commission,” he confided to me in 2016, taking up a phrase from Jean-Claude Juncker, “but perhaps the last Commission that has a driving force.” For him, the management of the Greek crisis, the end of austerity, and the fight for fiscal justice are achievements than can be credited to the Juncker Commission. But real progress was halted by German policy, especially from 2017 onwards. The two books that the commissioner wrote during his term of office elaborate on this ambivalence. I will come back to this in my concluding chapter.

The staff The academic literature on the European Commission distinguishes important social divisions within the Eurocracy: between politicians and technocrats, between nationals and Europeans, or between permanent and temporary staff.¹² In the cabinet, trainees illustrate these categorizations. There are three new stagiaires who show up every year: a trainee from the European Commission’s “blue book” program, usually a graduate of the College of Europe who intends to pursue a career within the EU; a student from the École nationale d’administration who comes to Brussels to gain practical experience before returning to France; and a seconded national expert from a national finance ministry who comes to learn about the workings of European decision-making. These divisions find different expressions within the cabinet but they can be collapsed into an overarching distinction, more fluid but also more powerful, between the “Parisians” and the “Brussels people.” This overlaps to some extent with the opposition between outsiders and insiders identified by Jean Joana and Andy Smith.¹³ It does not necessarily distinguish the French from the nonFrench. The Brussels people, who include several French passport holders, are invested in a long-term career within the Commission (regardless of whether they are permanent civil servants). Often more like “technocrats,” they open themselves up to politics through their position in the cabinet, while maintaining their primary loyalty to the Commission bureaucracy. Parisians, often trained in French grandes écoles, closer to Socialist Party networks, pursue their desire to do politics and do not necessarily aspire to the civil service. They are less likely to have developed pan-European networks when they arrive at the Berlaymont.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

27

The border between the two groups is porous and I have observed quite a few “conversions”: while some Brussels people got caught up in politics, including French politics, several Parisians, attracted by the material conditions or the lack of alternatives at the end of their term of office, ended up taking an interest in a career in Brussels. But the distinction between the Brussels people, whose future is linked to the Commission’s secretary-general, and the Parisians, whose fate rather depends on the commissioner’s personal networks, remains strong in the collective imagination of the cabinet. Political work is experienced differently by the two groups, and this is especially true when it comes to questioning the legitimacy of European institutions. Moreover, recruitment to the cabinet is based on the distinction between the two groups, with a few nuances. In the composition of a cabinet, rules of nationality (a maximum number of the commissioner’s compatriots), seniority (a continuum of administrative grades), and a balance between internal and external members must be respected. For those who wish to be recruited, I am told that the ideal formula is to be selected by both the chef de cabinet and the commissioner, and supported by both the Commission’s administration and the Permanent Representation (embassy at the EU) of their country of origin, which ensures the presence of compatriots in the cabinets. Satisfying this formula may include “exchanges” between countries—for example, France supporting a Romanian candidate in their commissioner’s cabinet if Romania includes a Frenchman in theirs.

The Brussels people Olivier, the chief of staff, lies at the intersection between the two worlds. A Frenchman from the southwest with a Spanish mother, a graduate of Sciences Po in Strasbourg and the Sorbonne, he worked in the cabinet of Pierre Moscovici when he was European affairs minister in the Lionel Jospin government before winning the European civil service competition. At the Berlaymont, he rose through the ranks, becoming assistant to Secretary-General Catherine Day, at the administrative heart of the Commission, before being appointed Commission spokesman and then “Antici,” one of the institution’s representatives to member state ambassadors. Thanks to his time at the SPP, where he dealt with economic files, Olivier knows all the press correspondents in Brussels, especially the French. He insists that cabinet members and civil servants include political communication as part of their work. His other hobbyhorse is making sure that the administrative services understand the voice of their respective masters. Olivier believes in the Commission’s political ambition: to steer the files upstream, measure the balance of power, and put the administration at the service of a strategy. Over time, I observed his growing interest in French politics; this was never more apparent

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

28

  

than when he talked about the Elysée Palace and Matignon, which he visited as often as he could. Olivier is the cabinet’s architect. “I wanted a pilot fish, an insider,” the commissioner explains. By his own admission, Olivier is shaped, like the commissioner, by the French style of management: he is the contact point and relay between a rather distant commissioner and his cabinet staffers (see Figure 1.4). Others speak of a “hub-and-spoke” model: everything, in fact, goes through Olivier. George Ross observed the same management style in his study of Jacques Delors’ cabinet, headed by Pascal Lamy, and while it is efficient, this style lends itself to accusations of verticality. “I know I’m slipping into an authoritarian attitude towards the cabinet,” Olivier tells me once. “I can feel it. But, at the same time, we have a good cabinet, it works.” And indeed, Olivier’s influence and the competence of his staffers were often highlighted by people I interviewed outside the cabinet. As is customary in the Franco-German couple, the French chief of staff is flanked by a German deputy chief of staff, and vice versa. For a cabinet that will spend a good part of its time scrapping with Berlin, the presence of a German national is fundamental. Coming from DG ECFIN and having worked for the German finance ministry, Reinhard has a doctorate in economics. While Olivier is in charge of strategy, communication, and relations with the commissioner, Reinhard is the expert on economic issues. He knows the Stability and Growth Pact and the “European Semester” by heart. Above all, he has extensive networks

Figure 1.4 The boss and his chef de cabinet

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

29

among the civil servants at the Commission and in Berlin. Reinhard never looks stressed: an avid reader of the press and scientific articles, he speaks sparingly and kindly and is happy to receive members and trainees who come to him with questions. Like everyone else, he works long hours, but spends his weekends with his family. Although he does not display his political preferences openly, I feel he is close to the Greens, if only because he bikes almost every day to the Berlaymont. Other Brussels people are usually seconded from the Commission administration. Some of them have gone through the College of Europe in Bruges or university programs in European studies. Many knew Olivier in their previous jobs but had no personal connection with the commissioner. In the cabinet, they are responsible for technical files related to the DGs. “It’s a question of finding a balance between technical expertise and the political dimension,” one of them explains. The first person in charge of tax files was Elena, a Francophile Italian. A lawyer and tax expert, she studied at LUISS in Rome, the Universities of Strasbourg and Bologna, and the College of Europe. Having worked for ten years in three cabinets responsible for taxation, she leaves the Moscos in 2016 to return to DG TAXUD, where she is appointed head of unit. Although Elena defined herself as the “voice of civil servants,” as a technocrat, she seemed to enjoy cabinet life very much. She is replaced by David, a Frenchman born in Canada. A graduate of Paris Dauphine University, a tax expert like Elena, he worked in a few lobbies and Commission DGs. While Elena was passionate about VAT, the value-added tax system, David is more interested in tax evasion and comes to life when he talks about the Commission’s big project, corporate taxation. During her mandate, Elena is assisted by Franck, a Frenchman from the Côte d’Azur, who worked as a contractual in the SPP. Having won the European civil service competition while he was in the cabinet, Franck is soon recruited to DG TAXUD, where his first task is to improve the briefing procedure, which is universally decried in the cabinet. At the time of his recruitment to the civil service, the image of the EU is at its lowest ebb: “Maybe I’ll be the last recruit in history,” he laughs. Affable, always available for me and the interns, he listens to the news on Radio-Canada every morning. He is replaced by Maud, a French graduate from Sciences Po in Aix, who worked for the SPP and the Brexit task force. She becomes first Elena’s and then David’s assistant, before taking over responsibility for Brexit when the customs union became a strategic issue for the Commission. An avid reader of literature, modest and reserved, Maud tries to reconcile her loyalty to Brussels with the criticism she often hears in France. Since the number of members is limited to seven, some assistants, like Franck and Maud, deal with files that involve political work. This is also true for Olga, a Polish woman who, without being passionate about party politics, injects political meaning into her administrative tasks. The other assistants, Delphine, Cecilia, and Yannick, are in charge of coordinating files, travel, and the two “Councils”: the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

30

  

Eurogroup and the ECOFIN Council, where the commissioner has to defend the Commission’s proposals before member-state finance ministers. This is a colossal task in a cabinet where each member has a full agenda of missions and preparatory meetings. Delphine, a Frenchwoman, is Olivier’s assistant, making her at once the chef de cabinet’s private secretary, executive assistant, and secret-holder. Cecilia, for her part, is a Swede who has been working at the Commission for several years. She assisted several cabinet members before becoming the commissioner’s own executive assistant at the end of his term of office. Yannick, whose office I share, is a Belgian born in the Congo. She is Reinhard’s assistant. In charge of the preparation of ECOFIN and Eurogroup meetings, she amuses me when she has to print out the physical files (“Everyone is supposed to have a laptop . . . ”). Her sense of humor is corrosive: “ECOFIN is not compatible with the preservation of the Canadian forest . . . ” With sweets on permanent display, Yannick receives all the staffers in need of sugar. In this way, my office becomes a strategic place for observation and informal chats. On economic and financial affairs, the chief protagonist is a Romanian woman brought up in Los Angeles, Ioana. She studied at Vassar College in the United States and at Sciences Po in Paris before working at Deutsche Bank and Bear Stearns. At the time of the 2008 crisis, having lost her job in finance, she found herself in the new structures created in Brussels to manage financial instability. Recruited as a temporary agent at DG ECFIN, she won the civil service competition in 2014, just before joining the Moscovici cabinet. Concealing her political preferences, Ioana defines herself as a “nerd.” She is passionate about Greece, the most explosive file in the cabinet, for which she is responsible. During her maternity leave, Ioana is replaced by Leila. With a PhD in economics on the Chinese hukou system, Leila is a dual Spanish-British national, but she, like Ioana, is also fluent in French. She lived in China for six years. She is an expert on structural reforms and joined DG ECFIN in January 2010, where she became a member of the troika on Greece. A stint in the cabinet is for her a way to bring to a close the Greek dossier, which has occupied a decade of her professional life. An Irishman with Italian roots from the Channel Islands, Simon is responsible for the commissioner’s relations with “international” (i.e., non-French) media, as well as his participation in international meetings such as the G7, G20, and the IMF. As each member has to cover a certain number of countries, Simon naturally inherited Italy and the United Kingdom, but also Spain—heavy files, as we shall see. Trained in European studies in Essex, Bath, and Siena, he worked in a consulting firm before becoming the editor of a magazine, E!Sharp. He then joined the SPP, where he worked with Olivier on economic and financial affairs. Even if his Irish citizenship protects him from the effects of a Brexit that he considers disastrous, this Europhile is not, at the beginning of the mandate, a permanent Commission fonctionnaire.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

31

The Parisians As we have seen, there are quite a few French people among the Brussels people. However, some French people are more French than others. This is true of those who came from Paris more or less with the commissioner. Isabelle I and Isabelle II are, successively, his executive assistants. While Isabelle I knew Pierre Moscovici from Paris, where she was already a close collaborator (in the cabinet, she is the only one who uses the tu form with him), Isabelle II comes from the Quai d’Orsay, where she worked with Secretary-General Pierre Vimont and then followed him to the European External Action Service. Walking a fine line between the Commission’s requirements and their loyalty to the commissioner’s, both Isabelle’s are multitasking professionals who make themselves available twentyfour hours a day. Other staffers knew the commissioner before coming to Brussels. As a student at Sciences Po in Paris, Audrey volunteered for François Hollande’s campaign and then worked at the Elysée Palace when she was not yet twenty years old. From our first exchanges, she tells me that she is disappointed by politics and wants to leave after two years, which she will. Creative, enjoying the commissioner’s ear, she manages relations with parliamentarians and think tanks. While Simon handles the international media, a press officer, Chloé, covers the French media. Barely older than Audrey, she knew the commissioner when he was her teacher at Sciences Po. She knows she has a reputation: “I’m the optimist of the gang.” Economic policy, on the other hand, does not fascinate her. She also leaves at mid-term. After their departure, Audrey and Chloé are replaced by Rémi and Étienne, who move to Brussels after the French Socialist defeat in 2017. As much as Audrey could sometimes seem disillusioned, Rémi exudes hope and good humor. A leftwing small-town councilor, Rémi likes human contact. Having worked in the office of the labor and then overseas ministers, he crafts messages that speak to people in their daily lives. The young man is also passionate about politics: an important task of his, especially at the end of the mandate, is to create a narrative for Pierre Moscovici’s Commission legacy. While Chloé was full of energy, Étienne is more reserved. He is a graduate of the École normale supérieure, where he studied Italian political thought. Erudite, a bit somber at times, he left the academic world for the cabinet of a Socialist minister, François Rebsamen. Often a critic of European policies, he writes elegant speeches for the commissioner—which he feeds with references to Gramsci—and prepares crisp messages for his interventions in the media. Working closely with Rémi but in direct contact with French-speaking journalists in the capitals and in Brussels, he also is the cabinet’s sartorialist. Always smiling and discreet, Lucie came from Paris with the commissioner. She is the main speechwriter, in both French and English. With no formal file of her own, she is a bit like the bomb-disposal expert who is sent into other cabinets or

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

32

  

the DG to defuse delicate problems. Having worked at the United States Mission in Brussels, the European Parliament, and the French finance ministry, Lucie knows the historical position and sensitivity of the commissioner, as an individual, as a Frenchman, and as a socialist. “He wants to have a political discourse, not to be a technocratic pickle,” she says. Before the end of the mandate, she returns to the US Mission. After Lucie’s departure, speechwriting is transferred to Alice, a graduate in economics from the École normale supérieure and in European politics from the Sorbonne. A pro-European and a socialist sympathizer but not an activist, she met the commissioner at a conference and gave him her CV. Like Lucie, she has to put the commissioner’s concerns (populism, illiberal democracy, social justice) into words and smooth out the technical speeches drafted by civil servants. There is a last protagonist who, like Olivier and Reinhard, remained in the cabinet from beginning to end: Fabien. Quick-witted, sometimes truculent, Fabien wrote his PhD thesis in economics on inequalities in Germany under Thomas Piketty. A graduate of the Ecole normale supérieure and an administrator at INSEE, the French grande école for statistics, he worked at the Treasury, in Washington and Berlin, before becoming an economic adviser to Socialist prime minister Jean-Marc Ayrault. He met Pierre Moscovici in 2014, when he became his chargé for a mission on investment. While Olivier can be described as a Brussels man who is very interested in French politics, Fabien is a Parisian technocrat who has tamed Europe. Fluent in French and American colloquialisms, he is the only Frenchman at the cabinet who speaks German fluently, hence his frequent exchanges in this language with Reinhard, his office neighbor. On my first day at the Berlaymont, he told me, “Ask me any question you want, I’ll answer.” Unsurprisingly, he is often quoted in the pages that follow.

Esprit de corps The distinction I have just drawn between Brussels and Parisian people does not cover all of the Moscos’ sociological characteristics. Whether Brussels or Parisian people, there is a division of labor between public policy experts (Reinhard, Ioana, Elena, Leila, David, and Maud among the Brussels people, but also Fabien and to some extent Lucie among the Parisians) and political communication specialists (Audrey, Chloé, Étienne, and Rémi among the Parisians, but also Simon and Olivier among the Brussels people). Among the assistants, there is a noticeable difference between those who see themselves as administrative staff and those who see themselves more as “cabinet members” with their own files. As I have tried to show, the Brussels people are all more interested in French politics than would be the norm for staffers of another cabinet. Generally speaking, the commissioner insisted that all cabinet members, even career civil servants,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

33

should have their hearts on the left. Although they live according to the rhythm of French politics, Parisians are not the bearers of the national interest in Brussels: pro-Europeans, they are familiar with the workings of the EU and they socialize with other Brussels expats around the Place Flagey, the Châtelain district, and Parvis de St-Gilles. Gender is an important characteristic. Although there is a roughly equal number of men and women in the cabinet, both members and assistants, women occupy all the administrative functions, whereas the leadership of the cabinet (the commissioner, the head of cabinet, and the deputy head of cabinet) is exclusively male. While jokes playing on national stereotypes are common, I have never heard derogatory comments made about a person because of their nationality, gender, or sexual orientation. No staff member belongs to a visible minority (this is true of the European institutions in general), but all regions of Europe, from east to west and north to south, are represented. Some kind of French connection (education, family) is always present, however. Drivers, archivists, seconded national experts, and trainees belong to the cabinet. They are not considered staffers, but some individuals are part of the “family.” The drivers, for example, spend a lot of time with the commissioner and with the staff who migrate to Strasbourg once a month: I have experienced firsthand that the five-hour journey—including the stop at McDonald’s, in the Luxembourg rest area—is a unique opportunity to exchange views on each other’s personal lives. By their personality, some archivists and trainees also succeed in joining the social life of the cabinet. Since French is the cabinet’s informal working language, non-French speakers or those with a poor grasp of French social codes have more difficulty integrating. Not everyone can appreciate the particular irony, cultural references, expressions, and political meanings, particularly the popular culture and leftist innuendo that are de rigueur in “the French cab.” At the same time, these codes give the Moscos a singular identity, an esprit de corps that transcends the symbolic borders I have observed. Coming from at least eight different countries, the staffers will spend several years living together and conducting “emergency politics” on a continental scale. Unsurprisingly, they share a loyalty to the cabinet leadership (Pierre and Olivier), which is interspersed with a few recurring reservations (about the political prudence of the former or the organizational obsessions of the latter). As far as I was able to observe in the meetings, corridor exchanges, or tasks carried out jointly on Word documents, teamwork was executed efficiently, in a disciplined and mutually respectful manner that can be explained by a very explicit concern for the reputation of the commissioner and his cabinet. Being part of the cabinet, and of this cabinet in particular, is clearly a source of pride for its members, who in some ways see themselves as distinct from their counterparts in other cabinets. There is not much talk about most other

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

34

  

cabinets, either because their files are far removed from economic and financial affairs or because they are not considered sufficiently “political.” But some are central. The cordial relationship displayed by commissioners in the College is premised on the fact that their cabinets fiercely defend their bosses’ interests beforehand. For the Moscos, there are competitors: the Vestagers and the Timmermans. Vestager is an ally on taxation, Timmermans is part of the socialist family, but the two northern commissioners defend a liberal line at the College and occupy a lot of media space. There are also rivals: the “Dombros” and the head of cabinet to Vice President Dombrovskis, a conservative who in principle has the right of scrutiny over Moscovici, and with whom it is necessary to struggle to define the Commission’s position on the eurozone. And there is a permanent threat: that posed by the head of the president’s cabinet, Martin Selmayr, who is often suspected of machinations against the Moscos. To fend him off, the commissioner and Olivier sometimes have to enlist President Juncker himself.

Methodology for an ethnographic narrative In the introduction, I explained, quoting Bourdieu, that this book aims to unravel the “mystery of ministry.” More prosaically, and quoting Fabien, this ethnographic narrative is about the “making of the sausage.” Unlike investigations that rely on retrospective interviews, questionnaires, or archives, I have tried to get as near as possible to the concrete experience of the people involved in doing politics. This is what Bruno Latour calls, in his ethnography of the French Conseil d’État, the “stuttering” decision.¹⁴ For eight months over a period of more than four years, during stays of two or three weeks each, I crashed into meetings, interviewed the commissioner and cabinet members, observed various interactions with the press (one of which is shown in Figure 1.5 below), and listened to their conversations in the corridor. I cross-referenced the information I was given with the information I was able to gather from other actors in the Brussels bubble, whether in other cabinets and DGs, in the Council, in Parliament, in the Permanent Representations, in Paris, Rome, or Athens, for a total of seventy interviews conducted outside the Moscovici cabinet. My only instrument in this investigation was my Rhodia notebook. The result was some twenty hand-written notebooks, or about five hundred typed pages. I am not the first to conduct this kind of embedded observation. In European studies, George Ross was a pioneer with his ethnography of the Delors cabinet in the early 1990s. He was followed by Marc Abélès and Irène Bellier, who spent a year with the Commission, and then by Cris Shore with his cultural anthropology of the European institutions.¹⁵ My contribution is

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

35

Figure 1.5 In my embedded observation, I usually stayed close but in the background. Here in Alexis Tspiras’s office, I would stand behind Olivier, the chef de cabinet

to have carried out a study over a long period of time, which allows me to chronicle a turbulent period in the European Commission, Jean-Claude Juncker’s “last-chance Commission.” If this observation is embedded, it is also situated. The Moscovici cabinet is a fulcrum for analyzing the fate of the Juncker Commission’s political program. It is an observatory with a limited axis of rotation. Studying another cabinet would have yielded different results. In particular, I am only interested in the economic files falling within the commissioner’s two main portfolios: economic and financial affairs on the one hand and taxation and customs union on the other. Each chapter is organized chronologically and highlights the ambitions that the commissioner and his staffers have expressed, their successes and disappointments, the obstacles and surprises that they have encountered during their term of office.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

36

  

I try, as far as possible, to track each file in detail, inserting dialogues I heard, situations I witnessed, and, when I was absent, relying on personal debriefings. Several anthropologists and sociologists have studied decision-makers in their “natural habitat.”¹⁶ Think of Marc Abélès’s work on the National Assembly, Dominique Schnapper on the French Constitutional Council, or Bruno Latour on the Conseil d’État. Participatory observation is increasingly used to reconstruct the social reality of international organizations. In addition to Ross’s work, already mentioned, I can cite Marc Abélès on the European Parliament and the World Trade Organization, Séverine Autesserre on humanitarian actors, Michael Barnett on the UN Department of Peacekeeping Operations, Rebecca Adler-Nissen on the Danish Ministry of European Affairs, Iver Neumann on the Norwegian Ministry of Foreign Affairs, or Christian Lequesne on the Quai d’Orsay. A generation of young scholars have taken advantage of internships in international organizations to produce analyses of international relations that are rich, relevant, and, above all, draw on a deeper empirical well than what is offered by a good deal of political science.¹⁷ In this chapter, I have already tried to highlight the practices and political dynamics of the Brussels bubble in which the cabinet is embedded. In the following chapters, I discuss the individual trajectories that have been shaped through political work. My aim is to reconstruct the experience of men and women who, in good faith, devoted a significant part of their professional life to Europe and/or the Left. I try to interpret their world, critically but without criticizing it. Over time, I have developed a sensitivity close to theirs. The “tacit knowledge” that underlies their world, already close to mine (we have completed similar university programs, we speak the same language, we are interested in Europe, and, I confess, I am a social democrat), has not been too difficult to internalize. Despite the warnings of epistemologists—who advise to break with common sense in order to construct a truly scientific object¹⁸—I did not expect to develop as much respect, let alone admiration, for the actions of these men and women. As Dominique Schnapper explains, quoting Max Weber, ethnography is an experience both of disenchantment and of re-enchantment with the world.¹⁹ In the concluding chapter, I will come back to the difficulties of a real epistemological break in qualitative research, which, like this one, concerns practices observed over the long term. Beyond its ethnographic dimension, the particularity of this investigation is its focus on political work. By this I mean the set of practices through which the commissioner and staffers attempted—sometimes successfully, often not—to create an autonomous space for political agency in the face of the institutional, legal, diplomatic, economic, and technocratic constraints they faced. Novels such as Die Hauptstadt by Robert Menasse, La clé USB by Jean-Philippe Toussaint, and Les compromis by Eric Cardère and Maxime Calligaro show quite faithfully how

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

37

political work is deployed in the European institutions. Die Hautpstadt describes a DG Culture official whose project is manipulated by a secretary-general who could be mistaken for Martin Selmayr. La clé USB features a foresight expert who could be working in the Bureau of European Policy Advisers, the Commission’s internal think tank, also located in the Berlaymont building. Finally, the murder investigation at the center of Les compromis takes place in the European Parliament and the area around the Place du Luxembourg. Without the literary talent of these authors, I hope to be able to show the very real challenges that decision-makers face because of the configuration of the European Union—but also how people manage, sometimes, to create room for political agency. Over the years, I have often been asked how I gained access to the “field” and what ethical rules I followed. The answer to the first question is simple. Since my PhD dissertation, I had dreamt of repeating George Ross’s investigation within an international organization. When, at the very beginning of the Juncker Commission, I realized that I knew someone who knew Pierre Moscovici’s chief of staff, I asked him to establish contact with him. I then submitted a proposal to spend two months a year in the cabinet for the duration of its mandate. The commissioner accepted. The Commission imposed only two rules: that it redact passages quoting persons or documents that are subject to institutional confidentiality, and that publication be delayed until the end of President Juncker’s term of office. In an exchange of letters, it was agreed that all other wording and analyses would be at my own discretion. The European Union is often criticized for wanting to influence research through generous funding. For my part, I have neither obtained nor applied for European grants to carry out this project. It was, however, the answer to the second question, that of ethics, that was decisive in carrying out this investigation. Appointed stagiaire atypique in the Commission (no one was ever able to explain exactly what that meant), I had a badge, an office space, and an institutional e-mail address with which I could access electronic conversations. But would I have real access to the “backstage of Brussels”? In the international sphere, many would-be ethnographers are limited to observing a few meetings or “para-sites” of semi-public places, often far removed from the action.²⁰ It is on this point that the reception of cabinet staffers was decisive. From the outset, I made it clear to all that I would be taking notes but that no comments or situations that would allow them to be identified would be published without their agreement. This agreement was formalized in an ethics protocol approved by my university. In exchange, the Moscos opened their door to me, gave me their time, were transparent, and—I cannot pass over this point in silence—extended a friendship that far exceeded my expectations. After first reading the manuscript individually and then collectively, they modified very few passages, usually to ask me to remove a swear word or to avoid hurting someone else.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

38

  

The book you have in your hands has therefore been read by all the protagonists, who have approved the passages that concern them. Today, scholars face a double injunction: to coproduce knowledge with “subjects” and to respect their physical and moral integrity. In exchange, institutions are asked to be open and transparent. Thanks to my twenty “subjects” (collaborators and former collaborators of the cabinet), who have filled the role of as many research assistants—enriching my analyses, correcting my mistakes, proposing their own interpretations, engaging in contradictory debate—we have succeeded in making social science a truly collective undertaking.

Notes 1. Ludovic Lamant, Bruxelles chantiers: Une critique architecturale de l’Europe (Montreal: Lux, 2018), 224. 2. Jean-Michel Eymeri-Douzans, Xavier Bioy, and Stéphane Mouton, Le règne des entourages: Cabinets et conseillers de l’exécutif (Paris: Presses de Sciences Po, 2015). 3. Michel Mangenot, “Une cabinetocratie bruxelloise? Les cabinets des commissaires européens entre collégialité et équilibres nationaux,” in Le règne des entourages: Cabinets et conseillers de l’exécutif, ed. Jean-Michel Eymeri-Douzans, Xavier Bioy, and Stéphane Mouton (Paris: Presses de Sciences Po, 2015), 679. 4. Morten Egeberg and Andreas Heskestad, “The Denationalization of Cabinets in the European Commission,” Journal of Common Market Studies 48, no. 4 (2010): 775–86. 5. Jean Joana and Andy Smith, Les commissaires européens: Technocrates, diplomates ou politiques? (Paris: Presses de Sciences Po, 2002), ch. 2; Mangenot, “Une cabinetocratie bruxelloise?”; Athanassios Gouglas, Marleen Brans, and Sylke Jaspers, “European Commissioner Cabinet Advisers: Policy Managers, Bodyguards, Stakeholder Mobilizers,” Public Administration 95, no. 2 (2017): 359–77. 6. George Ross, Jacques Delors and European Integration (Oxford: Oxford University Press, 1995). 7. Hussein Kassim et al., The European Commission of the Twenty-First Century (Oxford: Oxford University Press, 2013), 151–80. 8. Sophie Petitjean, “Le controversé Martin Selmayr annonce son départ de la Commission européenne,” Le Monde, July 16, 2019, https://www.lemonde.fr/inter national/article/2019/07/16/le-controverse-martin-selmayr-annonce-son-depart-de-lacommission-europeenne_5490045_3210.html. 9. Didier Georgakakis, Le champ de l’Eurocratie: Une sociologie politique du personnel de l’UE (Paris: Economica, 2012). 10. Peter Kraus, A Union of Diversity: Language, Identity and Polity-Building in Europe (Cambridge: Cambridge University Press, 2009). 11. Joana and Smith, Les commissaires européens. 12. Liesbet Hooghe, The European Commission and the Integration of Europe: Images of Governance (Cambridge: Cambridge University Press, 2004); Marine de Lasalle and Didier Georgakakis, “Genèse et structure d’un capital institutionnel européen: Les très

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

13. 14. 15.

16. 17.

18. 19. 20.

39

hauts fonctionnaires de la Commission européenne,” Actes de la Recherche en Sciences Sociales 166–7 (2007): 38–53. Joana and Smith, Les commissaires européens, 56. Bruno Latour, La fabrique du droit. Une ethnographie du Conseil d’État (Paris: La Découverte, 2002). George Ross, Jacques Delors; Marc Abélès and Irène Bellier, “La Commission européenne. Du compromis culturel à la culture politique du compromis,” Revue française de science politique, 46, no. 3 (1996): 431–56; Cris Shore, Building Europe: The Cultural Politics of European Integration (London: Routledge, 2000). Richard F. Fenno, Watching Politicians: Essays on Participant Observation (Berkeley, CA: Institute of Governmental Studies, 1990). Dominique Schnapper, Une sociologue au Conseil constitutionnel (Paris: Gallimard, 2010); Bruno Latour, La fabrique du droit; Marc Abélès, Un ethnologue à l’Assemblée (Paris: Odile Jacob, 2000); Marc Abélès, La vie quotidienne au Parlement européen (Paris: Hachette, 1992); Marc Abélès, Des anthropologues à l’OMC (Paris: CNRS Éditions, 2011); Séverine Autesserre, Peaceland: Conflict Resolution and the Everyday Politics of International Intervention (Cambridge: Cambridge University Press, 2014); Michael Barnett, Eyewitness to a Genocide (Ithaca, NY: Cornell University Press, 2002); Rebecca Adler-Nissen, Opting Out of the European Union (Cambridge: Cambridge University Press, 2014); Iver Neumann, At Home with the Diplomats (Ithaca, NY: Cornell University Press, 2012); Christian Lequesne, Ethnographie du Quai d’Orsay (Paris: CNRS Editions, 2017); Olivier Schmitt, Allies That Count (Washington, DC: Georgetown University Press, 2018); Yves Buchet de Neuilly, L’Europe de la politique étrangère (Paris: Economica, 2005); Romain Lecler, Une contre-mondialisation audiovisuelle ou comment la France exporte la diversité culturelle (Paris: Sorbonne Université Presses, 2019). Obviously, this is not an exhaustive list. Frédéric Mérand, “EU Politics,” in Sociology of the European Union, ed. Adrian Favell and Virginie Guiraudon (Houndmills, UK: Palgrave, 2009). Schnapper, Une sociologue. The expression is borrowed from Marc Abélès, Des anthropologues à l’OMC.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

2 Facing Varoufakis Greece, 2009–2015

The Eurogroup is a game played for ninety minutes and at the end the Germans win. —Anonymous observer of the Eurogroup Between 2009 and 2015, Greece experienced a crisis longer and deeper than the Great Depression was for many Western countries in the 1930s. As public debt jumped to 180 percent of GDP, the fiscal crisis turned into an economic one: in less than a few years, Greek national income fell by 30 percent. The crisis was also social: the unemployment rate rose to 25 percent and thousands of Greeks left the country. Finally, the crisis was political: having applied austerity cuts equivalent to 15 percent of GDP, six successive governments faced unrest, the rise of the neoNazi Right, and an influx of refugees that, while not directly linked to the country’s economic difficulties, worsened their consequences.¹ How can we explain this economic, social, and political disaster? From the cafés of Athens to the pink pages of the Financial Times, we find two opposing interpretations. The first interpretation focuses on the Greek political system: the impecunious nature of its leaders, the incompetence of the administration, widespread corruption, labor market rigidities, the underground economy, rent-seeking practices that make a Greek mailman or pope better paid than a Czech IT specialist. Not to mention tax evasion, which, according to former finance minister Yanis Varoufakis, has become “a phenomenon halfway between an Olympic sport and a patriotic duty.”² Embodying Greece’s dysfunctions, the Elstat statistical institute deliberately concealed public account figures for more than ten years, publishing a deficit of less than 4 percent when it was in fact close to 15 percent. “Greece,” wrote the German tabloid Bild in 2015, “must understand that work comes before the nap.” According to this rather uncharitable interpretation, European leaders made a serious mistake when they admitted Greece into the eurozone for political reasons and in defiance of economic logic. This allowed the Greeks to live far beyond their means for almost a generation, while reinforcing the worst failings of the political system. The only solution is to comprehensively reform the administrative system, transform the country’s economic and political

The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0003

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

41

culture and, if that is not possible, put Greece under quarantine so it does not harm the eurozone. Without denying Greece’s dysfunctions, a second interpretation attributes most of the blame to the “troika.” That is the name given to the institutional framework that brings together officials responsible for implementing the adjustment program from Brussels (the Commission), Frankfurt (the European Central Bank, or ECB), and Washington (the IMF). Admittedly, the Greek economy was never healthy, but before the euro it could use competitive devaluation to stimulate its exports. In fact, joining the single currency worsened Greek pathologies by facilitating the accumulation of credit and debt through interest rates that were too low, because they were aligned with those in Germany. This was attractive to German and French banks, who thought they could lend to Athens without risk. When the crisis hit, Greece was unable to devalue its currency because of the euro. To bail it out, the institutions imposed fiscal consolidation (i.e., drastic cuts) and structural reforms (i.e., layoffs) on a scale unprecedented for an industrialized country. For many economists, the drastic cure applied by institutions did more harm than the disease itself. “Greece’s depression happened,” writes Nobel laureate Joseph Stiglitz, “because the country did do what it was supposed to.”³ While structural reforms cut pensioners’ incomes and put thousands of civil servants out of work, while companies saw their taxes rise, the state was forced to cut social spending to produce a primary surplus (once interest on debt had been paid) of 3.5 percent. Aiming at reducing public debt, austerity applied in a context of economic recession directly contributed to ballooning public debt. For former IMF economist Ashoka Mody, by demanding debt restructuring, “the Greeks had economic logic firmly on their side, but the eurozone’s politics inflicted unnecessary misery on them.”⁴ Throughout the Greek crisis, much of the public debate was conducted in a moral register.⁵ The image of a young, tanned Greek pensioner spending the money of a poor Slovak worker on his yacht was opposed to the image of a housekeeper in Athens reduced to begging by a troika of “men in gray.” CostaGavras’s political film Adults in the Room helped disseminate the interpretation of Yanis Varoufakis, a short-lived protagonist who staged the resistance of the Greek government to Brussels’s diktat. In this chapter and the next, I describe how the Greek crisis was experienced by the very people who were responsible for managing it. I am neither an economist nor an expert on Greece, so I do not pretend to assess policy options or report on their consequences for the Greek population. But, balancing and at times qualifying Varoufakis’s narrative, I will show how the Commission, and in particular Pierre Moscovici’s cabinet, tried to carve up a political space that would enable Greece to challenge the economic, diplomatic, and institutional constraints that seemed at the time to lead inexorably to Grexit. * *

*

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

42

  

I began my investigation inside the Berlaymont as the most dramatic episode of the Greek crisis was about to end. On July 5, 2015, Alexis Tsipras’s government won a referendum on the European rescue plan. Sixty-one percent of voters voted “no” to the so-called third program proposed by the EU, the ECB, and the IMF. After six months of complete standoff between Syriza, a radical left party elected on January 25, 2015 to “end the program,” and its creditors, Tsipras encouraged his fellow citizens to resist “blackmail” by voting against Brussels’s ultimatum. For Randall Henning, this was a “Pyrrhic victory” since Athens, cut off from its creditors, now found itself cornered.⁶ A few days later, stupefying the world, Tsipras gives in to everything he had been refusing for six months. A new assistance program is agreed, with new and even tougher conditions for Greece. This gives birth to one of the most famous Twitter hashtags of this period: #thisisacoup. To restart negotiations, Tsipras forces his finance minister, Yanis Varoufakis, who had led the fight against the troika, to resign. On July 11, Eurogroup finance ministers meet to respond to Athens’s requests. For quite some time now, the German finance minister, Wolfgang Schäuble, had been in favor of suspending Greece from the eurozone: a “time out,” he called it. But France and the Commission are opposed to Grexit.⁷ On the morning of July 13, Franck picks me up at the reception desk of the Berlaymont, where I will spend my first day of embedded observation. The day before, European finance ministers and heads of government spent the night negotiating Greece’s future. Negotiations, Franck tells me, were interrupted at midnight and resumed at 4:00 a.m. The eurozone summit lasted seventeen hours, probably the longest summit in history. It is said that the president of the European Council, Donald Tusk, refused to let the leaders out of the room until there was an agreement. Franck tells me that an interim agreement has been reached. He takes me to the tenth floor, where Moscovici’s cabinet is located. The cabinet meeting starts at 10:00 a.m. Olivier, Moscovici’s chef de cabinet, reviews the agreement with Greece. The Eurogroup meeting, he says, was “very long and hard.” Facing an impasse, the ministers gave way to the leaders’ summit. According to “Pierre,” as members of his staff call him, Greece is being asked too much. Tsipras may not hold his party together and the banks will not reopen tomorrow morning. Ioana, the cabinet member in charge of the Greek file, adds information on the financing of the agreement, which will go through the European Stability Mechanism (ESM). Simon, who attended the Eurogroup meeting along with the commissioner, says that Greece was “humiliated” but that the new finance minister, Euclid Tsakalotos, who replaces Varoufakis, remained “calm and dignified.” Lucie, in charge of the commissioner’s speeches, asks how the deal can be “sold” to the press: the commissioner has to prepare for a doorstep, an informal press conference. For Olivier, who, thanks to his experience as a former Commission spokesman, knows that journalists will need a few hours’ sleep after a long

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

43

summit, it is useless to organize the press briefing at 11:00 a.m.: “let’s wait for the Eurogroup in the afternoon.” “My challenge,” he adds, “is to convince Pierre to stay in Brussels tonight . . . . We’ll give him an extra vacation in exchange.” The commissioner’s visits to the Berlaymont are always busy. But I have the opportunity to sit with him right after the cabinet meeting. The greetings are quick, and I ask him what he thinks of this morning’s agreement. “I’m glad there’s an agreement, but the content is a disaster.” For him, the agreement is too harsh, it is bad for the Greeks, and the EU will continue to pay. In a book he publishes a few months later, he develops this line of thinking: At the memorable Eurogroup on July 11, 2015—where I heard from some ministers scornful and angry remarks about Greece, which shocked me— followed by the European Council on July 12, it was decided that a new program—and therefore a new memorandum—between Greece and Europeans should be concluded . . . . That day, I had mixed feelings, [including] sadness for my Greek friends in the face of such a mess, but also optimism at the opening of a more constructive period . . . . The Greeks did indeed have a legitimate aspiration to put an end to a brutal austerity that was only cutting budgets and demanding reforms that would have further impoverished an economy in recession for five years. I opposed it.⁸

While Greece seems to have fallen into line, negotiations on the details of the new program are far from concluded. They continue throughout July, under the threat of a Grexit that Berlin still wants to consider. In mid-August, the Greek parliament finally adopts a third memorandum of understanding (MoU), which comes with an €86 billion rescue plan. Tsipras must accept a new program that hardens the conditions Syriza rejected during the referendum. It is flanked by new demands, such as the creation of a €50 billion privatization fund. Over the next four years, I will observe a paradox in the cabinet’s communication. On the one hand, the commissioner wants to be Greece’s best friend. He is strongly opposed to those in the Commission and in the Eurogroup, but even more so the IMF, who wish to impose draconian conditions. On the other hand, he presents each new agreement between the institutions as “promising.” In his book, the commissioner writes: “The drafting of the memorandum of the third program is precisely aimed at relaunching growth in Greece and enabling that country to restart and regain economic autonomy on the markets and its full place in the Eurozone.”⁹ At almost every meeting we have, he insists that the Commission “avoided the worst for the Greeks.” But, as his most left-leaning collaborators remind him, by remaining in solidarity with the “institutions,” “we were accomplices to a social disaster.” How did it come to this?

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

44

  

From improvisation to exhaustion (2009–14) The Greek crisis actually began in October 2009, when Prime Minister George Papandreou announced that public deficit figures had been grossly underestimated since the country’s adoption of the euro in 2001. In relation to GDP, he admits, the deficit is 12.5 percent (it will be revised to 15.6 percent a few months later) and public debt has risen to 127 percent—the highest in the eurozone. State coffers are empty and important loans are due in the coming weeks. The extent of the disaster is soon confirmed. The “spread” between the interest Greece has to pay on its loans and what other eurozone members have to pay is widening fast and Athens can no longer find creditors to finance its debt. Greek banks undermine their balance sheets by taking on liquidity from the ECB to buy public debt that the government will not be able to repay. It’s a vicious cycle. The Greek government has two options: default or obtain a massive loan from its partners. The EU is not ready for such a situation. Thanks to low interest rates, the last decade has given the impression that European economies were converging. In times of growth, the Stability and Growth Pact, which in principle forces eurozone members to reduce their public debt, has been somewhat forgotten (see chapter 5). The global economic and financial crisis that began in 2008 shakes this confidence. In a climate of urgency, leaders must invent a new script, necessarily discretionary.¹⁰ Faced with the possibility that Greece will drag other fragile economies down with it, Germany, France, the Commission, and the ECB must decide whether they will “save” Greece by lending it money, or let it default, which could have a contagious effect on Italy, Portugal, Ireland, and Spain. “What followed,” Erik Jones writes, “was a series of improvisations.”¹¹ At first, German finance minister Wolfgang Schäuble considers the default option, which is based on the Maastricht Treaty’s “no bailout clause.” But he quickly changes his mind, a turnaround that probably has to do with the significant exposure of German banks to Greek debt.¹² In any case, the IMF, the ECB, and France are opposed to default. They are not in favor of debt restructuring (lowering the amount that is due) either, but they believe that a rescue plan is possible. This plan would focus on providing liquidity. The German government dithers.

Enter the troika After a first mission to Athens by the Commission, the IMF, and the ECB, who represent potential creditors, an agreement is reached. On May 2, 2010, eurozone finance ministers grant a €110 billion loan to Greece, the largest rescue plan in history. Since the EU has no budget for and no expertise in bailouts, the IMF is called upon, despite initial opposition from Jean-Claude Trichet, the ECB

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

45

president. A few days later, the Europeans create a first bailout fund, which will later morph into the ESM. Financial assistance, equivalent to 50 percent of Greece’s GDP, is conditional on the signature of an MoU that provides for both radical reforms of the Greek economy and a drastic reduction in public spending. What was supposed to be a one-time adjustment program will turn out to be the first of a series of three (2011–12, 2012–15, 2015–18), each more painful than the last.¹³ Economists such as Martin Sandbu, Ashoka Mody, and Joseph Stiglitz now blame the EU for this rescue plan. For some, it would have been preferable for Greece to suffer in the short term, defaulting to reconstitute its credit or even leaving the eurozone. For others, it was counterproductive to demand both budget cuts and structural reforms: debt relief should have been part of the solution from the beginning. No one seems to share this view in Brussels, where the blame is put on the climate of urgency and the particularities of the eurozone. “When the crisis knocked off in 2010,” an official who worked at the EU mission in Greece tells me, the euro area had no instrument, we were scrambling around, we negotiated a program even though we had no money. That explains why the IMF came in: we had no money, and we had no clue. We were afraid because Greece was shut off from markets. The first thing was to stabilize the system. You stop the bleeding first. Then . . . you deal with the ugly stuff.

In a detailed report, the EU Court of Auditors confirms that the logic of adjustment programs was to prevent the Greek crisis from spreading to the rest of the euro area.¹⁴ Programs are harsh because government bailouts are expensive. In theory, a bail-in, whereby private creditors take most of the losses, would help. But it is risky. At the Deauville summit in October 2010, Sarkozy and Merkel announce that, in the future, the private sector will have to contribute to a bail-in, leading to a market panic and speculative attacks against Greece, Portugal, and Spain, other countries where creditors could be asked to pay the damage.¹⁵ That is why there has never been a real bail-in. Today, the bailout option, with public money and strong conditionality for the Greek state, is lambasted because it made ordinary citizens pay for private investors’ recklessness. Fabien, the commissioner’s economic adviser, was not yet around at the time, but he understands why the EU behaved the way it did. For him, the bailout was inevitable in order to avoid a domino effect: With the eurozone, you have no choice but to bail out. Because banks are still national in Europe. If the banking system is threatened, we have to intervene. And since we know we’re going to have to make a bailout, we need rules . . . . See, the problem with economists who criticize austerity is that they were not there.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

46

   It’s a little easy to judge after the fact. When the roof is leaking and you have twenty-four hours to fix it, the first person who has an idea how to do it is the one who gets to do it. And if he’s a Chinese architect, he makes you a roof like that [he draws with his hands the curves found in traditional Chinese architecture] and you end up with a pagoda.

Ioana, who has more experience with the Greek file, agrees: “The problem is that theoretically it’s easy to do a bail-in. But it was never tested for a reason: there would be a run on the banks. And in Greece, the banks were in really bad shape already.” Still, by lending €110 billion to a Greek bailout, the EU and the IMF merely add to what is already a high level of debt. The austerity imposed on Athens leads the country into a recessionary spiral that makes it even worse. Unable to devalue its currency, Greece is forced to do internal devaluation (to lower wages). Meanwhile, the ECB, concerned about inflation in the eurozone, twice raises interest rates, which helps to plunge Europe into a double recession. Far from emerging from the crisis, Greece is sinking. In Athens, the social situation becomes more turbulent and, on October 31, 2011, Prime Minister Papandreou announces a referendum on the austerity measures required by the troika. Under pressure from his fellow heads of state and government, who worry about the impact of a referendum, he gives up four days later. Forced to resign in nebulous circumstances, he is replaced by a technocratic government led by Loukas Papademos, a former vice president of the ECB who resumes negotiations with Brussels.

The second program In the winter of 2012, the Greek economy is devastated and the government once again short of money. A second program is granted: €130 billion, on top of the €110 billion from the previous year, with new austerity conditions. In short, the debt is increasing and the government’s constrained budget is a weight on the economy.¹⁶ Why is the first program a failure? There are three conflicting views. The first view, held by Varoufakis, focuses on the original sin, the rescue plan: in an arrangement he calls “bailoutistan,” money is borrowed to pay back old debts, in an unending cycle. German banks saw their bad debts paid off by German taxpayers, who expect to be reimbursed by Greek citizens. The only solution would have been to write off part of the debt, with the creditors accepting a net loss to give Greece a boost. In 2012, as part of the second bailout plan, private creditors, somewhat under duress, did agree to restructure Greek debt to the tune of €100 billion. They

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

47

accepted a significant haircut in exchange for which governments bought back existing bonds. For Athens, the payment period for loans (their “maturity”) was extended in order to make the debt more bearable. But, critics say, it was too little, too late, and Greek institutions were more affected than foreign banks, which had already left the country. The second view, dominant in Berlin, focuses on veto points in Greece. For one German Treasury official, the Greeks “failed to implement the most important things. They don’t have a cadastre, their administrative capacity is below Thailand’s. Why should Germany deal with it? Because it’s our taxpayers’ money. So it has to be done on our terms.” One of his colleagues adds: “Greek politicians never did anything beyond the program, nothing without conditionalities.” These two seemingly antagonistic interpretations come together in a vicious cycle. For Martin Sandbu, The failure of the first rescue . . . fed the German feeling that Greece was being helped not out of European solidarity but at the point of a gun. The spectre of default was constantly hovering over the Greek program . . . . This meant Greek leaders could afford brinksmanship. They dragged their feet over many of the painful choices their lenders demanded on them, reasoning that the loans would come in the end. The German public in turn could be forgiven for increasingly thinking it was being blackmailed into helping. Against that backdrop it was politically impossible for Berlin not to try to control as tightly as possible what the Greeks did with their money . . . even though the bulk was not spent by the recipient countries at all but promptly recycled back to pre-existing (private) creditors.¹⁷

A third, more nuanced view dominates within the Commission and among the Moscos: a bailout with conditionality was necessary, but several conditions imposed on Athens were ill-conceived. “You have to understand,” Ioana says, “that we had no experience with these kinds of problems: restructuring, financial market analysis . . . . We didn’t know how to manage negotiations, surveillance . . . . That’s why we focused on the fiscal aspect. It seemed to us to be at the heart of the Greek crisis.”

To cut or to reform? For the Moscos, the troika put too much emphasis on fiscal consolidation and not enough on structural reforms. When I ask them who introduced the harshest provisions in the memorandum, the Commission blames the IMF, which imposed its hawkish preferences in the troika. For a former official of the mission in Athens,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

48

   We effectively gave the lead to the IMF from the beginning. The language, the instruments were copied from the IMF. We gave them veto power and they abused it. The IMF was pursuing its own agenda. The IMF model doesn’t work in the euro area where you can’t devalue and you have a corrupt state.

While some in the Commission believe that, given the “stratospheric nature” of the Greek deficit, there was no other choice than to undertake radical fiscal consolidation, others believe the mistake was asking for budget cuts too early. A troika official recalls: “The IMF was obsessed with firing public servants. That was the most divisive issue. It created a panic. They wanted to fire fifteen thousand people. For the Fund, firing people was the stick. This led to increasing tensions. And the ECB was backing the fund.” For Leila, who worked in two program countries (Greece and Cyprus) for six years before joining the cabinet, the troika’s “fiscal” guys were looking for areas where we could make cuts. They would go to the most vulnerable sectors: health, education. That’s where the most money was. But it’s also where you reach the most people. And that’s where I see myopia. Why cut spending and not increase revenues? Why? We were confronted with a reality we didn’t know much about.

Like other cabinet members, Leila felt that fiscal consolidation was too narrow a response to Greece’s deep problems. That’s also what many Greeks think. “The Europeans follow an easy recipe,” a Greek negotiator says. “The EU doesn’t have the guts to reorganize the economy and society. You need time for that. So they just check boxes. It’s easier to ask the debtor to pay back the money. I would do the same. But it’s not the right solution.” With a looser fiscal policy, it may have been possible to design and implement structural reforms. But time was running out. “We were brainstorming,” Leila admits. We could see that, as long as we did not carry out structural reforms, it would never work. There was no more money for education and health. When we had a meeting on the labor market, we found ourselves with people who didn’t really want to make things happen: for example, questioning incompetent public servants. At the end of the day, budget cuts dominated rather than the issue of misused revenues: the General Accounting Office, you went in there, it was a magnificent building, you felt like you were in the age of Ulysses, but the databases were still mountains of paper. It wasn’t even computerized.

The reforms demanded by the troika also drew criticism. Denouncing “technocratic imperialism,” Martin Sandbu believes that the reforms “infantilized the Greek body politic, which was already weak.”¹⁸ In his book, Stiglitz lists

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

49

aberrations in the structural reforms demanded of the Greeks: removing the reference to “fresh milk,” changing regulations on the weight of bread, subjecting independent pharmacies to competition—reforms whose impact on national accounts is hard to see.¹⁹ The report from the Court of Auditors prefers to question conditions that were sometimes too vague, sometimes too detailed and therefore impossible to accept, and that did not take into account potentially perverse effects. The Court points out that the Commission had no experience with adjustment programs. It acknowledges that social impact was not taken into account, especially in the first two programs, before social impact assessment criteria were added. Cabinet members themselves consider certain reforms, such as the wage reduction, to be “ideological,” “especially since Greece does not export anything.” All the people I interviewed in the Commission seem to be saddened by these early years of the program. Many report having been intimidated by Greek politicians or harassed by the media; some were brought close to depression. However, they do not show contrition. A DG ECFIN official who lived this period as a “cataclysm” argues: It’s easy to say, “We could have done this or that.” We have not been very good at explaining structural reforms. For example, if we break the children’s milk monopoly in Greece, that’s a good thing, right? I see that it does not harm the population! Of course, when we talk about the labor market or pensions, it hurts some people.

Ioana, when I ask why so many seemingly absurd structural reforms were imposed on the Greeks, explains that they needed to run up the expertise with a government that was not interested in doing reforms. Managing a program, when you work at ECFIN, it’s the most interesting thing you can do. It’s very concrete, you get engagement [from the political level]. It’s exciting. But there was too much at stake. We thought we could solve it in three years. Maybe we should have tried not to do everything at the same time.

When I ask Leila, she pauses: “Is it the troika’s fault? No. It’s the fault of being in front of the precipice, the unknown . . . . So we hang on . . . and we get hurt.”

All quiet on the Greek front? On July 26, 2012, the risk of the Greek contagion spreading to other eurozone countries dissipates when ECB president Mario Draghi, addressing an audience of

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

50

  

investors in London, says, “Within our mandate the ECB is ready to do whatever it takes to preserve the euro.” This is the beginning of operations to increase liquidity and repurchase public debt: first outright monetary transactions (OMT) and then quantitative easing (QE). Markets calm down. Meanwhile, though Prime Minister Antonis Samaras’s conservative government stalls the adoption of structural reforms, it implements the fiscal component of the memorandum by reducing deficits.²⁰ An economist at the EU mission in Athens sees this period as one of relative calm: The new coalition had to fight the rise of populism. It was a shaky coalition and they perceived that they would not last. They said, “We want debt restructuring.” We said, “Be patient. Implement the package of reforms, then we’ll do it.” We managed to convince them. Many times they said, “We don’t understand what you’re asking but we will do it anyway. Because you ask us to.”

The economy is slowly recovering. The banks are partly recapitalized. The government is about to announce a primary surplus. The task force set up by the EU provides technical assistance on a longer-term basis.²¹ As Ioana explains it, “Our position was to try and get a package that would be as beneficial as possible for the Greeks. I think in 2013 a haircut might have been an option if everything had gone well.” But public opinion in Germany, which is exposed to constant media coverage of so-called Greek profligacy, makes that perspective rather uncertain. In fact, at the end of 2014, tensions between Athens and its creditors reach a new zenith. The Samaras government, which lost a lot of political capital in implementing the program, expects to lose the next elections and slows down reforms. In November, interest rates rise steeply and Greek stocks fall. “Because of the turbulence,” a troika official says, all our economic predictions started to be wrong. We needed to adjust the fiscal path, which was unrealistic. We were talking a lot, assessing the pros and cons all the time. It wasn’t very quantitative. That would make no sense in an economy that is drastically changing. It was largely an inductive approach. But we were building on theories that had nothing to do with what was happening.

Denouncing Syriza’s opposition to the election of the president of the republic, an honorary position, Samaras decides to hold early general elections.²² Caught between an increasingly unstable Greek government and the pressure exerted by the Eurogroup and Wolfgang Schäuble, who do not trust Athens, Commission staff are in a difficult situation. The Commission is ready to offer concessions to the Samaras government to enable it to win the elections and complete the second

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

51

program. But the IMF, supported by the ECB, opposes this. “It didn’t make sense to drive Samaras out,” a Commission official explains. We drove them over the cliff. But it didn’t matter what we thought. There was a huge fight with the IMF and the ECB about what to ask the government. The Greek government was asking for a biscuit. We gave them nothing. From a high probability of losing the election it became a certainty. The IMF for their own reasons wanted to run their own little experiment. It wasn’t in our interest to provoke a political crisis . . . which of course we did.

This official, like others, insists on a feeling of collective exhaustion. We had new instruments, new players, but a long history of people completely fed up with Greece. What happened at the end of 2014 was the failure to complete the program. It was a policy fuck-up, both in the EU and in Greece. The Greeks are a bunch of messers, of course. But what happened didn’t have to happen.

Unable to adapt its program to the Greek political calendar, Brussels is undergoing its own transition. In July 2014, Jean-Claude Juncker is appointed president of the European Commission. For the economic and financial affairs portfolio, he brings Pierre Moscovici on his team to replace Olli Rehn, a Finn. But the new Commission does not take office until November. In the meantime, there is a power vacuum. An official at the mission in Athens recalls: “My recollection is, I didn’t have a boss. We were completely on our own.”

The winter of chaos When Pierre Moscovici takes office, he gets the Greek file. He knows it well since, as French finance minister from 2012 to 2014, he took part in all the Eurogroup meetings devoted to the Greek rescue plan; so did Jean-Claude Juncker, who was president of the Eurogroup when he was finance minister of Luxembourg. By mutual agreement, they want to wrest the Greek dossier from troika officials and politicize it. Both also oppose Wolfgang Schäuble and his willingness to contemplate Grexit. In theory, Pierre Moscovici shares the dossier with Vice President Valdis Dombrovskis. But they quickly divide the labor between them: Ukraine (where a civil war started in 2014) to Dombrovskis and Greece to Moscovici. Juncker’s “political Commission” involves extracting the dossier from a treatment that, in Brussels as in Washington, is perceived as too technocratic in regard to its consequences on public opinion. The Greece team is one of the first the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

52

  

commissioner meets when he arrives in Brussels: “They were more hands-on,” recalls a civil servant, referring to the Moscovici cabinet. During his term of office, the commissioner will visit Greece at least twelve times, whereas his predecessor, who oversaw the worst years of the crisis, went only once in four years. In the meantime, the institutional and macroeconomic situation has changed. In Greece, there is no foreign capital left to speak of. By 2014, fears of contagion in Italy and Portugal are gone. With the economic-governance reforms adopted between 2011 and 2013 (see chapter 7) and the creation of the ESM, Europe’s arsenal for containing a crisis is now more powerful. Greece no longer seems to pose a threat to the euro. That is why some believe that they were close to achieving the goal of completing the second program and enabling Greece to finance itself on the markets, much like Portugal and Ireland, who freed themselves from the troika’s tutelage. However, the winter of 2015 will turn out to be the most dramatic season in the Euro-Greek saga. One of its protagonists describes this period as “chaotic, fascinating, crazy, tiring . . . . It’s hard to put into words how bunker crazy the whole thing was.” After the failure of negotiations on an extension of the program, and although it is impossible to establish with certainty a link between the two, the Samaras government loses power to Syriza, a far-left party that has long been relegated to the margins of the Greek political landscape, but which takes advantage of the collapse of traditional parties to promote its “anti-program program”: the end of austerity. In Brussels, there is considerable shock.

“The lunatics are taking over the asylum . . . ” Initially, the Commission and Syriza are both in favor of politicizing the Greek issue. The new prime minister, Alexis Tsipras, requests a dialogue at the leaders’ level in order to renegotiate the terms of the second program, which, in principle, should be concluded in February 2015. While for Juncker and Moscovici, the objective is to show that the EU is concerned about the political consequences of its actions, the challenge for Tsipras is to sideline the troika. In Greece, the troika is referred to as the “four knights of the apocalypse,” the “men in black,” or simply “the junta.” This point of view of the Greek Left is not widely shared at the Eurogroup, dominated by center-right governments, and the ECB, bound by the treaties. These institutions are suspected of wanting to punish the new government even before it has had the opportunity to present its proposals. On February 4, 2015, one week after Syriza’s election and three weeks before the program is set to expire, the ECB Governing Council withdraws the derogation that allows Greek banks to use government debt as collateral, called “emergency liquidity assistance”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

53

(ELA), in effect turning off the government’s tap. Liquidity will only be available if Athens accepts in full the program negotiated by the previous conservative government. Ashoka Mody believes that “with the February 4 decision, unelected ECB officials stepped into the political arena and determined Greece’s economic and political trajectory.”²³ On top of that, the ECB insists on a tight repayment schedule for the €7 billion owed by Athens. “The goal,” writes Martin Sandbu, “was to force the left-wing radicals to continue with similar policies as the centerright party they defeated in elections.”²⁴ Layered on to this political dispute are various personality conflicts. The new finance minister is an economics professor who spent most of his career in the United Kingdom and the United States. As an individual, Yanis Varoufakis breaks all the rules of etiquette in force at the Eurogroup: he does not wear a tie, he interrupts his peers in meetings to correct them, and he gives press conferences to denounce their ostensibly confidential comments. In substance, however, Varoufakis’s analysis is supported by many economists. It is a question of doing away with “bailoutistan” by suspending repayments until Greece has resumed growth or, failing that, by indexing interest rates on the growth rate and extending maturities. This would be a more ambitious debt restructuring than the one completed in 2012, which Varoufakis believes would put an end to the vicious cycle of borrowing. Affirming that he agrees with 70 percent of the reforms identified in the second program, Varoufakis insists on proposing his own list of reforms for the remaining 30%, instead of those listed in the memorandum, which he intends to renegotiate. Calling himself a Europhile, he sometimes alludes to Grexit insofar as he sees it as a credible threat to force creditors to engage in a dialogue on restructuring. Creditors interpret Varoufakis’s proposals with skepticism. Seeing these proposals as a way to borrow time, they insist on the implementation of the tax, pension, and labor market reforms agreed by the Samaras government. Under the influence of Wolfgang Schäuble, Jeroen Dijsselbloem, the Dutch president of the Eurogroup, prevents Varoufakis from raising the renegotiation of the program in the Eurogroup. The finance ministers stick to the memorandum of the second program; for them, this document is the product of fierce negotiation between the eighteen other Eurozone member states and, as such, cannot be jettisoned because of the Greek election. According to George Tsebelis, Syriza’s politicians did not understand the rules of unanimity within the Eurogroup, where “the status quo is almost impossible to change.”²⁵ Within what Frédéric Lebaron and Didier Georgakakis call the “social field of Eurocracy,” Varoufakis’s atypical behavior provokes exasperation.²⁶ His heterodox entourage, made up of radical economists and Syriza militants with no diplomatic experience, does not inspire confidence. “It became very clear,” admits a senior Commission official,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

54

   that part of what we had to do—it’s going to sound terrible—was to socialize them. Varoufakis had a point about debt relief, of course. But the situation was better than he thought. And he wanted a complete write-off. The deal was always, “You reform, you get the money.” He wanted money but no reform. Never fundamentally, anyway.

A misunderstanding At the end of a difficult month, an agreement seems to be within reach on February 20, 2015.²⁷ After a day of negotiations in which Varoufakis makes concessions on language before giving the impression that he does not have the support of his own government, Eurogroup finance ministers agree on a communiqué that provides for a four-month extension of the program, allowing the Greek government to prepare its own list of reforms. However, the communiqué is based on a misunderstanding: since the word “memorandum” is not included in the text, Varoufakis believes he has won the right to renegotiate it. That is not the view of his eighteen colleagues in the Eurogroup.²⁸ In the following months, the “institutions” (as the troika is renamed, at Greece’s request) stiffen and the Greeks become increasingly disillusioned. The Syriza government drags its feet on reforms and blocks access to European officials in Athens. The commissioner tries to find political compromises but his personal relationship with Varoufakis deteriorates. According to one member of the EU mission in Athens, Varoufakis sowed a climate of mistrust. Every session things got worse and worse. Statements got worse. So things got tighter. Everybody was skeptical, but there was an effort. The Greeks were trying to take advantage. OK, the Germans were tough, more than us, but the door wasn’t closed. With hindsight, they were right. Schäuble checked all the details, there were painful discussions. He wouldn’t agree on a word that could be abused.

Finance ministers and Commission officials dispute Varoufakis’s sincerity when he says he wants to implement reforms. When I challenge a Commission official about Varoufakis’s claim that he agreed with 70 percent of the proposals and only asked for some leeway to identify his own, he does not mince words: That’s complete nonsense! He hadn’t read the MoU. On every single policy they rejected reforms just because they were agreed by Samaras. Every reform stopped. Eventually they may have been willing to do some things, like on anti-corruption, because they were not tied to the old elite. But they were all rhetoric and no policy. How exactly do you fight corruption? They didn’t know.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

55

Varoufakis did serious damage. They were all about slogan, no substance. We thought we were talking to Mickey Mouse.

The commissioner shares this impression: “the famous 70 percent were all minor things.” Varoufakis claims that the troika carried out intrusive work in Athens. “From the beginning,” he writes in his memoir, “the troika teams strove to violate the separation between the political and the technical.”²⁹ The issue of pensions is a perfect illustration of this. “While commentaries in the Wall Street Journal and the Financial Times made out that Brussels and Athens were the scenes of a major disagreement over fiscal targets, tax rates and administrative reforms, in reality what was happening was the equivalent of the nineteenth-century gunboat diplomacy used by the British Empire.”³⁰ The Brussels people recall differently their attempts to apply the memorandum. Leila, who undertook more than thirty missions to Athens, acknowledges that there was an asymmetry of power but claims that Greek politicians were taking advantage of the imbalance. “At my level,” she says, “we avoided talking face-toface with the ministers. But it was the ministers themselves who called us. I recall at least three ministers, they would call me, I told them, ‘Call my head of mission,’ but they called me back anyway.” Saying that he wants to respect Greek sovereignty, the commissioner suggests to Varoufakis that their representatives meet in Brussels, in the offices of the Greek Representation, rather than in Athens, where, according to one of the European negotiators, “the troika had turned into a media show, making people very depressed.” He continues: They were coming with non-elected people, young ones, who were given crucial roles. There were some who came from outside, a lot of professors, who were reasonable but with wrong views of the world. Some were very ideological. The Syriza people had only one thing in common: they had been elected against the MoU. But they had never read the MoU.

Not only do the negotiations stall, but the Commission is not supported by the Eurogroup, which takes a more hawkish line. In the words of an adviser who closely followed the work of the Eurogroup, “there was the suspicion that the Commission tried to strike its own deal, that it wasn’t loyal to the troika.” Wielding the threat of Grexit and the memory of Germany’s occupation of Greece during the Second World War, Tsipras believes he can count on support from Angela Merkel. This justifies Varoufakis’s growing demands to the Eurogroup, particularly on debt cancelation. For those in the Commission who had to prepare the staff-level agreement following the February 20 Eurogroup communiqué, this was an unreasonable strategy. As one official explains,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

56

   If you talk to any politician, they never say no. They say, “I understand your problem, we set up a process, talk to my officials . . . ” They never draw red lines. So Merkel was polite with Tsipras. They interpreted her politeness as a green light! They would then come to me, the Greeks, and say we have a mandate to discuss debt relief. They completely misinterpreted what the politics were.

Referendum betrayed Blamed for the stalemate, Varoufakis is gradually excluded from the discussion as the leaders take over.³¹ High-level meetings take place almost every two weeks. In June, Angela Merkel, Mario Draghi, François Hollande, and Christine Lagarde present Tsipras with a joint position drafted by the Commission. For Stiglitz, these negotiations were only “a face-saving gesture to enable the crisis-country government to swallow the bitter medicine.”³² The main concession is to reduce the expected primary surplus from 4.5 to 3.5 percent.³³ This is not enough for a government that promised its electorate to end both the program and austerity. After the failure of the eurozone summit on June 24–5, 2015, Dijsselbloem tells Varoufakis, “It is a take it or leave it offer, Yanis.” “Apart from France and the Commission,” a German finance ministry official recalls, “everyone was ready to expel Greece.” On June 27, to everyone’s surprise, Tsipras announces a referendum on the EU’s “final offer” and, three days later, Greece unilaterally defaults on the IMF loan. The reaction is swift: the ECB blocks liquidity to Greek banks. The government is forced to close banks and impose capital control.³⁴ The July 5, 2015 referendum is held in a strangled economy, where citizens see their bank withdrawals limited to €60 a day.³⁵ Nevertheless, it is a resounding political victory for Alexis Tsipras, who asked Greek citizens to vote “no” to the EU’s proposal. The very next day, EU leaders warn the Greek prime minister that they do not feel bound by the referendum results. In the street of Athens, there is considerable shock. “In the summer of 2015,” Joseph Stiglitz sums up, “sixteen years after the euro was launched, it looked as if Greece would have to exit.”³⁶ In a volte-face that still arouses bewilderment today, Alexis Tsipras then gives in to all the institutions’ demands. Within a few hours, the population’s “no” to the memorandum vote turns into the government’s “yes” to a third program. For a former member of the EU mission in Athens, “the troublemaker was defeated because he never managed to create a problem for Portugal or Spain. [Compared to 2010], Syriza was no longer able to make Greece a European problem.” After this brutal reminder of the economic and institutional reality, and thus the limits of political work, Tspiras agrees to negotiate a third program. The new memorandum, adopted on August 19, 2015, includes draconian conditions justified by Greece’s worsening fiscal situation during the first six months of the Syriza

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

57

government. They are flanked by additional measures if the rather optimistic growth targets are not met. At the Commission, the first half of 2015, which precedes my fieldwork in the Moscovici cabinet, remains an episode as traumatic as it was exciting. A tragic episode too, since everyone came out a loser. This is true for Greece, of course, which lost 25 percent of its GDP, but also for the ECB, which had to invest €80 billion in July 2015, and the EU, whose legitimacy was seriously damaged. Many have bitter memories of Juncker’s statement after Syriza’s election: “There can be no democratic choice against the European treaties.” A questionable moral sentiment, perhaps, but a clear-sighted political assessment, to be sure.

The Varoufakis story It is impossible to write the history of the aborted Grexit without addressing the version given by the most media-savvy of its protagonists, Yanis Varoufakis. During each interview, I wanted to test the reaction of my interlocutors to the revelations and interpretations contained in his book Adults in the Room, which Franco-Greek filmmaker Costa-Gavras turned into a political thriller in 2019. With the exception of the commissioner, all of them replied, with a more or less disgusted face, that they had refused to read it. In Brussels and, as I have seen, in Athens, Varoufakis is considered a narcissist and a maverick. Only Olga, who welcomed the Greek minister a few times to the tenth floor, confesses that she found him friendly: “He would come to the commissioner’s office with his little bag, his leather jacket, his flower shirt. He was a star. Very different from other finance ministers who came here with their retinue.” In the office, when someone shows up wearing jeans, people still speak of the “Varoufakis look.” In his book, Varoufakis tells the fascinating story of the six months he spent at the head of the Greek Ministry of Finance, from which he led Syriza’s fight against the program. While his story has offended many politicians whose confidentiality he betrays, the facts have not, for the most part, been challenged. Describing himself as a Europhile, Varoufakis denounces the inflexibility of the Eurogroup, reserving a particular animus for its Dutch president, Jeroen Dijsselbloem. Varoufakis wanted to find a solution to the Greek crisis that involved renegotiating the program. Despite the support of famous economists, including Paul Krugman, Lawrence Summers, and Joseph Stiglitz, the Greek says he was turned down flatly. Varoufakis mentions several moments when Dijsselbloem and Schäuble refuse to circulate his proposals, his non-papers, his analyses. Schäuble explains that, if he accepts these documents, the law will oblige him “to submit them to the Bundestag.”³⁷ Varoufakis plans to circulate them by e-mail, but Dijsselbloem warns him that this would be a “breach of protocol.” He is advised instead to forward his documents to the troika, which refers him, through Thomas

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

58

  

Wieser, the chairman of the Eurogroup working group, back to the Eurogroup since this is a ministerial-level issue. “I might as well have been singing the Swedish national anthem,” writes Varoufakis. “It would have made no difference.”³⁸ A fundamental question guiding my sociology of political work is whether there was any leeway, any political discretion in these negotiations that the new Greek government wanted. Observers like George Tsebelis think that there was not; in his opinion, Varoufakis did not understand the veto logic within the Eurogroup, which made it impossible to roll back the program. In his book, however, the Syriza minister faithfully describes the dynamics of the Eurogroup, whose power relations he seems to master even as he is unwilling to submit to them. He is simply more interested in economic theory than in the complexity of institutional rules. In the Moscovici cabinet, people continue to believe that there was room for political agency, a narrow room perhaps, but a real one nevertheless. In the end, even if the majority of Eurogroup members were prepared to consider it, there was no Grexit, and this is largely thanks to the Commission and France, which opposed it. For the commissioner, “only the European Commission, in the person of Jean-Claude Juncker and myself, wanted to help the new Greek government understand the European game.”³⁹ An adviser to President Juncker adds: There was a Greek desire to raise the level with the naive idea that politicians would stamp on the rules. It was very Syriza. First they wanted to talk to the leaders, then to the finance ministers, before talking to the Commission. Until they realized that they had no friends other than the Commission.

Varoufakis devotes several passages of his book to his relationship with the commissioner. In essence, he insists that their views converged, but he also evokes the “humiliations” that the finance ministers inflicted on the French commissioner. Moscovici, he argues, assured him of his support in putting an end to technocratic intrusions into Greek sovereignty. They agreed that talks on reforms, debt, and the budget should be held between politicians in Brussels—which the commissioner calls the “Brussels Group”—while technocratic missions would be deployed to Athens only for data collection. Using an expression that I, too, have heard him say, the commissioner tells Varoufakis that “it is only right that these negotiations take place in Brussels, with ministers talking only with ministers, and technocrats talking with technocrats.”⁴⁰ Varoufakis says he discussed a “contract” with the commissioner that would have replaced the MoU but was never approved by the Eurogroup. According to Varoufakis, the commissioner controls neither the Eurogroup— true, since he has only limited influence over President Dijsselbloem and memberstate governments—nor his administrative services, which, in my opinion, is debatable: “In private,” he writes, “Moscovici would agree readily and

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

59

enthusiastically with my arguments about a consistent fiscal policy and on issues like labor relations. But then the Commission representative . . . would reject all these ideas out of hand.”⁴¹ The latter, whom I asked about this, does not deny that he felt caught between the Commission’s tree and the Eurogroup’s bark. Ioana, who was present alongside this European official on behalf of the cabinet, gives a more direct denial of Varoufakis’s statement: We would say to him, “This is our position, but we don’t make the decision alone.” We would go in the Eurogoup meeting and repeat our position, like we said we would, but Varoufakis lacked an understanding that we couldn’t make the decision. Dijsselbloem had his own position and he was president. The member states had their position. And they were the decision-makers. It’s not a one-man game.

I also questioned the commissioner, who has read Varoufakis’s book, about the Greek minister’s interpretations. “It’s very lively, even interesting,” he told me. He is a funny memorialist. He says the right things about plans and actions. But, first, he should ask himself why he was betrayed by his opponents, allies and friends, and second, he neglects his own responsibility. We lost six months because of him. We lost money. His book should be called Children’s Tales, not Adults in the Room.

An alternative within the program? The commissioner’s words, like those of the other protagonists in the Berlaymont who lived through the crisis, show both an openness to Greek demands and a sincere feeling of having contributed to the Greek mess. At first, there was “sympathy for the idea of having someone who rocks the boat,” a cabinet member says. The commissioner says he saw in Varoufakis a “man of the Left,” relaxed, open, whom he met for the first time on a Sunday, both wearing jeans. The fellow feeling didn’t last. But on substance, was an agreement really possible? Like the commissioner, Fabien thinks so, provided that Syriza had accepted the principle of “a political alternative within the program,” which is to say, making left-wing changes without challenging the parameters of the program. “On the debt side it was impossible to do anything about the nominal value. But we wanted to find symbolic reforms with the Greeks.” Fabien agrees that this limited the options for a government elected on the promise to end the program: “When you have to make a 3.5 percent primary surplus, it’s such a fiscal effort, it’s almost impossible to make changes within the program.” The room for discretion was

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

60

  

very limited—too much, at least initially, for Syriza militants. Olivier confirms that, with this realization, both sides grew further and further apart: From February onwards, things started to go wrong. Greece was completely isolated. Pierre told Varoufakis that it is not a good idea to mention the Nazis. From the moment he saw that Tsipras was starting to move away from him, he told him that his finance minister was making things worse, was even hated by the Eurogroup. At first they were close, but it was Varoufakis who alienated everyone. It is unfortunate, even tragic, because Varoufakis was right about democracy and the economy. But he did it the wrong way. And it hurt us because it showcased the intransigence of the rules against democracy. This is not what we wanted.

* *

*

In the movies and in the media, Yanis Varoufakis’s struggle against the troika symbolizes the Greek tragedy. Inside the Berlaymont, this episode was experienced in a more prosaic way as one chapter in a long crisis that the flamboyant professor only exacerbated. To Syriza’s and Varoufakis’s “ethics of conviction,” the Moscos invoked the “ethics of responsibility.” Varoufakis wanted to defend convictions that were economically reasonable. For Stiglitz, Varoufakis “was probably the only economist among the finance ministers with whom he was supposed to ‘negotiate.’ ”⁴² But economics did not have much place in an institutional framework—the European rules—and in a diplomatic context—the growing mistrust of the Greek government—both of which had to be taken into account. Political work was lacking. Did the problem lie mostly in Varoufakis’s convictions? Or was it his style? Varoufakis thinks that his ideas were rejected. According to him, by criticizing “bailoutistan,” he was questioning the very people who had invested so much political and professional capital in that regime since 2010: “The troika’s purpose,” he writes, “was to defend its program while leaking to the media that we were incompetent fools whose ideas were all over the place.”⁴³ For the Brussels people, Varoufakis didn’t understand he was asking finance ministers, who had imposed severe austerity measures in their own countries, to bail out Greece unconditionally. It’s also true that Varoufakis’s lectures didn’t go down well with his colleagues. When Stiglitz describes Varoufakis as an economist, he means it as a compliment. But being an economist also entails a set of professional behaviors—proposing contradictory analyses, interrupting people in meetings, speaking straightforwardly—that are totally out of step with a diplomatic culture that prioritizes waiting your turn to speak and respecting what Erving Goffman calls the “sense of one’s place.” “In the Eurogroup,” Leila explains, “you have to swallow a little saliva.” “Varoufakis,” continues Fabien, who attended a few Eurogroup meetings, “was the kind of person who would tell the Germans,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

61

‘Look, we’re not within €1 or €2 billion . . . ’ and then babble about the net present value of Greek debt. He thought he had enrolled in a graduate seminar that could last seven hours.” The commissioner echoes this observation in his own book: Through his heterodox and professorial discourse as well as his deliberately offbeat look, his frantic taste for the media, his unbridled narcissism, Yanis Varoufakis attracted the spotlight and cannibalized the debates for a few months. He staged his political and ideological opposition with Wolfgang Schäuble and his animosity, almost physical, I can testify, with the president of the Eurogroup, Jeroen Dijsselbloem. He stretched the discussions, refusing almost any negotiation, overwhelming his audiences with endless and peremptory perorations, leaving his partners exasperated and increasingly hardened.⁴⁴

“He didn’t understand a thing about the European ecosystem,” the commissioner concludes privately. In the end, a member of the Eurogroup working group sums up the “Varoufakis moment” quite well: “Varoufakis thought he was at university and people would like to engage in debates about Keynesians versus neo-Keynesians. Some questions he raised were important. But the Eurogroup was not the right place.” In short, Varoufakis’s style did not help Greece’s cause. And yet, as I will explain in the next chapter, it is not certain that a less flamboyant minister would have achieved a lot more for Greece.

Notes 1. Alexia Katsanidou and Zoe Lefkofridi, “A Decade of Crisis in the European Union: Lessons from Greece,” Journal of Common Market Studies (advanced publication, 2020): DOI: 10.1111/jcms.13070. 2. Yanis Varoufakis, Adults in the Room: My Battle with the European and American Deep Establishment (New York: Farrar, Straus and Giroux, 2017). 3. Joseph E. Stiglitz, The Euro: How a Common Currency Threatens the Future of Europe (New York: Norton, 2016), 231. 4. Ashoka Mody, EuroTragedy: A Drama in Nine Acts (Oxford: Oxford University Press, 2018), 413. 5. Rebecca Alder-Nissen, “Are We ‘Nazi Germans’ or ‘Lazy Greeks’? Negotiating International Hierarchies in the Euro Crisis,” in Hierarchies in World Politics, ed. Ayse Zarakol (Cambridge: Cambridge University Press, 2017), 198–218. 6. Randall C. Henning, Tangled Governance: International Regime Complexity, the Troika, and the Euro Crisis (Oxford: Oxford University Press, 2017), 212. 7. Viktoria Dendrinou and Eleni Varvitsioti, The Last Bluff: How Greece Came to Face-toFace with Financial Catastrophe and the Secret Plan for its Euro Exit (Athens: Papadopoulos Publishing, 2019), 276–85.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

62

  

8. Pierre Moscovici, S’il est minuit en Europe (Paris: Grasset, 2016), 217–18, 220. 9. Moscovici, 220. 10. Jonathan White, “Politicising Europe: The Challenge of Executive Discretion,” in Democratic Politics in a European Union Under Stress, ed. Olaf Cramme and Sara Hobolt (Oxford: Oxford University Press, 2014), 87–102; Luuk van Middelaar, Alarums and Excursions (New York: Columbia University Press, 2019). 11. Erik Jones, “The Forgotten Financial Union. How You Can Have a Euro Crisis without a Euro,” in The Future of the Euro, ed. Matthias Matthijs and Mark Blyth (Oxford: Oxford University Press, 2015), 54. 12. Mody, EuroTragedy, 251–61; Martin Sandbu, Europe’s Orphan: The Future of the Euro and the Politics of Debt (Princeton, NJ: Princeton University Press, 2015), 56–8. 13. Henning, Tangled Governance. 14. EU Court of Auditors, “The Commission’s Intervention in the Greek Financial Crisis,” Special Report 17 (2017). 15. Jean Quatremer, Il faut achever l’Euro (Paris: Calmann-Lévy, 2019), 486; Nicolas Véron, “Europe’s Radical Banking Union,” Bruegel Essays and Lecture Series 5 (2015), https:// www.bruegel.org/wp-content/uploads/imported/publications/essay_NV_CMU.pdf. 16. Olivier Blanchard and Daniel Leigh, “Growth Forecast Errors and Fiscal Multipliers,” IMF Working Paper 13/1 (Washington, DC: International Monetary Fund, 2013), https://www. imf.org/external/pubs/ft/wp/2013/wp1301.pdf. 17. Sandbu, Europe’s Orphan, 181. 18. Sandbu, Europe’s Orphan, 130, 163. 19. Stiglitz, The Euro, 450–1. 20. Sandbu, Europe’s Orphan, 77. 21. See Marylou Hamm’s PhD dissertation on the task force, currently in progress, which draws on rich empirical observations that echo my own findings. 22. Quatremer, Il faut achever l’Euro, 588. 23. Mody, EuroTragedy, 417. 24. Sandbu, Europe’s Orphan, 238. 25. George Tsebelis, “Lessons from the Greek Crisis,” Journal of European Public Policy 23, no. 1 (2015): 25–41. 26. Didier Georgakakis and Frédéric Lebaron, “Yanis (Varoufakis), the Minotaur, and the Field of Eurocracy,” Journal of Historical Social Research 43, no. 3 (2018): 216–46. 27. Quatremer, Il faut achever l’Euro, 690. 28. Dendrinou and Varvitsioti, The Last Bluff, 49–78. 29. Varoufakis, Adults in the Room, 341. 30. Varoufakis, Adults in the Room, 353–4. 31. Dendrinou and Varsvitsioti, The Last Bluff, 129–46. 32. Stiglitz, The Euro, 228. 33. Henning, Tangled Governance, 211. 34. Anna-Lena Högenauer and David Howarth, “Unconventional Monetary Policies and the European Central Bank’s Problematic Democratic Legitimacy,” Zeitschrift für öffentliches Recht 71, no. 2 (2016): 21; Clément Fontan, “Frankfurt’s Double Standard: The Politics of the European Central Bank during the Eurozone Crisis,” Cambridge Review of International Affairs 31, no. 2 (2018): 162–82.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

  35. 36. 37. 38. 39. 40. 41. 42. 43. 44.

Dendrinou and Varvitsioti, The Last Bluff, 214. Stiglitz, The Euro, 171. Varoufakis, Adults in the Room, 249. Varoufakis, Adults in the Room, 320. Moscovici, S’il est minuit en Europe, 215. Varoufakis, Adults in the Room, 394. Varoufakis, Adults in the Room, 319. Stiglitz, The Euro, 101. Varoufakis, Adults in the Room, 264. Moscovici, S’il est minuit en Europe, 214.

63

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

3 “We have to build a success story” Greece, 2015–2019

After a winter of chaos, the summer of 2015 ends with a sigh of relief in Brussels and complete humiliation in Athens. Despite Alexis Tspiras’s successful referendum on July 5, 2015, Berlin’s credible threat of Greece’s expulsion from the eurozone leaves the Greek prime minister with his back against the wall. Surrendering to the conditions of the Eurogroup, he agrees to request a third financial assistance program of €86 billion. He also dismisses Finance Minister Yanis Varoufakis and replaces him with Euclid Tsakalotos, who is perceived to be smoother around the edges. Everything indicates that the “bailoutistan” that Varoufakis decried will continue as before. In reality, it takes a few weeks for a new modus vivendi to be put in place. Surrender must be negotiated. During the summer months, the commissioner and Ioana are more or less alone in the cabinet. First of all, a bridge financing mechanism must be included to pay off Greece’s arrears to the IMF and the ECB. But above all, the troika has to draw up a detailed list of new conditions and resurrect those that had been set aside during the previous six months: on VAT reform, tax reform, pension reform, the transposition of the European directive on bank bailouts, and so on. “All these things that Greece had not done in the past year were reinserted in the memorandum,” Ioana explains. A working agreement is reached on August 11.¹ Between the leaders’ agreement to keep Greece in the eurozone, on July 13, and the signing of a new memorandum in mid-August, the working climate had changed, recalls one cabinet member. “When Euclid [Tsakalotos] arrived, the difference was palpable. He was there to understand, he was listening, giving feedback, sharing his negotiating position with us so that we could help him at the Eurogroup. That’s how we avoided the big battles.” In the media, interest in the Greek crisis is waning. Greece is tamed, the risk of contagion seems to have disappeared. However, in the cabinet, the dossier remains a hot potato for Brussels people, while Parisians watch from the sidelines. Ioana and, during her maternity leave, Leila, carry it on their shoulders. The commissioner, for his part, develops a special connection to Greece and to Tsipras, who is re-elected on September 20, 2015. Faced with the objections of Berlin and the IMF, the commissioner’s political work consists in carving out some wiggle room for Greece, but also for

The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0004

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

“        ”

65

the Commission, when it comes to implementing the third program. This is the “alternative within the program” that had eluded them the previous winter.

Between Athens, Berlin, and Washington Looking back, the 2015–19 period and the implementation of the third program can be summed up by two major tensions that the Varoufakis episode did not overcome. The first pits the Tsipras government against the Commission, which in the Brussels bubble is seen as a friend of Greece but which many in Athens view as an enemy. After his re-election, Tsipras comes to embody a form of political stability that will last almost four years. Early on, he adopts an austerity plan that, following the memorandum, includes pension cuts for civil servants. In May 2016, his government cuts pensions again and increases VAT and other taxes. A phased cycle of conditionality is being put in place. The adoption of each “milestone” by Athens and the conclusion of periodic program reviews by the “institutions,” as the troika is now called, are prerequisites for the disbursement of funds. During these years, the commissioner often visits Athens to keep up the pressure on the government. He always meets with Tsipras and Tsakalotos. In the Berlaymont, the Greek government is thought to be well-meaning but a bit incompetent. Between January and June 2015, Syriza’s policy was defined by its resistance to the memorandum and to the troika. The party’s defeat after the referendum gave way to a feeling of dispossession. Coming from the radical Left, Tsipras dilutes his economic program and adopts clientelistic practices that his predecessors would not have disavowed. As a Greek analyst explains: “Tsipras came through the door, and like Goldilocks, he found it was warm in there, that the soup was good.” The second, more important tension is between the Commission and the IMF—more particularly its European director, Poul Thomsen—which goes a long way toward explaining the Commission’s equally fraught relationship with Berlin. The IMF and Germany push for the adoption of aggressive fiscal measures in Greece. Arguing it can only lend money to governments with a reasonable level of debt, the IMF also wants to force Germany to accept debt relief for Greece.² However, Germany refuses to do so: the August 14, 2015 Eurogroup press release explicitly excludes debt relief.³ This option being rejected by the Europeans, the IMF believes that a radical austerity cure must be imposed on Greece. For different reasons, then, both Berlin and the IMF advocate harsh fiscal austerity.⁴ Paradoxically, the IMF is not putting its own money into this third program. Since 2012, a new player has come to town: the Luxembourg-based ESM, on behalf of which the Commission will implement the program. Most of the new resources will be drawn from this fund of several hundred billion euros,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

66

  

managed by Klaus Regling but controlled by European finance ministers. The IMF can nonetheless impose its conditions because Germany and the Netherlands refuse to participate in a program without the backing of the Washington-based institution. Under the guise of “technical assistance,” the IMF plays a key role in lending credibility to the periodic reviews that monitor program implementation.

What reforms? As I explained in the previous chapter, the Moscos prefer structural reforms to budget cuts. They think debt reduction is probably unnecessary, given that interest on Greek loans has been frozen and maturities (i.e., the repayment period) extended. They believe that Athens has enough fiscal space to manage its debt if growth is not killed by spending cuts. It is a question, for the Commission, of liquidity and debt management. The commissioner tells me why he does not agree with Joseph Stiglitz, the economist who has just published his book on the euro in which he argues for the cancelation of Greek debt:⁵ “If we canceled the debt,” he says, “they would have problems with the creditors and that would not solve the problems of Greek society, of a worm-eaten economic structure . . . . Our role in the Commission is to promote the necessary reforms. The IMF has a much tougher version. It’s a difference in degree, not in nature.” From a political point of view, structural reforms are less painful than spending cuts. But they are difficult to implement and involve a deeper intrusion into Greek legislation, even micromanagement.⁶ In fact, a member of the EU mission in Athens confides, “the Greeks were told what to do. We even wrote it down for them. They had to reform bankruptcy law, recapitalize banks, introduce health reform . . . . We literally took them by the hand.” Many reforms, such as those concerning public administration, privatization, and the recapitalization of banks, elicit little controversy among the institutions: in agreement with the IMF and Berlin, the Commission’s role is to maintain pressure on Athens.⁷ Other reforms, however, are more divisive: they bring the commissioner closer to Tsipras and against both the IMF and Berlin. This is the case with reforms that have a social impact. Addressing the Moscos’ concerns, the third program includes a provision on social impact assessments. While the Greeks find these assessments too program-sided, the Germans do not find them even “useful.” In the Commission, they are considered “important.” The issue of pensions is the most sensitive. Although in Greece they account for a higher portion of GDP (around 16 percent) compared to many other European countries, pensions affect the most vulnerable people. A ruling by the Constitutional Court protects “legacy” pensions, but the entitlements of younger generations are being eroded by the memorandum. The IMF insists that in order to consolidate Greek finances, more cuts are needed. The cuts it wants to impose

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

“        ”

67

on Athens are getting harsher with each program review. The Moscos are opposed: “We fought very hard against this,” explains Ioana. “We had the Greeks’ figures, we knew what the cuts meant for them.” In Greece, too, the issue of pensions is hotly debated. For economists, the Greek system is the most cumbersome of any OECD country. It is also inequitable since it benefits retirees at the expense of the current workforce, the young, and the unemployed. For the government, however, consolidating the pension system remains the best way to support families that often depend on a single income. As Nikos Erinakis, founder of a think tank close to Syriza, explains, Greek society is “the sum of all its families.” Another sensitive issue is the temporary ban on primary residence foreclosures adopted by the Tsipras government. For the troika, foreclosures are essential in order to reduce the banks’ bad debt. But household insolvency rules affect the poorest people the hardest, whom Tsipras wants to protect. At stake is the value beyond which a property can be foreclosed, a question that has not yet been resolved. For the IMF and the ECB, the banks must be saved, even if that creates collateral damage; for the Greek government, the proposal to allow foreclosures is socially explosive. On this issue, the Moscos are, once again, closer to Athens than either Washington or Berlin.

Good cop, bad cop In the German media and even opposite the Berlaymont, in the Justus Lipsius building, where the Council is headquartered, the Commission is accused of being too accommodating toward Greece. Some people say that “the Commission undershoots and the IMF overshoots conditionality”: by forecasting higher economic growth than the IMF, the Commission allows Athens to predict a more comfortable primary surplus. In this way, it is possible to soften conditionality, which the IMF does not want. The commissioner and Olivier insist that the figures presented by the Commission are solid, but it is true that their presentation is always optimistic. In front of MEPs belonging to the Financial Assistance Working Group in the European Parliament, the commissioner sums up what is at stake: “We are trying to write together a success story for Greece.” At the same time, experts on the Greek dossier such as Ioana and Leila are worried that an overly optimistic discourse “might take some of the pressure off” the Greeks. On a jour fixe (a meeting with the administrative services) following his return from Greece in November 2016, the commissioner raises this issue with ECFIN officials. “You have to be careful not to raise expectations,” an official explains to him: We’re behind schedule with the delivery of the milestones. At the same time, we’re still moving forward. Key issues such as household insolvency will have to

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 13/5/2021, SPi

68

   be resolved. We have to be careful: if we create suspicion in the markets that we are off course it will be a problem for the recapitalization of the banks. We have to talk to the IMF, to send them a positive message and tell them to be careful. They have to calm down or there will be collateral damage.

“The Greeks are starting to deliver,” the official continues. “But it will not be ready in time.” The commissioner looks skeptical: “What do we do if Syriza’s proposals are not acceptable? After two days in Greece, I can say that household insolvency is a delicate matter.” He concludes that he needs to talk again to Euclid Tsakalotos to make sure the message gets through. And indeed, the commissioner spends much of that day on the phone. As we saw in chapter 2, the Commission is far from holding all the cards. Sometimes, member states play a double role. On the same jour fixe, the commissioner is told that Berlin and Paris are pushing hard for the privatization of Greek assets. The commissioner welcomes the fact that negative attention is being directed toward the member states, rather than the Commission, but he is concerned about the consequences of Franco-German intransigence for Greece. Above all, he is surprised at the doubletalk of a French official who claims to want to help the Greeks in public but tries to corner them in private. What is certain is that the Moscos want to distinguish themselves from the punitive approach adopted by the IMF and Germany. At a cabinet meeting, I hear Olivier hammering away: “If the IMF and Germany don’t want Greece to raise the minimum wage, let them say so. But this is not the Commission’s position.” Olivier insists that the Commission’s positive action should be presented in its most favorable light. The Commission’s . . . or the commissioner’s? A Greek interlocutor describes to me the game of “good cop, bad cop” played by the commissioner and the conservative man with whom he shares the dossier in public, Vice President Valdis Dombrovskis. Before the European Parliament’s Committee on Economic Affairs, where they are both invited to comment on the Greek program, Dombrovskis repeats in a monotonous tone the objectives and procedures contained in the memorandum. Taking up Berlin’s talking points, he recalls the efforts that Athens still needs to make. Moscovici, on the other hand, delivers general and positive political messages. On returning from one of these meetings, Olivier asks Fabien, “How’d it go with Valdis?” “To the commissioner’s advantage. Valdis’s intro was too long. The commissioner was both big-picture and detailed.” Ioana adds: “We achieved a very positive spin.” This exchange sums up quite well the sessions on the Greek question that I was able to attend at the Strasbourg assembly. During his term of office, the commissioner makes regular appearances in Parliament, whether in plenary, before the Committee on Economic Affairs, or in the smaller circle of S&D MEPs. Ioana explains that it is a question of being transparent before the Greeks, Parliament,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

“        ”

69

and the member states. Parliament, she says, is a good place to pass on messages— for example, to German Social Democrats, who can then relay them to the coalition government in Berlin. The commissioner wants to show that Greece is a political priority for him. On June 9, 2016, Olivier announces at the Thursday “agenda” meeting that the ESM has signed a new memorandum with Greece in Luxembourg. This allows the release of €10 billion. After Ioana tries to temper Olivier’s enthusiasm (“It’s a non-event,” she says), the chef de cabinet responds: “Can we turn it into half an event? You have to put together a little narrative to explain. There is no Greek media interested?” Simon smiles: “They are interested in the disbursement, not the signing!” Fabien suggests finding a symbolic place at which to sign the memorandum. “They could sign in a wagon,” says Olivier. “There are a few qui traînent around the region.” Seeing that Simon doesn’t react to his joke evoking the 1918 armistice between Germany and the Allies, Olivier scoffs: “You can’t understand, it’s too continental. Even though you were on the right side.” No reaction from Reinhard, the German deputy chief of staff. Simon insists; for him, as for Ioana, it really is a “non-event.” He suggests a photo and a simple tweet. Olivier thinks that’s not enough. He asks Simon to talk to the Greeks to make it a “known non-event”: “After all this, at last we’re there! €10 billion! Tsakalotos smiles, the commissioner smiles! A tweet cannot encapsulate all that. This is an opportunity to communicate effectively on this issue. I do not want to see the commissioner just using his pen.”

The conflict with the IMF The memorandum provides for periodic reviews to monitor the implementation of reforms by the Greek government: the program’s milestones. Each review is punctuated by discussions at the technical level and missions to Athens, which lead to a staff-level agreement. Once approved by the Eurogroup and the ESM, these agreements release new tranches of financial assistance. Normally, a review lasts only a few months. The first review takes twice as long, from January to June 2016. In the fall of 2016, a second review is launched; delayed by disagreements between the Commission and the IMF, it will last almost a year. The third review, launched in the fall of 2017, is concluded in January 2018. It is followed by a fourth and final review, which leads to the conclusion of the program in summer 2018.⁸ As early as the summer of 2016, when the first review is completed, the commissioner repeats to anyone who will listen that the end of the Greek crisis is near. In Strasbourg, in front of the S&D parliamentary group, he says: On Greece, we finally see the end of the tunnel. Our left-wing objective has not changed: to put an end to austerity in Greece. There are responsibilities

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

70

   everywhere. Adjustments had to be made and it was painful, but we have to move on to another phase. Politically we can be satisfied with this turning point. The fight for the integrity of the eurozone is on the way to being won. Our political family has played a key role in this and the Commission has acted as a friendly, understanding partner.

Since the Varoufakis episode, the Commission has invested considerable funds in the Greek economy, making the country the main beneficiary of the Juncker plan and the EU’s structural funds. “At that stage,” one official later confirms, “the Greeks had given up!” However, without returning to the abyss of winter 2015, 2017 is still a difficult year for the Moscos. When I ask Ioana which moment was the most complicated on a personal level, she answers without hesitation: the conflict with the IMF. The second review, which was due to be concluded in December 2016, is being held hostage by the IMF, which, because it considers the Commission’s forecasts to be too optimistic, demands tighter budget and pension cuts, in addition to wage compression. While the Moscos believe that Greece has already made significant efforts, the IMF argues that the government will renege on its promises at the earliest opportunity. The dispute concerns budget plans, in particular Greece’s forecasted primary surplus. In the Commission’s view, Athens is on track to meet the medium-term objective of 3.5 percent of GDP set out in the third program’s memorandum. The IMF, however, believes that Greece is far off track and will have difficulty reaching 1.5 percent. This would be insufficient to reduce its debt, hence the importance of further spending cuts. To arrive at these forecasts, experts in Brussels and Washington rely on different econometric models, which are subject to political inflections. The Germans, followed by several northern countries, align themselves with the IMF. Berlin’s insistence on keeping the IMF in the loop gives the Fund considerable power. “It has led them to blackmail,” laments one protagonist. “The IMF went mad,” recalls another. “They knew the Germans wouldn’t let them go. So they built this fiction of a 1.5 percent primary surplus. They wanted to provoke a crisis.” In the words of a Commission negotiator, “All this to show the importance of debt reduction. It was reverse engineering.” Tensions between Brussels, Washington, and Berlin lead to an absurd situation: while the Commission uses optimistic economic forecasts to reject both austerity and debt cancelation, the IMF uses pessimistic forecasts to justify both austerity and debt relief. But Germany, which supports the IMF, rules out debt relief. “The IMF would like the EU to play both sides: force Greece to reform and force Germany to write off the debt,” adds another interlocutor. “But since Germany is not going to move . . . ”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

“        ”

71

Is a political approach credible? Outside the cabinet, some believe that “political Commission” talk explains the IMF’s ability to stall Moscovici’s efforts. In Germany, the Commission is considered too lax. The commissioner, who gets his picture taken with Tsipras, is seen as too close to the Greeks. Some DG ECFIN officials share this unease, which they attribute to a growing distrust of the commissioner and President Juncker’s “political approach.” “To implement a program,” claims one, “you have to be tough. But this organization [the Commission] is based on consensus. Compromises have to be made. There is a tendency to want to be nice. From this point of view, the Germans are right.” I hear echoes of this view in the Eurogroup, where the credibility of the Commission is even more in doubt: Juncker thinks that the program shows that we are the best friends of governments. But if you are the best friend of a country subject to a program, you’re f*****. The idea of a program is to force it to do things it would not otherwise do. The Commission tries to be too nice. That is why member states say they need the IMF. To implement a program, you have to be a bastard.

The Moscos, by contrast, relish their political approach, which they believe will pay dividends in the long term. As Ioana argues: “We knew that Greece would stay with us. That was the full picture for us.” Her opinion is shared by a civil servant who spent a lot of time in Athens: We knew that Greece was going to remain part of the EU. That’s why we focused on public administration reform, the real thing. The IMF is having a blast on highly visible things like shop opening hours. But energy policy, for example, is more important, and that takes time. We’re not only concerned with the adoption of reforms, but also with their implementation.

A second review that goes on and on Launched in the fall of 2016, the second review is off to a bad start. Based on two opposing approaches to the Greek crisis, a strict implementation or a political implementation of the program, the deadlock crystallizes around the issue of pensions. Much of the animosity among Commission and cabinet officials is directed at Poul Thomsen, the IMF’s Europe director. Oblivious to its social consequences, the IMF demands a 20 percent cut in pensions, which the commissioner considers, at best, economically useless and, at worst, politically disastrous.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

72

  

The 20 percent figure does not appear in the memorandum; as we saw above, it is justified by the IMF’s economic forecasts, which are more pessimistic than those of the Commission: if growth is weak, there will be less tax revenue than expected; if there is less revenue, the primary surplus will be less than 3.5 percent, in which case the debt will not decrease as a proportion of GDP, and unproductive expenditures, such as pensions, must be cut. That’s the logic. Meeting Reinhard in the corridor on my way back from a meeting at the Greek Permanent Representation, I tell him that Greek officials look depressed. “If they had known the reactions in Berlin this morning,” he says, “they would have been even more depressed!” Reinhard, who has his contacts in the finance ministry, explains the German point of view: they insist on social spending cuts; like the IMF, they simply don’t believe that Athens can balance its budget in any other way. In early spring 2017, as the EU celebrates its sixtieth anniversary, the battle between the Commission and the IMF seems to tip in favor of the latter. The absence of a staff-level agreement at the March 20, 2017 Eurogroup gathering forces a series of working meetings aimed at achieving a “rebalancing of public finances” in Greece. On Thursday, March 23, the Eurogroup approves the IMF’s approach, which pushes for drastic cuts. The Moscos feel isolated. At the cabinet meeting the following Monday, Olivier lists the next steps: We have to deal with Thursday night’s après-deal, which is harsh on the Greeks. The commissioner has been talking with Tsipras. They agreed that this is not possible. He spoke with Christine Lagarde, who showed an openness. But the negotiators ont repris le jeu and they think qu’il faut taper et taper [you have to hit harder and harder]. There may be a question in the salle de presse: “In the middle of the sixtieth anniversary, the EU and the IMF are cutting pensions,” mouais [not great] . . . . We must show solidarity with the institutions but the political deal is very bad. Reforms must be made, but we would have at least liked to extend the cuts over two years. The commissioner was quite shocked that the IMF could behave like this.

After the meeting, I have lunch with Olivier, who looks back over the past week: We’ve got a big problem. The IMF sees someone with a fever and wants to put him dans un bain d’eau glacée [in an ice bath]. We cut the pensions by 20 percent—bam! I can imagine the headline when this comes out in the media: “The Commission has agreed to slash the pensions of the elderly.” The patient may die of a heart attack, but he will no longer have a fever. It went wrong last week and it went wrong again last night. Tsipras always has to give in, he’s the only one who moves. He started out with five requests and he’s given them all up. The IMF won’t make any concessions. The staff don’t follow political instructions. The IMF’s position is, “We reduce the debt, no matter what.”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

“        ”

73

Compromise over a meal At the beginning of April 2017, the second review, which began the previous fall, has still not been concluded. Conditions do not seem favorable for sending a mission to Athens. At the cabinet meeting of April 3, 2017, Olivier summarizes the situation: Every day that passes, we face a new obstacle and we have to find a new compromise with Germany and the IMF. We think we have succeeded and then . . . . Greece has conceded a lot. But we still don’t agree on the parameters. We have to abandon the mission even if we cannot make it public yet. C’est maintenant le tour des politiques [It’s now time for politicians to act]. The commissioner has been on the phone all weekend with Hollande, Dijsselbloem, Lagarde, and Tsakalotos. Tomorrow Tsakalotos, Dijsselbloem, the commissioner, and the institutions have a dinner at 8:00 p.m. in Brussels. If the politicians get involved, they will come to an agreement. Good or bad? Very bad, sans doute.

At the dinner, key stakeholders agree on a package of additional fiscal measures to be implemented in 2018–19, amounting to 2 percent of Greece’s GDP. Pension reform, which the Tspiras government does not want but the IMF demands, is a central element. However, the Commission gets the package pre-legislated in a conditional way: it will only be implemented if the pessimistic IMF forecasts are proven right and the 3.5 percent surplus is not reached. If the Commission is right, Greece will not have to make the cuts. The outlines of this compromise have been in the air for some time now. The adoption in law of contingent measures in the event of a downward revision of the economic outlook (and thus of the primary surplus) is a scenario I have already heard the commissioner present to Parliament as early as 2016. Administering oxygen to Athens while at the same time trying to reassure Germany—this all depends on the health of the European economy. In any event, the compromise makes it possible to send a mission to Athens and conclude the second review in the summer, almost six months later than planned. However, it adds conditions to the 2015 memorandum. Simon tells me that, in drafting the mission’s communiqué, he came across a note he had written in 2012, more than two years after the crisis began. “I could have copied and pasted it,” he says. “I’ve been working on Greece for six years and nothing changes.” I find the practice of “dinners among key stakeholders” (often Christine Lagarde of the IMF, Jeroen Dijsselbloem of the Eurogroup, and Wolfgang Schäuble) intriguing because it seems to be an important part of the political work that the commissioner carries out. Usually taking place in a luxury hotel or

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

74

  

in the Berlaymont, Olivier designs these dinners carefully in an effort to unlock a given situation. Widespread in diplomatic circles, where they serve as the very embodiment of “international society,” dinners are less formal when they involve politicians who know each other well, as is the case with the commissioner and his counterparts.⁹ In parallel with technical discussions and formal negotiations, they are used to smooth out the positions of influential ministers or to influence those who do not have a position (quite a few, it turns out). In principle, an informal agreement reached during a dinner can be more easily imposed on technocrats in the troika, even though some officials have a reputation for not complying with their political masters. For the commissioner, dinners provide an opportunity to address issues that do not lend themselves easily to discussions in the Eurogroup: as the host, he can choose his interlocutors in a confidential setting. That is why, unfortunately, I do not have access to them. Cabinet members are happy to debrief me afterwards, but they are often not around the table either. I can, however, count on the commissioner to give me his own point of view. Sipping his Diet Coke, he confirms what his staffers told me: About Greece, I wish there was a way out, but I don’t see one. This is due to the relentlessness of certain actors who are asking the Greeks to get out of it through a continuous austerity spiral. It’s economically inept and socially impossible. I’m afraid we’ll end up killing the patient [as is often the case, the commissioner and Olivier use the same metaphors]. I am not against reforms, but they have to be done under acceptable conditions. Otherwise we create a monster: social misery in a European country. There are at least two players who pose a problem. The IMF, with specious arguments: all you need to do is reduce the debt, otherwise draconian measures will be imposed. Then Germany and its ordoliberal ideology . . .

I ask him if, over dinner, he tells all this to his peers: Yes. At dinner this week, it was the same arguments over and over again . . . . There’s a deep irrationality behind it all. It’s in nobody’s best interest, it’s consuming time and energy. It takes 15 percent of a commissioner’s time for 2 percent of GDP on issues that should be dealt with structurally, not in the 0.1 percent assessment . . . . And it gives a very bad image of Europe.

While dinners allow guests to speak frankly, they assume that their colleagues will be discreet and refrain from leaking information at the end of the meal. “The difficulty,” the commissioner elaborates, “is due to the nature of the Commission. We are a political Commission but in a system that operates by consensus. We cannot display dissent in public. Anyway, we would be considered illegitimate.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

“        ”

75

Our allies in the Eurogroup are not vocal: Italy and France have their own problems, the socialists are divided . . . ”

Toward exit Even if the April 2017 dinner unlocks the situation to the advantage of the IMF, the compromise, which will not really move any further, remains the subject of a tug of war. Compared to figures out forth by the Commission, IMF officials continue to forecast a lower primary surplus and thus support deeper budget cuts. “The only thing that could change,” the commissioner tells me, “would be the US administration disengaging from the IMF”—that is, the White House forcing the IMF to give up the fight. By the end of the year, I feel that the situation is starting to turn around. We learn that Greece will have a 3.5 percent primary surplus, which is in line with the Commission’s forecasts and far from those of the IMF. According to one observer, “The IMF was working backwards with the math and everybody ended up seeing it.” The people I meet during my visit in October 2017 tell me that the IMF is going to come out of the program. For the Commission, this development is a blessing. In addition to US pressure and acceptable figures from Greece, a feeling of exhaustion goes some way toward an explanation. In the words of one cabinet staffer, the United States and Germany are fed up with the IMF playing with numbers. Even the Finns and the Dutch are sick of it. In the end, the IMF had to admit that they were screwing up. So everybody stopped listening to them. All the member states decided that, barring some kind of catastrophe, they were going to work on some kind of debt reprofiling.

In this exit scenario, Greece would remain under “enhanced surveillance,” meaning it would continue to be accountable to its lenders. “I hope the Greeks will walk straight now,” an irritated German official tells me. “This is no longer an important issue for us. They see the end of the tunnel, we see the end of the program. They got support from the structural funds, the European budget, agricultural funds . . . . Now they need courageous politicians.”

The end of the program In February 2018, how to exit the third program, which should be the last one, becomes a bit clearer. The third periodic review went much better than the second. Simon is relieved: “It won’t take much longer, it’s pretty smooth now. Everyone is

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

76

  

fed up. The IMF is more cooperative. So is the Greek government. There aren’t too many unreasonable demands. It will be over by August,” he predicts. “For the first time,” recalls one official a few months later, “we took the lead. We said the future of Greece couldn’t hinge on an [IMF] lunatic, and we sat down to write an exit strategy. It’s the first time we got on top of things.” “Greek fatigue?” I ask. “Partly. But we were mostly surprised that the Greeks made reforms! We gradually realized that the program was too intrusive. It hurt the country and it hurt the Eurogroup. At some point, the patient has to get out of the emergency room.” Ioana shares her relief as she describes the commissioner’s last trip to Athens: “The message was, ‘We’re 90 percent done.’ ” There are only four months left before the end of the program, which should signal a return to normality. “But Pierre,” Ioana warns me, “has to explain post-program monitoring. Commitments must be respected. The Greeks can’t go back ten years. They still have a lot to do.” In April 2018, I travel with the commissioner and Simon to Washington, where they take part in the IMF’s Spring Meetings. I am not allowed to observe the private meeting with Christine Lagarde on Greece. Afterwards, I go with Simon and the commissioner to the canteen in HQ2, one of the two IMF buildings. I ask the commissioner whether he thinks Greece will really come out of the program. He is rather sanguine: “Some countries obviously do not want to. There has been talk of extending the program, but Mario [Draghi] was very supportive, saying that it was ridiculous and would only create market panic. Christine [Lagarde] agrees that the program must end.” When I ask if the Greeks attend these private meetings, the commissioner and Simon answer that they do not. What about the United States? “Not really,” says the commissioner. After lunch, we go to the National Portrait Gallery to see an exhibition of Cézanne’s paintings. The Mall is festooned with French flags in advance of Emmanuel Macron’s upcoming visit. While the commissioner and I are chatting, Simon reads a message on his smartphone informing them that the Germans were brutal during a meeting with the Greeks. The commissioner shrugs: “Lagarde was not a pain in the ass. But the Germans are very difficult.” Is there still a window of opportunity? Simon asks him. During the next meeting in Sofia, perhaps? The commissioner is dubious: “We’ll have a statement, maybe, it’s not impossible.”

Toward normalization It is still unclear whether there will be some debt relief for Greece, or at least a further extension of maturities. The stakes are high for Alexis Tsipras, who must prove to Greek voters that their sacrifices were not in vain. General elections are due in a year’s time. Discussions on the exit strategy have begun at the technical

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

“        ”

77

level, in the Eurogroup working group, whose chairman, Thomas Wieser, is about to leave. In a Lebanese restaurant in Washington, Simon tells me about a meeting between the commissioner and Olaf Scholz, the Social Democrat who replaced Wolfgang Schäuble at the German finance ministry. The Germans don’t want to talk about unconditional debt restructuring,” Simon explains. The IMF does not want conditions. We are in between. We think there has to be significant relief, from the outset, to send a signal to the markets. Otherwise it’s useless. The Greeks know that the Commission is their best friend, especially the commissioner. He tells them that they have to be exemplary so as not to give the Germans any reason to veto an agreement.

A first question is how far member states are prepared to go in the discussion on debt relief. A new “grand coalition” government, formed in Germany after six months of negotiations between Christian Democrats and Social Democrats, could help, but the political situation is deteriorating in Italy, where a populist coalition of the Five Star Movement and the Lega takes power on June 1, 2018. In this context, Nordic fears of the “Club Med”—a pejorative term for the southern countries—resurface. The Greeks are rightly wary of vague promises of debt relief. The other, more pressing question is that of post-program monitoring, which will formalize the exit from the third program. Confirming Greece’s access to markets, it should turn it into an “almost normal” country. The commissioner often stresses this point. At the Peterson Institute for International Economics, a Washington-based think tank, the commissioner reminds an audience of experts that “the Commission is not on the hard side. There will not be, there cannot be, a new program. We need a credible growth plan, designed by Greece, and we need agreement on how to alleviate the debt burden.” Evoking Shakespeare, he says he hopes that the June 21, 2018 Eurogroup meeting, which is supposed to approve the end of the program, will not be a “midsummer night’s dream.” The commissioner’s wish becomes reality. In June, the Eurogroup confirms the finance ministers’ willingness to end the program. Creditors agree to extend the maturity of certain loans. A small emergency fund is planned: €24 billion. This is an important political concession for Tsipras and Moscovici. But we are still far from genuine, substantial debt relief. Greece exits the program on Germany’s terms. With normalization, the Eurogroup will lose its importance as a decisionmaking forum. “We spent years of our lives discussing programs,” a Eurogroup adviser recalls. “The Eurogroup was boring before the crisis. Then it became a crisis-management tool. I hope it will become boring again.” The commissioner nods: “The Eurogroup was Greece for 50 percent of the time and 80 percent of the stress. Stress-free meetings are boring.”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

78

  

A fourth program under a new name? On August 20, 2018, the third Greek program is officially concluded. In principle, Greece will soon be able to borrow on the market again. In return, Athens must continue to produce a primary surplus of 3.5 percent of GDP until 2022, and 2.2 percent until 2060. Reinhard explains the post-program surveillance mechanism, which the commissioner always translates in political terms as “normalization.” There will be no new reforms required, but many players fear that the government will go back on the reforms already undertaken. This is why an EU mission must ensure that it keeps its promises. How can this be done? During the crisis, the ECB bought Greek bonds on the secondary market—the so-called securities and markets bond-buying program— on which it earns profits that are redistributed to national central banks. It was agreed in 2014 that these profits would eventually be transferred to Greece to enable it to reduce its debt. However, this transfer remains conditional on Athens continuing to implement the promised reforms. For the Greek political opposition, this is simply an extension of the previous program under a new name. The Moscos prefer to speak of a “well thought-out incentive structure.” Without access to the market to finance its debt, the government continues to depend on EU assistance, which in turn demands fiscal efforts and economic reforms. As former Greek minister Evangelos Venizelos explains, it was politically impossible for the Commission and the German government to declare the need for a new program: “The ‘success story’ narrative is vital for the ‘political Commission,’ ” he tells me, “which is an outgoing Commission, and also for Chancellor Merkel, who is also leaving power. This is the common denominator between the Commission, EU governments and Tsipras. This is reality and not political communication.” According to a colleague from the University of Athens, a convergence of views gradually took hold between Brussels and Athens: “Little by little the Europeans saw that Tsipras accepted everything. Another government couldn’t have done a third of what he did because Syriza would be protesting outside in the street! Their discourse was, ‘We are fighting for Greece,’ while they were putting in place measures that another government would not have been able to do.” The main challenge for post-program monitoring remains the country’s primary surplus. If the surplus reaches 3.5 percent of GDP, Greece could cancel the pension cuts that were pre-legislated in 2017. In principle, the figures are promising: “They have some room. Give them a break!” says Leila, who replaces Ioana during her maternity leave. “As we speak, the Greeks have 4.5 percent primary surplus!” But the day after the official end of the program is announced, Tsipras, in preelectoral mode, declares that his government will be canceling pension reform. It’s too early: cancelation remains conditional on the approval of the Eurogroup. The commissioner must remind the Greek prime minister that, while he understands

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

“        ”

79

the importance of reassuring his electorate, he should not give creditors reasons to doubt his commitment. The Commission’s report on reform implementation must be adopted unanimously by the finance ministers and, even though the IMF is no longer around, Berlin remains vigilant: Olaf Scholz’s team is more or less the same as Wolfgang Schäuble’s. Despite his warning to Tsipras, the commissioner is also keen to maintain the narrative of the success story. For him, exit from the program widens the fiscal space within which Greece will be able to make its own budgetary choices. At a press conference on November 21, 2018 at which the commissioner presents his opinion on the national budget plans, he says he is pleased that Greece’s budget plan “is in line.” This is the first time that Greece is subject to the normal budgetary surveillance process (discussed in more detail in chapter 5). “It’s a very successful introduction,” the commissioner says. “Behind this, there is a political lesson. The efforts made by the Greeks, a program with high demands, paid off: for public accounts, for growth, and also for social justice.” At the same press conference, the commissioner presents the first report on post-program surveillance, which is positive: “This,” he says, paves the way for the cancelation of pre-legislated pension cuts. If these cuts were implemented, they would result in a 14 percent drop in pensions for 1.4 million pensioners, that is more Greeks in a precarious situation. That is no longer necessary. That is why I hope, I am confident, that the December 3 Eurogroup will accept this proposal. This is good news for Greece and for Europe.

After hearing this speech, Leila is not so comfortable. “The Dombrovskis cabinet criticized us because the report was too positive,” she tells me. “I corrected a lot in their version, which was still written in the language of the program: ‘It’s urgent,’ ‘We do not accept’ . . . In the end, they agreed because we have the lead on Greece. Greece continues to be different . . . even though it has become a normal country.” To illustrate her point, Leila tells me about a problem that occupied her whole day: a letter from the Greek finance minister that was never delivered to the Berlaymont. Perhaps it was never signed, she speculates—who knows. This kind of situation, which happens often with Athens, exasperates the Moscos and justifies their measured optimism. “It only needs to go off the rails for the commissioner to become a target,” Leila says, “which is something that must be avoided. We had a very positive first report; the second one [to be discussed on March 11, 2019] will be harsher. The Greeks are going to relax. The market doesn’t care about reforms but they want a positive report. And [in reality] progress is mixed.” Leila worries about the Greeks backtracking on reforms. According to her, the Tsipras government “overperforms” on its fiscal target, which is to say it cuts spending beyond what is required by creditors. Does that reflect a difficulty in planning budget execution? Or is it a conscious strategy to create a slush fund?

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

80

  

Evangelos Venizelos argues that it is a redistributive strategy in favor of social benefits.¹⁰ In any case, overperforming allows Greece to present itself as an assiduous pupil, and to better defend its own priorities—social spending, consumption— in the face of the structural reforms and investments demanded by the EU.

In Athens In the winter of 2019, I join the commissioner, Olivier, and Leila on what is likely their last trip to Athens. The mission, which takes place a week before the technocrats’ mission, aims to get some “direct” messages across to the government. It is also an opportunity for the commissioner to bid farewell to a country that is a central part of what he sees as his “legacy.” On the eve of our departure, Olga, Leila’s assistant, warns me that the mission may be canceled. Over the weekend, the leader of the nationalist ANEL party, on which the governing coalition depends, announced that he would oppose the recognition of North Macedonia that Tsipras wants Parliament to adopt. A vote of confidence is scheduled for Wednesday. The government could fall on the day when the most important meetings with the president of the republic, the prime minister, and the finance minister are supposed to take place. After some hesitation, we take off for Athens. On the way from the airport to the city center, Leila shows me the places where she lived through the worst months of the Greek crisis: the Hilton, the Hôtel de Grande-Bretagne, the Ministry of Administrative Reconstruction, the Ministry of Finance, and so on. “To walk from one place to another,” she recalls, “we would scatter and wear jeans so we wouldn’t be recognized.” In a restaurant opposite the Vouli, the Greek parliament, where we meet the next day, a Greek “friend of the cabinet” explains that the press is spreading conspiracy theories about the commissioner’s visit; they say he is coming to support Tsipras at a difficult time for the prime minister. “His message,” this friend insists, “must be, ‘I am here because I have been invited to a dinner by the business community. But I am taking this opportunity to take stock of the situation before the second report. There is nothing political about the timing.’ ” The friend adds that Tsipras, whose government is in danger of falling before May, has already promised to cancel the lowering of the tax threshold requested by the Commission. The commissioner must remind him of his commitments.

Visiting Tsipras In the early afternoon, we show up at to the prime minister’s residence, the Maximos Palace. There are already many journalists in front of the gates. It will

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

“        ”

81

be a tête-à-tête, but I am authorized to attend the first exchange, which is quite formal, in front of the journalists. While politicians meet, Olivier, Leila, and I sit in the adjoining lounge with an adviser to the prime minister or, as they say in Athens, “Alexis.” We are served coffee and cake. After twenty minutes talking about the issue of the day, the vote of confidence on the recognition of North Macedonia, Olivier raises technical issues. He suspects that the commissioner and the prime minister, passionate as they are about partisan politics, will only deal with technical aspects on the surface. He asks his Greek interlocutor about public opinion “five months after the end of the program.” The adviser replies, “The focus is on Macedonia at the moment. But the real economy is improving day by day. A second positive report [from the Commission] would help. As you know, the main problem is the banks.” “What about bonds? Do you want to issue them?” “Yes, but not for ten years.” Tsipras’s adviser explains that they are experimenting with shorter-term bonds to test the appetite of the market. In Greece, there is less and less talk about the program, he adds. “That’s good. That was the intention,” Olivier replies. The adviser is sanguine about Greece’s ability to reassure the market, particularly through privatization projects. Then he raises the government’s main demands to the Commission: to lower the ceiling below which banks receive liquidity from the ECB, to approve an instrument to protect residences against foreclosure in the event of bankruptcy or insolvency (the so-called Katseli law), and another to protect assets. Olivier registers these requests but reminds the adviser that there are only a few weeks left before the Commission’s second report. “We have to move forward,” he says. “This is the message that the commissioner is delivering to the prime minister.” However, several obstacles remain: the situation of the banks, whose nonperforming loans are still important, the government’s overly optimistic announcements on employment, and the slow pace of privatization. “The process,” Olivier explains, will become more inclusive in the College of Commissioners. Pierre is not in charge of banking, bad debts, employment, or energy. His colleagues will have a say. It is also a political decision. If the report is not good enough, I cannot guarantee that the College will follow Pierre. It is up to them to decide. It would be helpful if you could provide us with as much evidence as possible. Pierre will also have to say that Greece will enter the excessive imbalance procedure. This is normal for a post-program country. It was the same with Portugal. But we have to prepare the ground so that it does not come as a shock to journalists to learn that Greece still has imbalances. Anticipating communication is important.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

82

  

The bilateral meeting between the commissioner and the prime minister has been going on for about forty minutes already. The commissioner will be late for his next appointment. “Well, I’m sure Alexis and Pierre are very busy discussing fiscal targets in detail,” Olivier says sarcastically. According to him, ten minutes with the prime minister is worth more than an hour with the ministers, whom we are about to meet at the Ministry of Finance. As he exits Maximos Palace, the commissioner gently criticizes Olivier for interrupting his conversation with Tsipras as they were “getting to the heart of the matter.” In the street, a dozen journalists are waiting in front of the gates. They’re fewer than usual, the friend of the cabinet explains. The commissioner announces that the pensioners won’t need to suffer anymore, but “there’s still a lot to be done. Let’s make Greece a success story.” I am getting used to the sound bite.

Syntagma Square We are escorted by motorcyclists and three police cars to the finance ministry, located behind Syntagma Square. It’s a building from the 1960s, with a certain Corbusian charm. We enter through a back door guarded by cameras. (Leila explains that in 2011 activists would often try to break in.) We are received warmly. On the seventh floor, four ministers are waiting for us: Yanis Dragasakis (economy), Giorgos Stathakis (energy), Euclid Tsakalotos (finance), and Efi Achtsioglou (labor). The first three are Marxist economists and longestablished figures within Syriza; Tsakalotos, sporting the relaxed style of a university professor, replaced Varoufakis in 2015. Achtsioglou, the only female minister, is a rising star within the government. The commissioner, Leila explains, is there to support Minister Tsakalotos and to temper the ardor of his colleagues. In front of the ministers (see Figure 3.1 below), he insists that he has just reached an agreement with the prime minister. He recalls the problems of the banking system and the importance of speeding up reforms, with a view to adopting a second “positive” report on post-program surveillance. The Katseli law on the protection of residences in the event of household insolvency is one of the most important issues. But the commissioner is not here to discuss technical details: “I want to speak with you about how to consolidate results and ensure that growth and progress are sustainable. To make a long story short, we are close to the finish line. The spirit is positive but cautious. Let’s stay on the path of reform.” Dragasakis, the most venerable of the four ministers, says a few words in Greek but is soon joined by Tsakalotos, who speaks perfect English. He explains that the government wants to adopt an asset-protection program similar to the Italian one. But this instrument, which aims to relieve banks’ debt, could be considered as a form of state aid by

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

“        ”

83

Figure 3.1 A meeting with four ministers at the Greek Ministry of Finance

Margrethe Vestager, the European commissioner for competition—something Greece obviously does not want. “I am told,” Tsakalotos adds, “that the Commission has entered a phase of hibernation at the political level. Could you put some pressure on DG Competition to hear our request?” “ ‘Hibernation,’ you say. That is not the expression I would use,” the commissioner replies, smiling at Tsakalotos. “That’s what people tell me!” says Tsakalotos, to laughter around the table. “There is a political cycle,” the commissioner concedes. “But we will deal with this until the last day. Alexis also told me about DG Competition. ‘Pressure’ is not the right word. You have a British education, I’m sure you can find a better one.” “Whispering?” “We don’t whisper, we speak clearly. The fact that you are taking your cue from the Italian precedent . . . that is good, but I would remind you that in their case we had to whisper very loudly.” Another contentious issue is an increase in the minimum wage that the Syriza government wants to adopt. And speaking of whispering, the labor minister is whispering in Dragasakis’s ear. The commissioner notices and smiles: “Perhaps you want to tell me about your curious minimum wage project? You know, I understand Greek body language!” Minister Achtsioglou explains that an expert committee has recommended a 5 to 10 percent increase to the minimum wage. “We have not made a final decision about the level of increase,” she says. According to Leila, the decision has already been made to grant a significant increase; the Commission is not too happy about it because the country’s productivity remains low. The commissioner, who has read his briefing notes, replies to the labor minister: “As far as I know, my team

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

84

  

expects a more moderate approach.” Overly drastic measures, he adds, could undermine business confidence. “From my conversation with Alexis,” the commissioner explains, “I understand he wants a complete picture of the situation. The full picture is the importance of getting market access. That’s what matters.” On privatization, which is required both to replenish state coffers and to increase foreign investment, the commissioner and the Syriza ministers find themselves in an uncomfortable position, as socialists who have to show they are in favor of selling state-owned industries. Stathakis is amused: “As a left-wing economist, I find myself involved in privatization. We are trying to sell a lignite factory. Well, the plant is losing €750 million a year—let’s say that helps me overcome my reluctance as a left-wing economist.” “You know that I was a minister twice in France,” the commissioner says. “The Jospin government was the most left-wing government in recent history, but also the one that privatized the most. So it is very good to be left-wing and to privatize.” Tsakalatos, again provoking laughter, jumps in: “You won’t say that at the press conference, I hope?” As the meeting draws to a close, Achtsioglou warmly thanks the commissioner for his support on the pension issue: “It was our most important reform and in the end we protected pensions.” “We worked a lot with Euclid [Tsakalotos],” the commissioner says. “I am his adviser now [laughs]. The IMF wanted this. It was never an issue for us.”

“So you wanted to see a commissioner who does politics? There you have it!” After our session with the ministers, we proceed, still with an escort, to the Presidential Palace, the former residence of the king. I am allowed to attend the first part of the meeting, which is held in a beautiful salon lined with books and smelling of tobacco. President Pavlopoulos, through his interpreter, greets the commissioner and reminds him that Jean-Claude Juncker himself expressed regret for the measures that “forced the Greek people to make sacrifices that they did not deserve.” The commissioner replies that the Commission was “touched, delighted, and impressed” by the Greek president’s visit to Brussels last December: You mentioned President Juncker’s regrets, which were addressed to both the IMF and to the Commission. The minister that I was and the commissioner that I am has always been on the right side of this story. We are working to make Greece a normal country. Reforms must be continued, not to hurt but because there is no social justice without a prosperous economy. Next week there will be a [technical] mission. I have met with the prime minister and we have established

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

“        ”

85

the parameters of that mission as part of the post-program surveillance. I take two ideas from what you said: we need to strengthen institutions, and we need to democratize them. Democracy and the fight against inequality must be the pillars of Europe.

After this brief exchange, I have to leave the room. Afterwards, when we depart the palace, Leila tells me the meeting went very well. The two men switched to French and discussed politics “at a very high level”—which suggests that they avoided the subject of “enhanced surveillance” and talked mostly about partisan politics. The official reason for the commissioner’s presence in Athens is an invitation to meet with the Franco-Hellenic Chamber of Commerce. To conclude the visit, a final meeting awaits him at the Hyatt. While he talked politics with Tsipras and Pavlopoulos, he will now address business, a subject for which I feel he has a less consuming passion. Still, he does his duty, reminding his interlocutors of the importance of public investment, of taxation, of the role of businesspeople in supporting reforms: I told the government, “OK, you have to be pro-reform, but also pro-business. Privatization must be more vigorous. Investor confidence must improve. You also need to have a more competitive energy sector.” You will be sensitive to that: the minimum wage is a key element. We believe, and this is the message I have delivered, that an increase in the minimum wage is achievable but that it must be proportional to productivity.

Listening to the commissioner now, it might appear that he has dropped the leftwing idiom that marked his conversations with Tsipras. At the same time, when an entrepreneur compares, unfavorably, Greece’s tax rate to Bulgaria’s, the commissioner replies sharply, “I have just returned from Bulgaria. You should not envy them.” Clearly, chatting with businesspeople is not his preferred mode of communication. Throughout the evening, people stop the commissioner to take selfies. According to the friend of the cabinet, the commissioner is a familiar figure for the Greeks and he has a positive image in the country. At the same time, I have met some Greeks who think he was fooled by Tsipras. “The government,” an observer who does not like Syriza tells me, “has instrumentalized European socialists like Moscovici who are looking for the new Messiah. The government knew how to use that. There is also instrumentalization at the technical level. Those who do not know the Greek reality are often satisfied with gestures that are more symbolic than real.” In the evening, at the hotel bar, I ask the commissioner what he makes of Tsipras. “I like him very much,” he says. “I consider him a friend. We talk about

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

86

  

politics, about everything. I have a lot of admiration for his political talent. He always thinks three moves ahead.” When we leave the bar, he winks at me: “So you wanted to see a commissioner who does politics? There you have it!” * * * The arrival of Jean-Claude Juncker and Pierre Moscovici in Brussels changed the approach to the Greek crisis from technocratic management, subject to the institutional logic of the troika and the particularities of German diplomacy, to political work that seeks to exploit margins of discretion. For some, political work was necessary in order to avoid Grexit. For others, it merely swept Greece’s structural problems under the carpet. From my vantage point on the tenth floor of the Berlaymont, I saw people who were certainly far removed from the social reality in Greece, or even unfamiliar with the country in general, but who were genuinely concerned about the political consequences of their actions. I also saw people frustrated by institutional veto points in Brussels and exasperated by politics in Athens. Their attitude over the years was a mixture of excitement (What’s next?) and exhaustion (Why isn’t the discussion moving forward?). At the end of the mandate, in 2018–19, everyone wants to move on, including in Berlin. The commissioner is a special case. Greece is one of the few countries in which his name is known to the public. He received the Order of the Phoenix and an honorary doctorate from the University of Athens. In the Greek capital, he was treated as a head of government. But above all, for this social-democratic intellectual, Greece was a textbook example of the need to put forward strong political arguments: the importance of fiscal responsibility, certainly, but also of maintaining social justice. Compared to his predecessors at the Commission or his interlocutors in the Eurogroup, he always privileged political work—the possibility of finding “alternatives within the program”—over a strict implementation of the memorandum. Despite the important changes that occurred during the Juncker–Moscovici era, some things remain constant between 2010 and 2019. First, multilevel governance with sometimes opaque lines of accountability. In his book, Varoufakis refers to the Eurogroup as “the shadowy crucible in which the troika concocts its plans and policies.”¹¹ For the commissioner, the practice of closed-door meetings in the Eurogroup is a “democratic scandal”; indeed, he publicly denounced these meetings as such in September 2017.¹² For practitioners such as Leila, “too many cooks spoil the broth.” The conflict between the Commission and the IMF illustrates the unnecessary damage that an overly restrictive institutional configuration may have caused. Second, despite the commissioner’s desire to bring a more social-democratic approach to the management of the Greek crisis, no one seems to have ever

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 13/5/2021, SPi

“        ”

87

believed in the solution advocated by left-wing economists and the IMF. Even in the Berlaymont, I have never heard of the nominal debt write-off as a possible scenario. Instead, all efforts were focused on extending maturities and freezing interest rates, rather modest forms of debt relief. In the end, Greece stayed in the eurozone, it came out of the program, but few socialists—and, inside the cabinet, few Parisians—identify with the “success” of which the commissioner and the Brussels people are so proud. But it must be remembered that there were not many socialists in the Eurogroup. On July 7, 2019, Kyriakos Mitsotakis, leader of the conservative Nea Demokratia party, wins early elections in Greece. Although the news is well received by the market, it raises fears in Brussels that the Commission will have to “start all over again.” As it turns out, the new prime minister develops a good relationship with Moscovici. Although he wants to lower taxes, he is committed to the primary surplus target. I hear Leila call on “the Gods of the world to keep the political spectrum stable. There is Greek fatigue. Now we have other problems to deal with. If the markets get angry with Italy . . . ” Indeed, in the summer of 2019, Italian politics are as hot as they can be. We will return to this country in chapter 6.

Notes 1. See Memorandum of Understanding between the European Commission, Acting on Behalf of the ESM, and the Hellenic Republic and the Bank of Greece, https://ec.europa. eu/info/sites/info/files/01_mou_20150811_en1.pdf 2. In doing so, the Fund takes up the argument of many economists. For some, such as Joseph Stiglitz, this should have involved an exit from the euro. For others, such as Martin Sandbu, relief could have been achieved by remaining in the eurozone. 3. “Eurogroup Statement on the ESM Programme for Greece,” August 14, 2015, https:// www.consilium.europa.eu/fr/press/press-releases/2015/08/14/eurogroup-statement/ 4. Randall C. Henning, Tangled Governance: International Regime Complexity, the Troika, and the Euro Crisis (Oxford: Oxford University Press, 2017), 221–4. 5. Joseph E. Stiglitz, The Euro: How a Common Currency Threatens the Future of Europe (New York: Norton, 2016). 6. Calliope Spanou, “External Influence on Structural Reform: Did Policy Conditionality Strengthen Reform Capacity in Greece?,” Public Policy and Administration 35, no. 2 (2018): 135–57. 7. Spanou, “External Influence,” 135–57. 8. The documentation is available on the Commission website, https://ec.europa.eu/ info/business-economy-euro/economic-and-fiscal-policy-coordination/financial-assistanceeu/which-eu-countries-have-received-assistance/financial-assistance-greece_en 9. Iver Neumann, At Home with the Diplomats (Ithaca, NY: Cornell University Press, 2011).

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

88

  

10. Evangelos Venizélos, “Crise grecque et zone euro,” Commentaire 159, no. 3 (2017): 562. 11. Yanis Varoufakis, Adults in the Room: My Battle with the European and American Deep Establishment (New York: Farrar, Straus and Giroux, 2017), 129. 12. Sarantis Michalopoulos, “Moscovici dénonce le scandale démocratique du sauvetage grec,” Euroactiv, September 5, 2017, https://www.euractiv.fr/section/economie/news/ moscovici-greek-bailout-was-a-scandal-for-democratic-procedures/

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

4 A socialist, French commissioner Pierre Moscovici’s appointment to the Juncker Commission, with the portfolio of economic and financial affairs, did not go through easily. From June 2012 to April 2014, Pierre Moscovici is France’s finance minister, the European commissioner’s counterpart in Paris. Although France’s budget deficit decreases somewhat under his leadership, it exceeds the limits set by European treaties. The commissionerdesignate is now supposed to monitor eurozone budgets and punish governments that, like his own, do not comply with the criteria of the Stability and Growth Pact. The liberal Dutch MEP Sophie in ’t Veld fears the “poacher” has been appointed “gamekeeper.” In Parliament, where the confirmation hearing is tough, the suspense lasts almost a month, between September and October 2014. “It wasn’t all fun and games,” the commissioner recalls. As he himself acknowledges with a touch of pride, Pierre Moscovici has two faults: he is a socialist and he is French. Since the beginning of the eurozone crisis in 2010, the EU has adopted a series of measures, including a Fiscal Compact that enshrines the golden rule of fiscal discipline, aimed at reducing public deficits and debt.¹ The Left is opposed to this rule, which it considers incompatible with economic growth and social justice. Whether on the left or on the right, the French government accepts the principle, but, generating year after year a deficit that increases an already high public debt, it is considered a bad pupil in Brussels and even more so in Berlin. A socialist and a Frenchman: these are precisely the two reasons why JeanClaude Juncker chose Pierre Moscovici for this post. The new Commission president wants to strike a balance between his own economic convictions, which are rather moderate, and the austerity policy promoted by his conservative family, the European People’s Party (EPP). From this point of view, a former Socialist finance minister from France seems the ideal candidate to inject “flexibility” into a rigid set of rules. Some describe the new EU commissioner as “a French sausage in a German sandwich.” Unsurprisingly, socialism and France play a considerable role in the life of the Moscos between 2014 and 2019. Beyond fiscal issues, which I will address after explaining his move from French politician to European commissioner, Pierre Moscovici is deeply involved in European debates in France: in the media, in the field, in the Socialist Party, and with his head of state—first François Hollande and then Emmanuel Macron. The struggle for the Eurogroup chairmanship, the Socialist primary, and the European election campaign are significant episodes The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0005

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

90

  

in his constant engagement with France. In the Danish series Borgen, Birgitte Nyborg, the prime minister, tells a rival she wants to send to exile: “In Brussels, nobody will hear you scream.” But, as Fabien reminds me, the commissioner manages to “scream” a great deal from Brussels. As we will see, his political work ends up being hampered by a changing of the guard at the Élysée Palace, with the election of Emmanuel Macron, and by the decline of the Socialist Party, of which Pierre Moscovici becomes one of the last “elephants.”

From French politician to European commissioner When a commissioner is appointed in Brussels, he or she must take an oath “to exercise his or her responsibilities in complete independence, in the general interest of the Union” and “not to seek or take instructions from any government, institution, body, office or agency.” Research indicates, however, that most commissioners remain loyal to the country and the government that appointed them.² A former minister who becomes a commissioner keeps his or her ministerial habits and ministerial networks, and in this way is linked to a government to which he or she will often return after the term of office. The commissioner recognizes this tension: “I wanted to find a middle ground,” he explains. “To listen, to pass on messages to Paris, but not to take instructions from the president. I would use Edgar Faure’s phrase: ‘independence in interdependence.’ ” President Juncker encourages commissioners to maintain a close link with their home countries so as to communicate about European affairs. On certain issues, such as the rescue of Greece or the reform of the eurozone, it helps that the Commission’s positions are close to those of Paris. For Parisians who have just landed in Brussels, or for Brussels people who view the Parisians’ arrival with some apprehension, “independence in interdependence” can be destabilizing. Parisians are not used to the culture of compromise that prevails in Brussels. EU officials, on the other hand, fear that the influence of Paris will undermine the independence of the Commission. In order to reassure the cabinet, but also to clarify the commissioner’s posture, Olivier describes a “triangle” composed of three angles: the portfolio, or the policies formulated within the Commission; the policies of the Socialist & Democrat group in Parliament; and the positions of France. The commissioner’s action, he explains, must always be located within this triangle: Europe, the Left, France.

The first test From Pierre Moscovici’s first days in Brussels, Olivier’s triangulation theory is confronted with the specifics of the French budget situation. In 2014, the French

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 ,  

91

public deficit, inherited in part from the commissioner’s previous mandate as finance minister, is 4.0 percent of GDP. It is heading toward 3.5 percent, but the Germans are still concerned about their historical partner dropping out. The French economy is stagnating, debt is growing, and, during the 2008 economic and financial crisis, the country lost its AAA credit rating. Suspicion is rampant inside the Berlaymont, where there is a lot at stake for a French socialist commissioner judging a French Socialist government. Strictly from the point of view of his portfolio, the commissioner is expected to reject the draft French budget as out of bounds. Before leaving office, the interim commissioner for economic and financial affairs, Jyrki Katainen, prepared a negative opinion. This will be difficult for Paris to swallow. France does not comply with the rules of the Pact and has not done so since 2009, when the country was first subject to an excessive deficit procedure. Olivier says, “When we arrived, we had no strategy. On November 1, 2014, for the first package of budgetary opinions, Martin Selmayr wanted a very tough opinion on France.” Jean-Claude Juncker’s head of cabinet is within a hair’s breadth of obtaining what he wants. As he said he would during his confirmation hearing, the commissioner takes a tough stance on Paris. I am told that, in private, he is firm about the importance of carrying out reforms and not waiting for stronger economic growth to tackle the deficit. At the same time, it would be a delicate matter for him, as soon as he takes office, to reject a budget that is partly his legacy. “Pierre,” the head of cabinet of another commissioner tells me, “suffered from the perception that he was going to want to protect France. I didn’t feel sorry for him, but clearly he was suffering. From the very beginning, he had to make very difficult decisions about France.” In the winter of 2015, a written procedure, issued jointly by the Dombrovskis and Moscovici cabinets through the inter-cabinet process, recommends that the Commission reject the French budget. However, François Hollande and Michel Sapin, his finance minister, give the commissioner some assurances, highlighting the reforms they are carrying out in an unfavorable economic climate. Despite his reluctance, Vice President Valdis Dombrovskis, a conservative responsible for the euro at large, agrees at the last minute with Moscovici not to reject the French budget. The written procedure is recalled. At the hebdo, some heads of cabinet blame Olivier for wanting to protect France. Martin Selmayr joins the critics. To defend himself, Olivier reminds them that the decision was taken after consultation with the Dombrovskis cabinet, which cannot be suspected of being complacent toward a French Socialist government. Open conflict erupts. When there is no agreement between heads of cabinet at the hebdo, the subject is sent up to the political level. The debate in the College of Commissioners is tense. Several commissioners, whether close to the EPP or to the Alliance of Liberals and Democrats (ALDE), buy into a rigorous interpretation of the Pact. This is particularly the case with those from northern and eastern countries. They

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

92

  

see France as a multi-recidivist who has been breaking the Pact for years and whose economic situation does not justify an exemption from the rules. But President Juncker, primus inter pares, leans in favor of Pierre Moscovici’s flexibility: France is granted a third deadline to reduce its deficit below 3 percent of GDP.

“Because it is France” Each year, the debate is repeated with decreasing intensity: DG ECFIN’s budget forecasts are more pessimistic than the French finance ministry’s, but the difference is small enough to justify a certain leniency on the part of Brussels. The commissioner crafts his communication on the razor’s edge, highlighting the requirements of the Pact without condemning France’s fiscal choices too harshly. His political work targets the German government and its allies, who need to be reassured about compliance with fiscal rules. The Franco-German pair of economic advisers, Reinhard and Fabien, push the commissioner to engage in stronger dialogue with his German counterpart, Wolfgang Schäuble, while Simon seeks media opportunities for the commissioner to make his case in Germany, especially in the financial press. As long as a Socialist government is in office in Paris, the relationship between the Commission and France is cooperative. The commissioner speaks with President Hollande almost every month. He sees Michel Sapin, his successor at Bercy, the finance ministry. He is auditioned by the finance committees of the National Assembly and the Senate, where he explains the “European Semester,” which frames budgetary surveillance (see chapter 5). Press attachés tell me that they spend a considerable amount of time with French correspondents, providing context for the commissioner’s speeches in an attempt to avoid any misunderstandings with Paris. To placate his critics in the Berlaymont, the commissioner can count on President Juncker to offer his increasingly explicit support. However, the convictions and jurisdiction of Vice President Valdis Dombrovskis, who is responsible for the euro, must also be taken into account. The Latvian conservative, a mouthpiece of the EPP in the Commission, is not, to say the least, the French socialist’s best friend. This is why Olivier is in daily contact with Taneli Lahti and Kai Wynands, Dombrovskis’s successive chiefs of staff. Reinhard does the same with the deputy. Physically, these discussions are easy to have because the two offices are located a few meters apart on the tenth floor of the Berlaymont. They even hold a small fancy dress party on the floor each year. The wire connecting the two cabinets is taut, but it does not break. Instead of Pierre Moscovici, it is Jean-Claude Juncker who, acting like a lightning rod, manages to attract public wrath from the proponents of austerity.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 ,  

93

In May 2016, when Paris is expected to post a deficit of 3.3 percent, President Juncker, asked to justify the decision to once again grant France a derogation, is blunt: “Because it is France.”³ Judging that the 3.3 percent figure is “borderline,” the commissioner does not take up this sound bite, but neither does he denounce it. In the corridors of the Berlaymont, he is criticized by the Dombros and by DG ECFIN officials for suggesting that France enjoys immunity from the rules. One of them shares his frustration with me: “Pierre is deliberately weakening the Pact. That does not surprise me. As soon as he arrived, it was in the cards. A French commissioner [sigh] . . . he says he’s applying the rules but in fact he’s doing the opposite.” After five years of calls for austerity under the Barroso Commission (2009–14), the “Juncker–Moscovici doctrine” establishes a new normality for the Stability and Growth Pact: as long as Paris (or another capital) makes a sufficient effort, France (or another country) escapes condemnation. Deliberately ambiguous, the commissioner’s language about the French budget nevertheless arouses a little embarrassment, which ends up amusing the Moscos themselves. One day, during a cabinet meeting, the press attaché announces that the media is reporting France’s difficulties in complying with the 3 percent threshold. Raising an ironic eyebrow, Olivier retorts, “Who? Je n’ai pas bien entendu [I didn’t hear]. It’s not supposed to be news, is it?”

Bercy’s liability In May 2017, Emmanuel Macron wins the French presidential elections. To head the finance ministry, he appoints Bruno Le Maire. Although the Socialist Party is gone, the commissioner keeps in close contact with Bercy, the finance ministry, and Matignon, the prime minister’s office. It helps that Edouard Philippe’s government is ideologically committed to deficit reduction. For example, in 2017, France puts forward a tax credit (CICE) that will temporarily increase the burden on public accounts. In principle, the adoption of this measure would prevent France from exiting the excessive deficit procedure. That is why Brussels and Paris agree to delay its implementation until 2018. On one occasion, however, the commissioner’s time as a French politician comes back to poison his relationship with his successor at Bercy. In October 2017, a tax on corporate dividends adopted when Moscovici was finance minister is rejected by the French Constitutional Court. This nullification results in a bill of €10 billion for the French government. Incensed, Le Maire responds with talk of a “state scandal” and accuses his predecessor of “amateurism.”⁴ During a conversation with Étienne, the cabinet’s press attaché, Fabien expresses his concern:

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

94

   If, between now and next week, the story becomes, “Here comes the finance minister who dug up the French budget by ten billion and who now, as commissioner, wants to force us to cut spending,” on est vraiment dans la merde [we’re in deep trouble]. We need to regain control of the narrative. Well, ten billion is three times less per year than their gift to the richest 1 percent [the abolition of the wealth tax promised by Macron]. Do they really want us to say that?

The commissioner is upset: “There was no scandal,” he tells me, “there was a legitimate political process: taxing dividends is a left-wing thing to do. Some people forget that François Hollande’s economic adviser, when we introduced the dividend tax, was called . . . Emmanuel Macron.” The commissioner’s staffers decide to explain to Paris that no one will gain from a public skirmish. I guess they were convincing, because the controversy dissipates as quickly as it began. In the end, the fear of becoming the “poacher turned gamekeeper” does not prevent the commissioner from engaging in political work. Neither France, nor, as we will see in the next chapter, Spain or Portugal, is punished for breaking fiscal rules. Supported by Juncker, helped by economic growth, and wrapped in a rather subtle communication style, the commissioner’s “flexible and understanding approach” succeeds in winning over its opponents. In the coming years, the commissioner is questioned less and less about the French case. In 2018, the deficit falls below 3 percent, allowing the country to exit the excessive deficit procedure.

“Europe in the Berlaymont press room: that’s what killed it” The commissioner says that by coming to Brussels he gave up a national political career. Nevertheless, he keeps an eye on his home country. “The political virus has not let go of me,” confirms the man who continues to follow French polls closely. Throughout his term of office, he remains very present in the French media, especially on the morning radio shows, where he is a regular guest. He meets with the regional press and local channels on a regular basis. After Jean-Claude Juncker, Margrethe Vestager, and Federica Mogherini, Pierre Moscovici is the commissioner who tweets the most, a little in English and a lot in French. He also writes a blog, mostly in French and mostly for Socialist activists. “I especially like radio,” he tells me. “It’s a hot media, it’s comfortable, you have a bit of time. TV ignores Europe. On the radio, you can do a bit of pedagogy. It’s a way of keeping in touch with France, of staying a French politician.” A “French politician”? In the autumn of 2016, politics in that country is consumed with speculation about François Hollande’s future. Lagging in the polls, the Socialist president is ambiguous when asked what his next move will be. Compelled to participate in his party’s primary, he promises to announce his

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 ,  

95

intentions on December 1, 2016. In October, the publication of a book, Un président ne devrait pas dire ça, in which Hollande shows unusual candor, further damages his image. Rumors of his resignation abound, and are only sharpened by the candidacy of his former protégé, Emmanuel Macron. Some of Pierre Moscovici’s former staffers in Paris, such as Stanislas Guérini, Cédric O, Julien Denormandie, and Alexis Kohler, join the young challenger’s team. In Brussels, the commissioner says he “wants to do more politics.” “I don’t really know what that means,” worries Lucie, his speechwriter. “More France? Yes, of course, more politics means more France. But he also has to talk about Europe in France.” In November, the commissioner publishes a book in which he sets out his ideas on the French Left and on Europe.⁵ He is harsh about Prime Minister Manuel Valls but spares François Hollande; on Emmanuel Macron he maintains a certain discretion. “Pierre will be more interested in France,” confirms Olivier. “This is an obvious evolution. He wants Europe to be a theme that is talked about—and well talked about—in the campaign. I’m here to maintain the balance [with his duties as commissioner].” During a meeting, Olivier outlines a Euro-French strategy with the Parisians, Lucie, Fabien, Rémi, and Étienne. The strategy has to do with influencing the Socialist Party primary. “There are several speeches, the book, and our mid-term anniversary,” Olivier explains. “We have to make Pierre visible. Taking stock of the two years: what we have done for growth, for the economy, getting out of austerity, fighting tax evasion . . . . Soyons un peu populiste [Let’s be a bit populist], but let’s talk about ‘my fight against populists,’ so that this Commission can be truly political.” “In short, he has not turned into a cornichon,” Fabien concludes. A mission to France is planned. It is not the first. The commissioner follows the recommendations of President Juncker, who encourages him to be present in France and to participate in citizens’ dialogues in an effort to bring the EU closer to the concerns of ordinary people. “The commissioner is not the ambassador of his country in Brussels, he is the ambassador of the Commission in his country,” the commissioner tells me. With Audrey and then with Rémi, who replaces her in 2016, he plows the ground every six weeks or so. He goes twice to the Doubs, his former electoral riding, but also to Le Mans, Lyon, Lille . . . A field visit, Rémi explains, involves three steps: a visit to a firm or a project that has benefited from European funding through the Juncker plan, a bilateral meeting with a local political figure, and a gathering with Socialist Party members. “We want him to stay connected in the territoires,” he explains. “He often gets a slap in the face, but he likes it, he is good.” It’s true, the commissioner admits: “I have a certain appetite for that.” Rémi elaborates on his approach: When I prepare a tour, I first find a theme and then I target a territoire: a crossborder region that votes for the Front National, where unemployment is high . . . .

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

96

   The risk is to put a stratospheric European commissioner in a situation of nondialogue. But I believe in field visits. If you let them lock themselves in their technocratic bubble, you create monsters. On the move, he has access to people he doesn’t normally see. Of course, there’s always a certain artificiality to it, with the media and all that.

The last French socialist? Everyone in the cabinet thinks that the commissioner wants to play a role in the upcoming presidential campaign. The man himself does not deny this, but he presents it as a unique opportunity to promote Europe. For the Parisians, the campaign is a cherished opportunity to get closer to the commissioner. “We do strategy, we make notes, we prepare trips. We eat with him, we suggest things,” Rémi explains. “In Paris, he is by himself,” says Étienne. In the capital, the commissioner has his own political and media networks. During the Socialist primary, newspapers say he is supporting his friend Vincent Peillon, alongside Lille mayor Martine Aubry and Paris mayor Anne Hidalgo, in order to stop Prime Minister Valls, who has positioned himself as a rival of Hollande. When I ask, the commissioner denies any involvement, but he adds, “Valls is not a great European. He is fundamentally a nationalist and we are not in tune on societal issues.” He is especially critical of Valls’s restrictive position on immigration. When François Hollande resigns in December 2016, the commissioner decides not to publicly support any candidate in the primary. But he invites them all to Brussels to talk about Europe. “I would have played a role if Hollande had gone for it,” he says. “He was wrong to give up. He let himself be discouraged.” A socialist at heart, Rémi sums up: “Our position is that we have to make sure Pierre plays a role in the primary, but not as a challenger.” In March 2017, the commissioner thus welcomes to Brussels the man who, in the meantime, has become the official Socialist Party candidate, Benoit Hamon. Étienne tells me about his idea of having the commissioner write an op-ed for the daily Libération, addressed to Hamon, in which he would lay out a sympathetic but critical (“as a comrade”) analysis of Hamon’s plan to democratize the eurozone. This plan, influenced by the economist Thomas Piketty, proposes the creation of a eurozone parliament.⁶ The commissioner likes the ambition but does not think it is politically realistic. On its own initiative, Libération titles the piece “Benoit Hamon’s beautiful and unattainable project.” This title shocks the cabinet’s Parisians, who are loyal to the Socialist Party. “We wanted to engage in an intellectual debate, but on leur a

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 ,  

97

chié dans les bottes [we only upset them],” Étienne deplores. “It became: Mosco attacks Piketty and Hamon,” adds Rémi. Asked about who he is going to support in the presidential election, the commissioner remains ambiguous: “I am a Socialist and I voted in both rounds of the primary. When one takes part in an election, one respects the verdict.”⁷ While he does not support the Socialist candidate with greater conviction, the commissioner’s relationship with François Fillon, the right-wing candidate, is limited to a sartorial scandal. In March, the satirical weekly Le Canard enchaîné publishes an article about expensive suits given as gifts to the conservative leader. This scandal ends up contributing to Fillon’s decision to exit the race. Now, according to a police investigation, the commissioner also received a few suits from the same tailor in the past.⁸ Journalists query him at the press conference with Hamon. Initially, Étienne is devastated, but the polemic vanishes from the news when it appears that the gift predates the adoption of public ethics rules and that there was no quid pro quo. In the cabinet, people laugh about the answers the commissioner could have given to journalists: “You see, we did nothing wrong: me and my team are really badly dressed . . . ” The election of Emmanuel Macron, who did not come to the Berlaymont either, is a cataclysm for the French Socialist Party, which gradually turns into a rather more Eurosceptic party. “I am the only Socialist who is interested in Europe,” the commissioner often repeated during the primary. After the June 2017 legislative elections in France, as the PS collapses from 280 to 30 deputies in the National Assembly, he is even more isolated. With a sigh, Rémi concludes, “Pierre is the last living Socialist.” “That’s why,” he adds, “we are now betting on the territoires, the local level. We’re surfing on the fact that Macron doesn’t care about them.” From 2017 onwards, field visits focus more and more on the regions and the local elected representatives, including conservative ones. The commissioner sees ministers— whom he used to visit often when the Socialist Party was in power: many of them were of course friends—less often. He redirects his attention to regional presidents and mayors, with whom he can talk about European issues and EU funding. Local party “sections” too: “they are happy to see a Socialist.” In this rather depressing landscape, there is limited space for political work, but the “French politician” manages somewhat to hang on.

Hollande and Macron With Macron’s election, the commissioner’s political base and ideological family, the French Socialist Party, more or less disappears. So does the special relationship he had with President Hollande, for whom he had served as a colleague at the Court of Auditors, the national secretary of his party, and the organizer of his

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

98

  

victorious 2012 campaign. In my role as an observer at the Berlaymont, I, too, see a change in relations between the commissioner, his cabinet, and Paris. The commissioner saw François Hollande every month at the Élysée Palace. Olivier and either the president’s secretary-general, Jean-Pierre Jouyet, or his Europe adviser, prepared a “menu” of subjects to discuss but, in the commissioner’s own words, “we improvised about policies. At the end we would spend fifteen or thirty minutes on our common passion, French politics.” With Emmanuel Macron, who poached several of Moscovici’s former staffers, relations are more distant. Between 2017 and 2019, the commissioner has only a few one-on-one meetings with the president, though he is closer with Prime Minister Edouard Philippe and there are frequent exchanges between Olivier and Alexis Kohler, the Elysée’s deputy secretary-general. Nevertheless, “it’s gone down a level,” Olivier explains. Fabien is also in close contact with both Matignon and Bercy, where he worked before coming to Brussels. Together with Michel Barnier, who has become head of the Brexit task force, the commissioner, Olivier, and Fabien are interpreters of sorts for French leaders who want to understand what’s going on in Brussels. “Our cabinets are interconnected,” the commissioner says, thinking of the Elysée Palace and Matignon. The personal relationship between the commissioner and Emmanuel Macron is complicated. While they share strong support for Europe, the commissioner remains faithful to a socialist ideology that he feels the president has “forgotten.” In November 2018, before the European elections, the media report that former conservative prime ministers Alain Juppé and Jean-Pierre Raffarin, along with Pierre Moscovici, were guests at a dinner with the president at the Élysée Palace in Paris. They speculate that the commissioner, like other politicians who were once close to Dominique Strauss-Kahn, the fallen angel of French-style social democracy, could join Macron. Even cabinet members buy in to this rumor. But the commissioner tells me that he remains a committed socialist. In our exchanges, I feel he is tempted to cooperate with Macron, but not to defect. “Emmanuel Macron is progressive and pro-European, but he is not a social democrat. He knows that I remain loyal to my European political family,” he assures me.

The first European socialist? As early as December 2016, the commissioner believes that “the presidential election is lost for the Socialists. In 2019, the only elected position I can set my eyes on is to be the Socialist Spitzenkandidat for the European Parliament. This is the only thing I would be interested in.” At the same time Martin Schulz, who was the S&D leader in 2014, is leaving the European Parliament presidency to lead the SPD campaign in Germany. “My fate is linked to social democracy in Europe,” the commissioner adds. “Social democracy needs to find its own way between a leftist

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 ,  

99

regression and the banality of the mainstream. We need to make a left turn without going crazy. In the Commission, I am the man on the left. The only one. Maybe with President Juncker.” Meanwhile, there are rumors that Juncker’s ill health will not allow him to complete his term of office. In July 2017, the Welt am Sonntag reports that the commissioner says he is a candidate to succeed the Commission president.⁹ These remarks, real or invented (the commissioner, in any case, denies them), take cabinet members by surprise. The rumor goes no further but, at the same time, the Moscos begin to seriously consider Pierre Moscovici’s candidacy for the presidency of the Eurogroup, which Jeroen Dijsselbloem will leave in January 2018.¹⁰ There are not many suitable candidates for this important function, which is in principle reserved for a finance minister from the social-democratic family; people mention the names of the Portuguese Mario Centeno, the Slovakian Peter Kazimir, and the Italian Pier Carlo Padoan. Why not kill two birds with one stone? Some of his staffers promote the idea of a Eurogroup president who would also be the economic and financial affairs commissioner, just as the high representative for foreign affairs is also vice president of the Commission. This “double hatting” would make it possible to institutionalize the idea of a “European finance minister” in charge of a European treasury (of which more in chapter 7). Throughout the fall, the project animates the cabinet greatly. It is clear that the commissioner himself is juggling with the idea. “Double hatting,” he explains, “is not the miracle solution. But it would give stronger leadership, some transparency and control. The Eurogroup would cease to be a secret group tempted by power.” A Moscovici candidacy, which several cabinet members view favorably, would require organizing a sort of informal campaign among the member states, which elect the president of the Eurogroup by a majority. But it would also depend on the support of France, now a “Macronist” country. That is what makes the commissioner doubtful: “Maybe it won’t work now,” he concedes, outlining four principal reasons. “One, Europe is conservative. Two, the Germans don’t want it. Three, the socialists are divided. And four, Macron has not endorsed me. That’s why I’m running a cautious campaign. For the idea. I’ll only submit a winning bid. And without Macron’s support, it’s unthinkable.” Conducted without much conviction on the part of the commissioner, the campaign fails, much to the chagrin of the cabinet members, both Parisians and Brussels people, who believed in it. In January 2018, Mario Centeno is appointed president of the Eurogroup. “Pierre has always been convinced that finance ministers would not vote for a European commissioner, that they would prefer one of their own [a minister],” Olivier says. “I think his chances were better than he thought they were. If he had been a candidate, it would have been difficult for others to position themselves against him. But he didn’t feel that Macron wanted him. I thought the planets had never been so well aligned.”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

100

  

The battle of the Spitzenkandidaten After this failure, the idea of volunteering to be an S&D Spitzenkandidat during the spring 2019 European elections gains ground. The ambition is not to win the elections—there is no likely scenario in which the S&D group can beat the EPP conservatives—but rather to establish Pierre Moscovici as a leader of the European social-democratic family. In the second book he publishes during his term in office, the commissioner says he is “putting himself at the disposal of events.” In person, he is more forthright: If I get involved with the social democrats, I’ll be sowing the seeds for ten years from now. But I’ll be seventy years old then. I don’t know how it feels to be seventy. If social democrats ask me to be their candidate, of course I won’t say no. But even if there is no other candidate, I’m assuming they will not ask me.

In the cabinet, the possibility of a European electoral campaign gets some people excited, especially the Parisians, who see it as an ideal opportunity to do politics in France. Moreover, the EU justice commissioner, Frans Timmermans, and the competition commissioner, Margrethe Vestager, are about to announce that they will be candidates, respectively, for the S&D and the ALDE. “The president said commissioners could run and still keep their portfolio, so we would have played a role. Not in the French meetings, but in the strategy, the communication.” This prospect worries others, especially Brussels people, who fear that the commissioner will be forced to neglect his portfolio. Will triangulation work? While the commissioner makes more or less equivocal statements in the newspapers,¹¹ his staffers debate the matter in the corridors and in cabinet meetings. “People who have read the article in Le Figaro ask me what the commissioner’s intentions are,” Maud says. “Will he be tête de liste?” “The headline in Le Figaro,” Étienne replies, “is ‘Mosco puts down a marker.’ It is a balanced article. He always says the same thing: ‘I’ll go, I won’t go . . . ’ It’s not fundamentally different.” “Pierre plays his little music,” adds Olivier. “He wants to continue to be useful. For the Left, for Europe . . . and what else? There’s a third element.” “La France!” Lucie says. “In any case, says Olivier, “he is faithful to the [Socialist] Party. Will he be a candidate? We don’t know. Of all the candidates with a European profile, I only know one [the commissioner]. But will Pierre want to go? I don’t know.” To be nominated as Spitzenkandidat for the Progressive Alliance of Socialists and Democrats, the formal name of the S&D group, you have to first be on the Socialist list in France—that is to say, you have to be supported by the French Socialist Party. For the moment, this list gets only 6 percent of the voting

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 ,  

101

intentions in France. If he goes all the way for it, the commissioner may deliver a disappointing result. Even if he is elected, he would head one of the smallest national delegations in the S&D group, which would undermine his prospect for European leadership. More importantly, the PS is moving toward an increasingly critical stance on the EU, which the commissioner does not share. Acknowledging this growing gap, on October 4, 2018 the commissioner announces in Le Monde that he will not be the Socialist candidate, adding that he will be involved in the campaign in a personal capacity.¹² His break with the Socialist Party is obvious: I knew very quickly that it would be very complicated. Hollande’s five-year term ended in an industrial disaster and we returned to infantile socialism. I saw that I would be stalled on the European level: I had no support in France, no support among the Socialists . . . . I’m not saying I didn’t think about being a candidate, but I did it with a clear mind.

The interview in Le Monde provokes a lively discussion in the cabinet, where the commissioner’s ambiguity about his political ambitions had been the cause of some perplexity. Olivier asks, “Did you hear any reactions after the interview?” After a moment of hesitation, Reinhard answers: “Yes, people think it was very clear. The question they ask is, ‘What is he going to do now?’ ” “No one questions the argument,” Simon continues. “Everyone accepts the idea that he is not running because of the PS’s position on Europe. But people are wondering what he’s going to do. He must have a plan or something lined up!” “There are a lot of questions about his differences with the PS,” opines David. “People think he’s preparing for a second round if the Spitzen process fails.” Indeed, within the Brussels bubble, doubt is growing about the prospect of a Spitzenkandidat ever becoming the next president of the Commission. The Parliament imposed Jean-Claude Juncker on the member states in 2014, but this time Emmanuel Macron has declared his opposition to the process in general, and to EPP candidate Manfred Weber in particular. Hence the idea of the “second round,” in which a non-candidate like Pierre Moscovici could still be nominated if the European Council refuses to endorse a Spitzenkandidat. “Fait-il un appel du pied à Macron? [Is he sending a signal to Macron?] The answer is frankly no, and you can say it if you are asked,” concludes Olivier. “For the campaign, I feel he’s motivated. Things are happening in France. He feels that the political landscape is being reshaped—that gets him excited.” As the campaign, in which the commissioner is supposed to play a discreet role, gets underway, a division of labor takes shape in the cabinet between those who focus on the portfolio and those who are involved in partisan politics. While all staffers respect the “triangle” theorized by Olivier between France, socialism, and the portfolio, the Parisians are, out of sensitivity and because of their tasks, closer

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

102

  

to the Franco-socialist side, while the Brussels people are loyal to the EU’s agenda. “Pierre wants to get involved in the campaign to do politics—to hit so-and-so, to stuff Salvini . . . . Whereas we want to communicate about Europe. The two can be—they must be—complementary,” Olivier explains to the cabinet. During the campaign, the commissioner finally plays a rather self-effacing role. He intervenes in the media in France and positions himself in the debates about the future of European social democracy, but his support for the Socialist Party is half-hearted. On May 26, 2019, the French Socialist list led by Raphaël Glucksmann comes sixth in France, behind the Greens and the radical Left. With a little over 6 percent of the votes cast, only six French Socialist MEPs are elected. Within the S&D group in the European Parliament, the French representation is equal to the Austrians, the Swedes, and the Bulgarians, but far behind the Italians, the Germans, and the Spaniards. Led by Social Democrat Frans Timmermans, who is also vice president of the European Commission, the S&D list obtains 20.5 percent of the total votes and 154 MEPs, 31 fewer than in 2014. This result, disappointing but predictable, nevertheless allows Timmermans to be considered for a time as a potential Commission president before he gets a comfortable second term as Commission vice president. Like Margrethe Vestager, the ALDE Spitzenkandidatin. If Pierre Moscovici had been a candidate in the European elections, would he now be vice president of the Commission? We will never know.

“Being a socialist is difficult” As early as 2017, Lucie shares with me her doubts about the commissioner’s political ambitions. “If you want my feeling, he will end up with a senior position in a grand corps in Paris.” Two years later, after the failure of the Spitzenkandidaten campaign, the commissioner offers his own interpretation: I had a concrete project that was the logical continuation of my history: a very important European post. That turned out not to be possible. My party got in the way. I was in the center, but the party went to the left while Europe went to the right. Here, now, I am almost seen as a Marxist. Little by little my historical networks broke down. Staying at the Commission is impossible, and it would not necessarily be interesting. So I am forced to reinvent something while leaving a reasonable amount to improvisation.

In the winter of 2019, Lucie’s prediction of a prestigious appointment in the French public service seems to come true. There are rumors that the commissioner’s name has come up as a possible replacement for Didier Migaud, the president of the Court of Auditors in France. The commissioner, who has been

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 ,  

103

part of this elite body since graduating from the Ecole nationale d’administration in the 1980s, does not deny the suggestion that he will leave his post in March, several months before the end of his term. During a visit to Athens, I ask him what is going to happen to the cabinet. With the European elections approaching, the Commission is a “lame duck,” he tells me. It no longer introduces new legislative projects and is losing its vitality. If the commissioner leaves, the cabinet will, in his own words, be a “lame lame duck.” Things turn out differently. The decision to appoint Alain Juppé to the Constitutional Council delays the departure of Didier Migaud, who had been promised a post in that same institution, by one year. The commissioner therefore stays in Brussels, even though he remains an unofficial candidate for the Court of Auditors. When I meet him and Fabien again in Montreal in September 2019, Fabien shows me an article from Le Canard enchaîné, entitled “Why Macron no longer wants Moscovici at the Court of Auditors.” The satirical newspaper reports that the president of the republic did not take kindly to a statement from the commissioner, quoted in Le Monde, lambasting Macron’s “mainstream populism.”¹³ While he acknowledges that he made a “mistake by talking to journalists who should not be talked to,” the commissioner does not seem too upset. One year later, on June 1, 2020, Moscovici is appointed president of the Court of Auditors. After he left the Commission, he spent six months in quasiretirement but, in late May, Macron finally gave him a call, and Lucie’s prediction came true. In the end, Pierre Moscovici’s European career was not a political springboard. Despite his efforts to remain a “French politician,” a French political career eluded him. The commissioner was not sidelined by his rivals. Rather, his political family collapsed, leaving only a field of ruins for the French socialist who might have been tempted to return home. With the Left moving away from Europe, the commissioner’s pro-European positions are more common among the Greens and En Marche’s liberals. And yet, even if he had wished to pursue a European career, it is unlikely that he would have received these parties’ support. Of Olivier’s France-socialism-portfolio triangle, he and the Parisians retain only the technical skills they acquired in the management of a prestigious portfolio: the knowledge of public policy, communication, and EU institutions.

Notes 1. Treaty on Stability, Coordination and Governance, entered into force on January 1, 2013. 2. Jean Joana and Andy Smith, Les commissaires européens. Technocrates, diplomates ou politiques? (Paris: Presses de Sciences Po, 2002); Liesbet Hooghe, The European Commission and the Integration of Europe: Images of Governance (Cambridge: Cambridge University Press, 2004).

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

104

  

3. Francesco Guarascio, “EU Gives Budget Leeway ‘Because It Is France’—Juncker,” Reuters, May 31, 2016, https://uk.reuters.com/article/uk-eu-deficit-france/eu-givesbudget-leeway-to-france-because-it-is-france-juncker-idUKKCN0YM1N0 4. “Taxe sur les dividendes: Moscovici regrette,” Le Figaro, October 17, 2017, https:// www.lefigaro.fr/flash-eco/2017/10/17/97002-20171017FILWWW00130-taxesur-les-dividendes-moscovici-regrette.php 5. Pierre Moscovici, S’il est minuit en Europe (Paris: Grasset, 2016). 6. Stéphanie Hennette et al., How to Democratize Europe (Cambridge, MA: Harvard University Press, 2019). 7. Lilian Alemaga, “À Bruxelles, Hamon peine à parler Europe,” Libération, March 21, 2017, https://www.liberation.fr/politiques/2017/03/21/a-bruxelles-hamon-peine-a-parlereurope_1557362 8. Jérôme Cristiani, “Costumes offerts à Fillion: Moscovici aussi,” La Tribune, March 22, 2017, https://www.latribune.fr/economie/france/costumes-offerts-a-fillon-moscoviciaussi-668493.html 9. Andre Tauber, “Der Kampf um die mächtigste Behörde der EU ist eingeläutet,” Welt, July 2, 2017, https://www.welt.de/wirtschaft/article166155310/Der-Kampf-um-diemaechtigste-Behoerde-der-EU-ist-eingelaeutet.html 10. Ryan Heath, “Pierre Moscovici: Finance Commissioner Should Also Run Eurogroup,” Politico, June 14, 2017, https://www.politico.eu/article/pierre-moscovici-financecommissioner-should-run-eurogroup-eu-confidential-ryan-heath/ 11. Tristan Quinault-Maupoil, “Moscovici prend date pour les Européennes,” Le Figaro, February 7, 2018, https://www.lefigaro.fr/politique/2018/02/07/01002-20180207A RTFIG00357-moscovici-prend-date-pour-les-europeennes.php 12. Cécile Ducourtrieux, Enora Ollivier, and Solenn de Royer, “Pierre Moscovici: Je reprends simplement ma liberté de pensée et de parole,” Le Monde, October 4, 2018, https://www.lemonde.fr/politique/article/2018/10/04/pierre-moscovici-je-reprendssimplement-ma-liberte-de-pensee-et-de-parole_5364520_823448.html 13. Gérard Davet and Fabrice Lhomme, “La dévorante ambition d’Emmanuel Macron,” Le Monde, August 29, 2019, https://www.lemonde.fr/politique/article/2019/08/29/ladevorante-ambition-d-emmanuel-macron_5504265_823448.html

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

5 Discipline, not punish Budget disputes with Spain and Portugal

Jean-Claude Juncker based his political program on a “grand coalition” of conservatives from the European People’s Party and social democrats from the Alliance of Socialists and Democrats, in the European Parliament but also in the Commission. In charge of the euro and social dialogue, he appointed Valdis Dombrovskis who, as prime minister of Latvia, had implemented radical austerity measures in 2009. Under this vice president, but with a great deal of autonomy, Juncker gave budgetary surveillance to Pierre Moscovici. Oddly, the conservative politician was tasked with social affairs, while the socialist was asked to curb public spending. As a “social Christian,” Juncker embodied a balance between the two men. Martin Selmayr, his chief of staff, speaks of a “Solomonic” role for the president. With hindsight, we know that Juncker wanted to put an end to austerity from the very beginning of his mandate. In the summer of 2014, his ambition seems to be supported by Angela Merkel, who talks about “growth-friendly fiscal consolidation.”¹ This is interpreted by some as relaxing the Stability and Growth Pact’s fiscal rules for eurozone members. From the autumn onwards, the president’s advisers draw up a communication entitled Making the best use of flexibility within the existing rules of the Stability and Growth Pact.² “Clarifying” the way in which the Commission intends to apply existing rules, this communication considers the adoption of structural reforms, certain investments, and the economic situation as mitigating circumstances that may justify temporarily exceeding budgetary limits, under which the government deficit is set at 3 percent of GDP. These “policy dimensions,” the communication explains, are part of the Commission’s “margin of interpretation.” In theory, the Commission is the “guardian of the treaties,” the institutions, and the law, of which the Pact is a key part. In practice, the Berlaymont may decide to adopt a rather flexible interpretation of the rules—namely, by excluding specific expenditures from the calculation of the budget or allowing temporary deviations. This is what Martin Sandbu calls its “discretionary power.”³ As Luc Tholoniat, one of President Juncker’s advisers, explains, “Using the flexibilities of the Pact was a political decision. We did not want to reopen the Pact; the Commission did not want to spend enormous political capital on something that had little chance of success. We worked within the political and legal framework of the current Pact The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0006

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

106

  

with all its flaws and complexity. We inherited the rules and we tried to make sense of them.” Even if he is not the originator, Pierre Moscovici rather likes this flexible interpretation, which corresponds to his own political and economic orientation. This is not the case with Valdis Dombrovskis, a proponent of orthodoxy. “In Brussels,” a Moscovici staffer explains, “the Left is about Keynesianism and the Right is about austerity.” A fair statement, but only in part. In this chapter, I analyze the five-year struggle between conservatives and social democrats over budgetary surveillance. Conservatives, first gathered around Germany and Valdis Dombrovskis and then more broadly around the so-called New Hanseatic League, support a disciplined fiscal policy . . . except, as we shall see, when it concerns their political allies. Social democrats, aligned with France and Pierre Moscovici, are rather more in favor of a “Keynesian” approach—but within the straitjacket of a Pact they do not necessarily question. Between the two camps, liberals, often hailing from northern countries, lean toward discipline. This struggle, led within the cabinet by Olivier, Reinhard, Fabien, and Simon, who cover the critical southern country files, is about whether to punish those countries that break the rules of the Pact. Is Moscovici showing too much leniency toward Portugal, where the Socialists take office in November 2015? Is the CenterRight-dominated College of Commissioners too tolerant of Spain, with its conservative government? While these polemics animate the media bubble, some governments and officials blame Moscovici (and Juncker) for weakening eurozone institutions, against the will of Dombrovskis and a majority of member states in the Council. A former president of the Commission, Romano Prodi, said in 2002 that the rules of the Pact were “stupid.” When Pierre Moscovici says he is applying the Pact “intelligently,” journalists interpret this cynically as a form of favoritism toward one political family or another: the EPP when a conservative government is targeted, the S&D when a social-democratic government is at stake. These political parties have their allies within the Commission itself, where the College, although dominated by those on the Center-Right, includes social-democratic and liberal commissioners. As I gradually realize, President Juncker’s “Solomonic” approach tilts toward Moscovici’s flexibility. Between 2015 and 2019, the Commission does not impose on faulty governments any of the sanctions for which the Pact provides. When, at the end of my time with the cabinet, I ask the commissioner about this, he tells me that he didn’t lose a “single battle against the conservatives.” In fact, grand coalition parties neutralized each other in order to spare governments from their respective political families. Thanks to the Moscos, whose political work sought to establish a moral equivalence between conservative Spain and socialist Portugal, the two Iberian countries I analyze in this chapter were never punished. Although it seems obvious now, this was not a foregone conclusion.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

,  

107

The Stability and Growth Pact, in theory The raison d’être of the Pact, adopted by EU leaders in 1997, is straightforward. With the adoption of the euro, the public debt of a profligate member state can affect borrowing conditions for all governments. To prevent “moral hazard,” the Pact institutionalizes the excessive deficit procedure introduced in the 1993 Maastricht Treaty, the founding act of the single currency. The Pact requires eurozone members to fulfill strict budgetary criteria: a public deficit never exceeding 3 percent of GDP and a public debt never exceeding 60 percent of GDP. The Pact’s set of budgetary constraints is combined with the Maastricht Treaty’s “no-bailout clause,” which prohibits the rescue of a member state in difficulty. Taken together, the Pact and the no-bailout clause mean that a government must control its budget, and that if it fails to, no one will come to its rescue. The Pact, which effectively compels member states to limit their spending, is the economic leg of the Economic and Monetary Union—in fact, the eurozone’s only economic policy, in the absence of a finance ministry. Although not everyone shares the orthodox approach underlying the Pact—for example, almost all French governments, from Lionel Jospin to Nicolas Sarkozy, emphasized the importance of stimulating growth—Germany never allowed its basic principles to be challenged. Only a few changes were made in 2005 to please the French under Jacques Chirac and the Germans under Gerhard Schröder, which, ironically for the latter, were then in breach of the Pact.⁴ While the Pact was more or less respected during its first decade of existence, the 2010 eurozone crisis leads to a tightening of the rules.⁵ The difficulties faced by Greece, Portugal, Ireland, and Spain are interpreted as sovereign debt problems. These countries’ debt spiral is blamed on the decision to water down the Pact in 2005. Such an interpretation is erroneous: Ireland and Spain have low levels of government debt when the crisis erupts, while Belgium and Italy, which have debt amounting to more than 100 percent of their GDP, do not experience short-term borrowing difficulties. The common denominator among countries in crisis is not sovereign debt, but the presence of macroeconomic and structural imbalances aggravated by a failure of the banking system.⁶ During the 2010–12 panic, the “Brussels-Frankfurt” consensus, according to which the eurozone faces a sovereign debt problem, nonetheless takes hold.⁷ As early as October 2010, at the Deauville summit, Nicolas Sarkozy and Angela Merkel agree to reform the Pact and create the ESM (more on this in chapter 7). The consensus they endorse leads to major initiatives that strengthen the authority of the commissioner for economic and financial affairs, who is entrusted with a more intrusive surveillance role in national budgets (as explained in Box 5.1).⁸ “In order to avoid a repeat of Greece,” Fabien explains, “budgetary surveillance is carried out upstream.”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

108

  

Box 5.1 Budgetary surveillance The Rules Budgetary (or fiscal, in proper English) surveillance is based on legislation adopted between 2011 and 2013. In the Brussels vocabulary, this is what people call “the rules”: • The 6-pack, a legislative package of five regulations and one directive that reinforces the “corrective arm” of the 1997 Stability and Growth Pact. Henceforth, sanctions can be applied to a delinquent state unless a qualified majority of member states opposes them. This “reverse qualified” or “semi-automatic” majority represents an increase in the Commission’s authority. Previously, the adoption of sanctions required a positive majority, which had allowed France and Germany to escape punishment in 2004. • The 2-pack, two regulations that require member states to submit their draft budgetary plans (DBP) to the Commission by October 15 each year. This is a kind of 6-pack timetable. The Commission can decide that these DBPs are “noncompliant” or at “risk of noncompliance” with the rules. October is a high point for the Commission, which is then seen as the judge of national budgets that have not yet been submitted to parliaments. • The Treaty on Stability, Governance and Cooperation, which includes a “fiscal compact.” Entered into force in 2013 and separate from the Stability and Growth Pact, it requires a structural deficit—one that is adjusted over the economic growth cycle—not exceeding 0.5 percent of GDP if the debt is above 60 percent of GDP, or 1 percent if it is below 60 percent. In principle, the Commission is associated with this intergovernmental treaty because it has to join the states that would prosecute an offending government. This has never happened.

Procedures Budgetary surveillance takes place in the framework of the European Semester. Launched in 2011, it is a complex process of coordinating fiscal, economic, and social policies within the euro area. In the autumn, the Commission presents an Annual Growth Survey (AGS) identifying the broad economic guidelines. Couched in technical language, the Commission’s economic forecasts are fundamental since they influence the calculation of the expected budget deficit. Member states present their DBPs as well as their reform plans. In its opinions presented in the “autumn package,” the Commission identifies those at risk of excessively high nominal deficits—in other words, those approaching the 3 percent limit. In the “spring package,” the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

,  

109

Commission issues recommendations based on the final plans submitted by member states. This is the preventive arm of the Pact. In bureaucratic parlance, a state that has not adopted the Commission’s recommendations is said to have taken “no effective action.” In budgetary matters, sanctions are the Commission’s main tool for forcing a government to implement its recommendations. Sanctions are punctuated: they include freezing and withdrawing EU funds and imposing fines. They are the possible culmination of the corrective arm of the Pact. The corrective part of the Pact consists of two separate procedures. The excessive deficit procedure targets member states with a deficit of more than 3 percent of GDP or a public debt of more than 60 percent of GDP. The excessive imbalance procedure targets member states whose macroeconomic results (employment, private debt, investment, etc.) are deemed to be detrimental to competitiveness and stability in the EU. In both cases, the effort required is structural: governments must show that they are not simply complying with a nominal target, but are working on long-term policies as well. In both its corrective and preventive aspects, the Commission’s role is to submit its recommendations to the Council of Economic and Finance Ministers (ECOFIN), which takes the final decision. The relevant procedures, which are lengthy and detailed, are based on a battery of indicators that only experts from DG ECFIN are familiar with. As Gregory Claeys explains, the multiplication of indicators (on the deficit, on the structural deficit, on debt, and on expenditures) and “flexibilities” leads to permanent negotiations between the Commission and governments, including in Brussels through the expert-level Economic and Financial Committee (EFC), which prepares ECOFIN Council meetings. “The complexity of the rules is not the cause but the consequence of a lack of trust,” says Marco Buti, ECFIN’s director-general. This is where the commissioner’s “smart interpretation” of the Pact (i.e., his political judgment) comes in. On the one hand, a strict application of the rules can lead to recommendations that go against the economic cycle, which nobody wants. On the other hand, there are borderline cases where the method does not produce a clear result, leaving room for political interpretations, especially in an electoral context.

From now on, member states have to submit their budget plans to the Commission, which must give its nod of approval. The Commission, says Renaud Dehousse, “can now intervene very directly in the preparation of national budgets— in theory, at the heart of national political systems. Legally, it has probably never been stronger.”⁹ Most observers share this view: from 2013 on, the Commission is genuinely empowered to constrain governments’ fiscal policy.¹⁰

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

110

  

Pierre Moscovici inherits these prerogatives. While they are impressive in scope, wielding them is a potentially thankless task, since that entails disciplining—and possibly punishing—national governments. This raises questions of democratic legitimacy. The new, stricter rules had never been applied before his arrival to the Berlaymont.

The Stability and Growth Pact in practice Despite its legal and almost constitutional dimension, budgetary surveillance is a “paper tiger.”¹¹ True, the Commission examines budgets and economic data; it gives warnings and gives opinions; it is in constant dialogue with national governments; and yet it has little control over national administrations and politics on a daily basis. Because it can lead to sanctions, the highest level of political tension occurs when the Commission considers launching the infringement procedure. This procedure, however, only comes into play at the end of a long process and, as we will see in this chapter, everyone tries to avoid it. As Olivier says, with a shrug: “Is the Commission here to win? No, we have internalized it for a long time: member states have to save face.” Apart from moments of tension, which I will come back to, budgetary surveillance boils down to two everyday practices: sending letters and making phone calls. Each is more political than it seems. Letters are the best way to warn a government that it is facing sanctions and to request that it make changes—for example, to its budget plan. The exchange of letters is not a legal infringement procedure. As ECFIN director-general Marco Buti explains, “Letters can in principle be part of a constructive dialogue. They express that we do not want an exclusively disciplinary approach because it is difficult to apply sanctions to a sovereign country. On the other hand, the letters should be an introductory step. They cannot replace the procedure.” “In principle,” Fabien confirms, “one can reject the budget or demand changes, but unless the budget is largely off the mark, this is obviously not politically possible. You’re asking them for a structural effort of 0.6 percent, knowing that they will make 0.3 percent.” Since they are sent on behalf of the Commission, the letters are drafted by DG ECFIN officials and approved by relevant cabinets, including the president’s. The question of who signs the letter on behalf of the Commission is not insignificant. Depending on the level of political importance, the letter may be signed by the ECFIN director-general (an official) or by the two commissioners, Valdis Dombrovskis and Pierre Moscovici. “The truc with the letters is that if they are sent by an official, you can say, ‘It’s not really serious, it’s between civil servants.’ But if it’s between politicians, they’re going to hate each other.” “At least we can

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

,  

111

say we’re doing something,” adds Olivier, who justifies the signing of certain letters by a fonctionnaire. In any case, the content of the letters is closely examined and negotiated by the cabinets according to their respective mindsets, the Dombros being generally more insistent than the Moscos on the need to apply the rules. Each circulation of letters gives rise to rumors of tension or compromise in the College. They evoke, for example, the protection granted by EPP commissioners (like Dombrovskis) to conservative governments or the leniency of S&D commissioners (like Moscovici) toward social-democratic governments. The final decision on the content of the letter rests with President Juncker. “Once the vice president [Dombrovskis] and the commissioner [Moscovici] agree,” says Luc Tholoniat, the president’s adviser, “the College has never changed the direction they proposed. That’s because they come from the two main political families. Once they agree among themselves, the rest of the discussion is fairly consensual.” The letters, once the usual formalities have been dispensed with, are very technical, even indigestible. The following excerpt from a letter is fairly representative; it’s worth quoting at length here, to give the reader an idea of the style: The budget plan provides for a structural effort of 0.3% of GDP, which, when recalculated by the Commission services, according to the commonly agreed methodology for calculating potential growth, amounts to 0.2% of GDP. This structural effort is lower than the effort of at least 0.6% of GDP required according to the commonly agreed adjustment matrix under the Stability and Growth Pact, contained in the Council Recommendation. The projected nominal growth rate of net public primary expenditure exceeds the recommended reduction of at least 0.2% of GDP by 0.1% of GDP. Similarly, the real growth rate of net public primary expenditure is expected to exceed the recommended reduction by at least 1.4%. This conclusion would be confirmed if the temporary allowance (to be confirmed on the basis of the outcome data) were deducted from the requirement. This suggests a significant deviation from the efforts required.

The technocratic lexicon notwithstanding, the preparation of a letter always triggers some agitation. In addition to its content and the question of who is going to sign it, a letter raises diplomatic questions, such as: Can a French commissioner sign a letter drafted in English by an ECFIN official for the French finance minister? It also gives rise to more practical administrative frustrations: when it is time to send out opinions, in October, several letters must be dispatched on the same day. According to the assistants, the office photocopier is “rotten,” forcing them to make last-minute reprints. Sometimes it is not certain that the letter has arrived safely or that deadlines are being met. As one assistant explains, “When the Pact says we have two weeks to give our opinion, is that two

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

112

  

weeks or fourteen working days?” Legal questions can thus play a large role in setting the pace that the Moscos must follow. As the cabinet is located in the Berlaymont building and DG ECFIN in the Charlemagne building across the street, discussions between staffers and civil servants usually take place over the phone. Sometimes people cross the street for a meeting in the canteen. Cabinet members have to proofread all the letters written by DG officials according to their country of expertise. They call civil servants to make sure that they have not overlooked the political dimension of these letters—for example, by adopting peremptory language or using overly technical arguments in a letter to a minister. In some cases, the letter’s delivery date is planned according to the political calendar or even the opening times of financial markets that may react to a negative opinion on a country’s budget. The Moscos also do a lot of double-checking, explanation, and problem-solving on the phone with their contacts in national finance ministries, from Dublin to Rome to Ljubljana. The Commission has only about a week to produce an opinion on the budget plan prepared by these ministries. The following excerpt, taken from a telephone conversation between Fabien and his contact in a country considered “at risk of noncompliance,” gives some sense of the work that is done before any official channels are opened. Fabien is explaining the content of an opinion on a country’s draft budgetary plan that the Commission is about to put online: We don’t see any structural effort. You say in your DBPs that there is some. We do not. What does the overall assessment say? That the structural balance is probably overestimated, too optimistic. You and I are going to talk honestly: your structural balance contains windfalls, that’s why we invented the expenditure benchmark, to correct that. So you’re at risk of noncompliance.

Of course, national governments have their antennae in the Commission. As I observed, some do not hesitate to try to obtain privileged information, especially if their country is deemed to be at risk of noncompliance. Seeing I am surprised by this type of interference during one of these telephone calls, Fabien assumes an amused look and says, “They all want to know what is going to happen with their country. I remain as vague as possible.”

Iberian politics at the Commission In addition to Greece, three countries were put under an assistance program during the eurozone debt crisis: Ireland, Cyprus, and Portugal. Spain was also under strict surveillance. When the Juncker Commission takes office, Ireland, able to borrow on the market since 2013, is more or less out of the woods. However, the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

,  

113

Commission maintains a vigilant eye on Portugal and Spain: while the Spanish deficit is around 5 percent, the Portuguese debt is close to 130 percent. This requires considerable fiscal consolidation efforts.¹² In July 2016, the Commission raises the excessive deficit procedure against the two Iberian countries, which are guilty of failing to take “effective action,” to a higher level. The launching of an excessive deficit procedure is not an easy task. It can lead to the adoption of sanctions. Most importantly, it could cause financial markets to react. South of the Pyrenees, concern has been growing for several years. At the jours fixes, DG ECFIN officials often warn the commissioner that the rules of the Pact are not followed. The commissioner, for his part, likes to remind civil servants that there are political constraints: the impossibility of imposing budget priorities on a government, the importance of reaching a consensus in the Council, and so on. Although they share the same economic fate, Spain and Portugal are at the opposite end of the political spectrum: while Mariano Rajoy’s (conservative) People’s Party is in government until June 2018 in Madrid, António Costa’s Socialists take power in Lisbon in November 2015. These contrasting political situations lead observers to suspect a partisan dimension in the Commission’s budgetary surveillance.¹³ The Moscos, for their part, accuse the Berlaymont’s EPP networks of wanting to apply “double standards” for socialist and conservative governments. The commissioner, at the weekly meeting of the College, and his chef de cabinet, at the hebdo, try to score points against conservatives. Their goal is to avoid as much as possible the prospect of sanctions—but, perhaps even more so, to make sure they are not applied only to socialist governments. Reinhard, Fabien, and Simon spend a lot of time discussing this strategy (as shown in Figure 5.1).

Figure 5.1 Simon, Reinhard, and Fabien discuss strategy while eating cookies in Yannick’s office (which is also my office)

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

114

  

Conservative Spain In the autumn of 2015, the Commission comes within a hair’s breadth of rejecting the Spanish budget for noncompliance. Presenting itself as a good pupil, Mariano Rajoy’s government tables its draft budgetary plan one month before the October 15 deadline. In fact, the conservative prime minister is preparing for elections and he would like to get a generous budget approved that he could then sell to the voters. On October 12, the Commission, forecasting a deficit of 4.5 percent of GDP, announces that Spain’s budget may not be in line with the provisions of the Pact. At a cabinet meeting the following week, the press officer summarizes the view of the right-wing Spanish press, including El Mundo and ABC, which denounce the Commission’s negative opinion on the Spanish budget. Olivier believes that this is a personal attack on the commissioner, who is said to be motivated by his support for Pedro Sanchez’s Socialist Party in the Spanish election campaign. “To be sure,” he says, “the leak comes from the Commission and more particularly from an hispanophone.” Everyone but me seems to understand the innuendo about who leaked the information. To respond to media criticism, Olivier asks Lucie to draft an article for the commissioner’s blog recalling the rules and the Commission’s role. He sketches out the message: “First of all, the analyses come from DG ECFIN and are therefore not partisan. Second, the data they use comes from Spanish authorities and is validated by the Commission in full transparency. Third, Pierre does not play partisan politics.” Reinhard adds that the opinion is not exclusively negative toward Madrid, since it also focuses on economic growth in Spain. While he is suspected of ulterior motives, the commissioner is not the most intransigent with regard to Spain. “Pierre has been criticized for being lax in the Eurogroup, so we are in the right place,” Olivier says at a cabinet meeting. Within the Commission, rumor has it that President Juncker, supported by EPP networks, is ready to compromise with Rajoy. I hear that DG ECFIN’s recommendation on the Spanish budget, based on a combination of the rules and econometric analysis, was watered down at the political level before it reached the ECOFIN Council, the Eurogroup’s formal approval body, where several finance ministers wanted to take a harder line. In November, after the Spanish government has reacted to the opinion, the Commission decides that noncompliance is not “serious” enough, leading observers to question the credibility of the supposedly tougher new rules.¹⁴ What happened? Although finance ministers complained, the commissioner agreed with Rajoy’s friends in the Commission that it would be unproductive to antagonize the Spanish government. “The ECOFIN Council did not agree with the generous position that the Commission ultimately adopted,” the commissioner muses. But thanks to reversed qualified-majority voting, the Commission does not need a majority in the Council. “Internally, I suggested a two-year deadline for

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

,  

115

Spain,” the commissioner explains. “For political reasons, we said one year. I bet you several restaurants that it will be two years. We have to avoid sanctions. The rules are badly f***** up.” Inside the cabinet, this variable geometry makes quite a few people cringe. Some members feel uneasy that Madrid openly flouted the rules; others, not particular keen on the rules in general, dislike the fact that Rajoy seems to have used political connections. Rather than to the commissioner’s “smart interpretation”, the fudge is blamed on divisions in the College: “Spain’s budget is completely unacceptable and we do nothing because the EPP summit is taking place in Madrid at the moment,” a cabinet member speculates. He implies that the College, and especially the president, refuses to apply the rules so as not to displease the conservative family, dominant in the grand coalition. In other words, the Commission, reputed to be independent, internalizes diplomatic and partisan constraints. In the Berlaymont, a tug of war takes place between EPP and S&D supporters, including the commissioner. The Moscos feel under pressure to spare Madrid for partisan reasons. In the cafeteria on the eleventh floor, I am told that conservatives who occupy key positions in the Berlaymont want to cancel the commissioner’s press conference on economic forecasts, scheduled for November 5. The press conference is supposed to present figures that could embarrass the conservative family: a German trade balance surplus of more than 8 percent (the limit being 6 percent) and Spain’s huge budget deficit. The commissioner is told that “nobody is interested in the figures.” Olivier is “furious” about this interference in their portfolio. As it turns out, the commissioner calls President Juncker on the phone and the press conference is reinstated. In his Libération blog, Jean Quatremer, a veteran journalist who knows most French people in the Berlaymont, reports the words of Commission spokesperson Margaritis Schinas (who will later become the Greek EPP commissioner): “I hope [Moscovici’s press conference] will be short, because afterwards, Jyrki Katainen and Violeta Bulc will come to present the launch of the new call for proposals under the Connecting Europe Facility.” This, Quatremer suggests, is not likely to be an exciting media event.¹⁵ For the Moscos, the spokesman couldn’t resist putting the commissioner down, whose speaking points briefly mention Spain’s worrying budget figures. In the December 2015 elections, Rajoy’s People’s Party comes out on top but loses its absolute majority in Parliament and is unable to form a government. New elections are called for June 2016. This interregnum lends itself to further electoral promises and the deficit widens even more than expected. A few days before the new elections, during a bilateral meeting, the commissioner explains to a Spanish MEP, “Relations with Spain are a bit complicated. In the electoral campaign the Commission’s opinions were used for political purposes. We predicted a 4.5 percent deficit and everyone told us, ‘Oh, that’s because you’re a socialist!’

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

116

  

I turned out to be wrong,” he continues ironically, “it was 5.2 percent . . . ” The conservatives, who win a few more seats, manage to form a minority government with the support of the small Ciudadanos party later in October.

Socialist Portugal While the commissioner is not too happy to spare Madrid, he ultimately goes along with the “carrot” approach he believes in. Meanwhile, although the Commission forecasts a deficit of 4.2 percent, Portugal also escaped the controversy. While it is led by the conservative Pedro Coehlo, the thirteenth floor, where the Commission president’s cabinet is located, is not keen to send a warning letter. As a result, a Moscovici staffer tells me, “the Portuguese budget is off the mark and we do absolutely nothing.” The draft budget plan, which was due to be submitted in October, is postponed until January 22, 2016, after the legislative elections. These elections bring Socialists to power, and that is when internal tensions erupt. Even though the previous Portuguese government and the Rajoy government in Madrid got a reprieve in the fall, there is now talk of sending a strongly worded letter to Lisbon on its projected deficit. This irks the Moscos. In the College, conservative commissioners, like Dombrovskis, now push for the hard line. “I had an impromptu meeting in the lift with the Dombros,” Olivier explains in a cabinet meeting. “They are determined. The EPP is in ‘Club Med is back and we’re going to hit them hard’ mode.” “During the crisis,” a Juncker adviser explains, countries on the right imposed their dynamics on countries on the left. Today there are more countries on the left to whom we have to apply right-wing rules. I am a little concerned because we cannot systematically postpone implementing these rules. In the end, no one will believe us anymore. But that means pleasing northern countries by imposing austerity on southern countries.

Valdis Dombrovskis and his allies are right to say that, formally speaking, the Pact does not take the electoral timetable into account. But there seems to be double standards. Since Spain was not sanctioned, even though its conservative government has been in power for five years, how can they justify punishing the other Iberian country that has just elected António Costa, a Socialist who is not responsible for his predecessor’s fiscal choices? Even though he feels strongly about double standards, the commissioner does not want to give the impression that he disregards fiscal rules. He knows that most of his colleagues in the College do not share his “smart interpretation.” And at this stage, it is not entirely clear what President Juncker thinks. Olivier argues

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

,  

117

that it is possible to save time by just explaining how the procedure works; “We must be careful on the first assessment,” he says. Simon, in charge of the Portuguese file at the cabinet, agrees: “Our preference is not to give figures.” “The message,” Olivier says, “is that there is a gap between the Portuguese figures and ours. The aim of the procedure is to explain the gap, that’s all.” The same week, the letter is co-signed by Dombrovskis and Moscovici. It uses nuanced terms which reflect tense inter-cabinet discussions. A few days later, the commissioner is to give a press conference on tax evasion. There is a feverish atmosphere in the cabinet as many questions about Portugal are expected. The communications person in DG ECFIN talks about the defensive points that need to be prepared. “For the press, the sanction is coming and it will be the first. Some journalists have understood the [nuanced] letter but for many, we are already there.” Olivier repeats the message that they crafted the week before: “Our teams are in place, we are going to talk to each other, to pacify the situation.” Simon adds: “We need to be reassuring. To say that Pierre is in permanent contact with Portuguese authorities.” Olivier turns to him and sounds a note of caution: “In the speaking points, I don’t want to see figures, otherwise Pierre will use them.” In the salle de presse, located in the basement of the Berlaymont, there are, as expected, several Portuguese journalists. The commissioner follows the plan. In an effort to relativize, he recalls that letters were also sent to Austria, Belgium, France, and Italy the year before. With regard to Portugal, he explains that the Commission’s initial analysis “raises questions. We need to discuss these before presenting our opinion to the College. The letter does not prejudge the outcome of the process.” It is quite clear that the commissioner does not wish to sound too harsh on Portugal. But on the tenth floor, the debate continues with the Dombros. Pressure is mounting on the commissioner to extract, together with the vice president, whose office is close to his, a commitment from Lisbon. It will be up to President Juncker to decide whether to sanction or not. According to one informant, “it wasn’t easy. Pierre and Valdis disagreed on whether and how to apply the rules.” For Olivier, who debriefs us at the beginning of February, “it is clearly a double standard. We did nothing when the Right was in power. Pierre tried to explain the political reality but, for the others, ‘rules are rules.’ We are a bit isolated. Either we get an extra effort [from Lisbon] and give a positive opinion, or Portugal will be the first country to be sanctioned.” Of course, the commissioner has a margin for political discretion, but there is also a timetable set by the two-pack. According to the procedure, the Commission must give its opinion by the weekend. Portugal wants to adopt its budget on Thursday. Olivier raises an eyebrow: “They have a perfect sense of timing, really.” “The president did not decide,” he tells the team, “but he did leave the door open: ‘If you can’t [reach an agreement with Lisbon],’ he said, ‘come back to the College

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

118

  

on Friday.’ There will be a press briefing.” “It would be nice if the press briefing took place after the markets close,” Fabien comments. Olivier concurs: “If we can avoid rejecting the Portuguese budget, it would be good.” In the coming days, the commissioner makes several phone calls to Portugal to put pressure on his socialist friends to adjust their figures. “We negotiated all night,” Olivier tells me later. “There were still €845 million to be found the day before the deadline. [We found them]. Taneli [Lahti, Valdis Dombrovskis’s chief of staff] said it’s OK. Before the College, Valdis also said he was OK. We send the procédure orale [for deliberations in the College] to the greffe [the clerk’s office] for the 1:00 p.m. meeting.” During this short period of time, however, Dombrovskis says he wants to add the issue of macroeconomic imbalances to the Portuguese brief. The commissioner does not agree. “The message would be negative for the markets: we are asking [Costa] to correct imbalances that date back to his predecessor, this is not good. If we do it for small countries, we also do it for big countries, and the imbalances in Germany are more important.” President Juncker, I am told, then calls Valdis Dombrovskis and Pierre Moscovici to his office. Olivier and Dombrovskis’s chief of staff wait outside the office, not knowing what is going on. The commissioner later describes the scene: I explained that Portugal was about to come out of the excessive deficit procedure, that our decision would be considered incomprehensible . . . . Juncker turned to Valdis and said, “We have to understand the context, we can postpone our discussion . . . .” This [meeting] started with three and ended with two against one. We were a sandwich and Valdis was the salami.

On February 5, the Commission decides not to ask for a revision of the Portuguese budget. “This is a good result for all concerned,” the commissioner is given to say in a press release. “Portugal, the Commission and the euro area. A constructive dialogue has led to additional measures amounting to €845 million, which will allow Portugal to maintain sound public finances.” “In the end, we won,” Olivier concludes with a smile. “Well . . . the Portuguese lost €845 million.”

Saving time “However,” the press release adds, “the risk of noncompliance remains.” Indeed, on May 18, 2016, Spain and Portugal are back on the agenda. Political instability in Spain, which is preparing for elections scheduled for June, and the spending commitments of the Portuguese government have led to a fiscal deterioration. There are lengthy discussions in the College. Defending the rules, Dombrovskis, supported by conservative and liberal commissioners, pushes for the launch of a procedure that would sanction both countries. Moscovici accepts the need for a

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

,  

119

procedure but with zero sanctions. “It’s a North–South conflict,” Olivier explains, “and even between Protestants and Catholics.” In the end, Juncker decides to put the procedure on hold. While the issue is not settled, the commissioner seems more and more confident of the outcome. In June, he meets Socialist MEPs in a Strasbourg hearing, where I join him together with Audrey, the commissioner’s parliamentary assistant. In front of a full house, he announces he is delighted to have convinced his EPP colleagues in the College not to open a procedure against France, Italy, and Belgium. He presses the point, saying, I convinced Dombrovskis not to do anything. That leaves Spain and Portugal. They need a bit of budgetary guidance, we gave them a year. We could have used Article 126(9), possibly sanctions, it would have been quite a debate, but we chose a slightly different path, that of resuming in July after the elections in Spain. Some in the Eurogroup criticize us for being lax or for treating small and large states differently. I ask a different question: Is it the Commission that loses credibility or the rules that lose their meaning?

As soon as he utters this last speaking point, an S&D adviser comes to ask Audrey if she can tweet it. Audrey replies that she will check with Olivier. She is obviously not against it as it highlights the commissioner’s critical approach to the Pact. The commissioner then reminds MEPs that the Commission is “political”: “We are only eight socialists against fourteen EPPs [in the College]. Yet I have not lost a single case. But, each time, it is a fight. Sanctioning is always a failure. If anyone cannot be suspected of wanting sanctions against Portugal, it is me, comrades.” This is the first time I hear the commissioner use that expression of proletarian solidarity so dear to his fellow socialists. By imposing symmetry and a sort of moral equivalence in the treatment of political families, the commissioner managed to save precious time for conservative Spain and socialist Portugal. However, although he slowed down the procedure, it is still binding. Political work cannot make it go away.

The Jesuit’s moment In July 2016, the College is finally due to submit its opinion to the ECOFIN Council on whether an excessive deficit procedure should be launched against Spain and Portugal. In order to preserve the Commission’s credibility, the opinion says, a procedure should be initiated. This would recognize that Spain and Portugal have not met their fiscal targets. But will this not antagonize two governments that, barely emerging from an economic crisis, say they are ready

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

120

  

to carry out structural reforms? “It’s going to be an interesting moment of political courage [in the Council],” a cabinet member reckons. A joint press conference with Valdis Dombrovskis and Pierre Moscovici takes place on July 7, 2016. There are about twenty-five journalists in the room, which is not a lot. Moscovici apologizes for the late 4:00 p.m. conference. He explains that he represented the Commission earlier in the day at the funeral of former French prime minister Michel Rocard, “a great European.” Then he gets to the heart of the matter. Having followed the turmoil of the last few days, his language does not surprise me. “On Portugal,” he says, “we must conclude that there has been a lack of effective action. With regard to Spain, we are also obliged to conclude that there has been a lack of effective action. That is the decision we are sending to the Council. Issuing a recommendation is the Commission’s job, our duty. We have done our job; it is up to the Council to decide.” Having declared Portugal and Spain in breach of the Pact, the commissioner announces that the Commission is recommending a financial penalty of . . . 0 percent! The calculation of penalties, he says, is a matter for the Commission to decide. “So we sanction at a level that amounts to not sanctioning,” Olivier explains. To a French journalist who acts surprised at what she calls the “Jesuitical” nature of this decision, the commissioner responds, “I do not attend congregations, churches, or even synagogues. I am an atheist, I have never been accused of being a Jesuit . . . . What do you want me to say? We play by the rules. The rules provide us with opportunities.” After exiting the salle de presse, I go upstairs with Reinhard and Fabien to the eleventh-floor cafeteria. Reinhard thinks the press conference went well; “The message was clear,” he says. In spite of the Dombros’ resistance, the Moscos’ position held: these countries are coming out of a difficult situation, they are not reaching 100 percent of the objectives, but they are making progress all the same. Fabien wonders how the message will be received in the countries concerned. Not without some reluctance, I am told, the ECOFIN Council supports the commissioner’s opinion. In July 2016, it has become clear that the Commission will probably never apply sanctions to rule-breaking countries under Moscovici’s tenure. The “soft,” “flexible” interpretation of the rules is the new norm. The “Juncker–Moscovici doctrine” is all the easier to achieve since, in the eurozone, government deficits are decreasing anyway. Olivier believes that this development opens up new perspectives: We could say there was a deal—discipline versus solidarity. We divided the deficits by a factor of four. Now we can talk about solidarity. Also, 2017 will be a pivotal year in the Commission’s mandate. It would be great to be able to say, “Europe has cleaned up its finances.” In short, there is a political—sorry, an economic momentum. I hope that it will not be spoiled by politics. There is an alignment of the planets that we must take advantage of. Pierre’s going to

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

,  

121

propose this narrative to the president for his State of the Union in September: We have to end austerity.

Indeed, the year 2016 ends with the impression that, in the fight between conservatives and social democrats, or, on a more individual level, between the Dombros and the Moscos, the latter have won the present round. Before he was ejected from his post, a member of the Dombrovskis cabinet shared his concerns with me. For him, Spain and Portugal twisted the rules: “Now political orientations determine preferences. The rules are based on a philosophy: we create a space in which political discretion is exercised. The problem for me is that the space is now being widened by the Left.” “As long as Juncker and Pierre are in charge,” a German official adds, “that’s the way it will be. In a way, the Germans are angry but not surprised. They’re even laughing about it now. It was in the cards from the beginning [when Juncker appointed Moscovici].” “Of course, people were grumbling,” Fabien recalls a few months later. “We should have told [German finance minister] Wolfgang Schäuble [a fiscal hawk], ‘Go ahead, tell us how you’re going to deal with the Portuguese and the Spanish!’ ” Luckily, the two Iberian countries are entering a period of economic growth that allows them to reduce their deficits more or less automatically in proportion to their GDP. By 2017, it is likely that Spain and Portugal will fall below the 3 percent threshold. The excessive deficit procedure will then be rescinded, in line with the Pact. Schäuble even marvels at the Portuguese finance minister, Mario Centeno, whom I am told he described as the “ECOFIN’s Ronaldo.” For the commissioner, this is a confirmation of his “smart interpretation” of the Pact, based on the encouragement of growth, against fiscal hawks like Dombrosvkis. On November 16, 2016, on the occasion of a drink to mark the adoption of the autumn’s DBP opinions and to bid farewell to Chloé, the cabinet’s press officer, the commissioner delivers a short speech in his office: We gave a chance to Italy, which needs it, to Spain, which does not deserve it, and we did not really give a chance to Portugal, which deserves it. With less punitive measures, we managed to change the Commission’s economic approach by rebalancing austerity and growth. We are blamed for this because we did not punish anyone. For me, this is a good result. What did we do yesterday [with the 2016 budget opinions]? We acted like a finance ministry. It’s an underground battle, people do not see it, but when you look at the picture from two years ago, it’s not the same anymore.

A European stimulus? In the autumn of 2016, the tide seems to be turning within the Commission in favor of a growth-oriented policy. In his September State of the Union speech,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

122

  

Jean-Claude Juncker refers to the need for a “positive fiscal stance”: an increase, after years of fiscal consolidation, in aggregate public spending. In other words, a coordinated stimulus. On November 16, the Commission publishes a communication entitled Towards a positive fiscal policy stance for the euro area.¹⁶ The aim is to call on governments that have enough fiscal space to spend more in order to stimulate growth. Interest rates are low, but the southern states, because of the Pact, do not have much capacity to borrow. In the absence of a European treasury, the Commission asks Germany and the Netherlands to make an additional effort to increase public spending in the eurozone by more than 0.5 percent of GDP. The positive fiscal stance comes from the thirteenth floor, where the idea is to promote an anti-austerity discourse and lower the pressure on countries such as Spain and Portugal. Three floors down, where the Dombrovskis and Moscovici cabinets are located, things are more complicated. The Germans took umbrage at Juncker’s State of the Union speech, which they perceive as a barely disguised criticism of their economic policy. Wolfgang Schäuble is, according to a staffer, “furious.” In the College and in the Council, conservatives do not see the point in alienating Berlin. Even the IMF criticizes the procyclical nature of this proposal, since the eurozone has already returned to growth.¹⁷ The Moscos are not hostile to the idea of a rebalancing of public spending, whereby countries with budget surpluses would compensate for fiscal consolidation in deficit-ridden countries. But they wonder about the extent of the effort required and worry that political talk on the positive fiscal stance may backfire. Within the Berlaymont, opinions differ in the face of a radioactive situation. Should they send out a strong message by proposing a “very positive” fiscal stance, at the risk of upsetting Berlin? Or should they act gently by putting forward a more modest figure, for example 0.25 percent instead of 0.5 percent, at the risk of watering down the message? In public, the commissioner supports the positive fiscal stance formulated by the thirteenth floor. But, because he does not believe that a coordinated stimulus can force Germany to change its economic model, he prefers to focus on a flexible interpretation of the rules that will allow governments to develop their own stimulus plans. Politically, it is easier not to apply a rule than to force a powerful player to change its preferences. The economic effects, Fabien tells me, may be the same. There are two possibilities: to encourage Germany to spend—but they won’t want to—or to legitimize the flexibility given to countries like Portugal—that is, to sabotage the rules, especially for small countries. That way, when a country goes 1 percent over [the projected deficit], we can say, “That’s good, that’s in line with the positive fiscal stance.” In fact, it’s an accommodative policy.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

,  

123

Growth is back! The year 2017 sees the highest growth rate in the eurozone since 2008. Spain and Portugal post rates above 2 percent. They begin to exit the excessive deficit procedure. At a cabinet meeting preceding the announcement of the February 2018 economic forecasts, Olivier is buoyant: For the press conference, I have a pretty clear idea of what I want: “Growth is back!” written in large print behind Pierre. Any photographer should be able to take Pierre’s head and see “Growth is back!” from all angles. Mais attention! I remember a press conference by Tajani when he was vice president: “Fighting corruption” was written behind him, but on all the photos you could only see the word “corruption” . . . [laughs]. In the talking points, you have to explain the figures but, surtout, that “after years of recovery, growth is strong.”

At the conference, I do not see “Growth is back!” in the background. Perhaps DG Communication didn’t want it or didn’t have time to prepare the visual. But the commissioner hammers home the message with a twist that only the Moscos can grasp: “The European economy has turned the page. La croissance est de retour! I do not say ‘Growth is back!’ because I do not like to paraphrase and because I want to use the French language on this podium,” he says with a smile. A year later, the last excessive deficit procedure, against Spain, will be closed. The majority of member states are compliant or broadly compliant. Global economic growth makes things easier. While everyone welcomes the return of growth in 2017, the decision to support a positive fiscal stance and to not punish states that broke the rules continues to haunt the Moscos. In the autumn of 2018, the European Fiscal Board, made up of independent experts, publishes a critical report on the Commission’s, and therefore the commissioner’s, 2017 economic policy. According to their calculations, the euro area has grown above its potential, so fiscal policy was expansionary and the Commission too accommodating in applying the rules. Reinhard coordinates the cabinet’s response to this report, which will be circulated in a letter from the commissioner to the Board’s chairman.¹⁸ “We were really shocked,” he explains to me. Less by the content than by the tone of the [Board’s] report. They analyzed in detail, point by point, all the decisions we made last year. On each one, they say, “Here’s the top of the margin of error, here’s the bottom, and the Commission always chose the most lenient position.” So it’s, in their view, a political decision. But that was the analysis of our experts!

“Will the report matter?” I ask.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

124

  

“I don’t know. Last year, the Court of Auditors made another report and it did not have much of an impact.” * * * During the commissioner’s mandate, government deficits went on a downward trend in the eurozone, and most of the countries that were subject to the excessive deficit procedure when he took office in 2014 were out of trouble by 2019. This is an undeniable success, especially given the fact this it was achieved without the imposition of sanctions. The Commission disciplined member states without ever punishing them. With hindsight, we can conclude that the Juncker–Moscovici tandem never wanted to impose sanctions on delinquent countries. Admittedly, the communication on flexibilities, adopted as early as 2015, gave them the intellectual cover to avoid automatic application of the rules. As we have seen in this chapter, however, the “Juncker–Moscovici doctrine” was developed by trial and error, through the interplay of strategies, alliances, and rhetoric between representatives of the major political parties in the Commission, as well as between the Commission and the Council. This protracted game culminated in the summer of 2016, when Spain and Portugal were fined €0. For people who believe in following the rules, Moscovici’s “smart interpretation” of the Pact is political in the partisan sense of the word. With the complicity of President Juncker, it allowed socialists to spare Portugal but also allowed conservatives, including self-styled hawks, to spare Spain. The two camps, as it were, neutralized each other. The commissioner’s political work thus undermined the Pact and the treaties. This is undeniable. However, a “smart interpretation” of the Pact also entails a cold-headed analysis of political factors that may influence economic policy: the electoral cycle, public opinion, the ability to carry out reforms, or business confidence. In other words, beyond partisan politics, a “smart interpretation” is a politically contextualized approach to economics based on the conviction that every rule is, every rule must be, subject to interpretation. In any event, the year 2018 is off to a good start for the commissioner. The economy is doing better and this can be partly attributed to less austerity. “Maybe we just got lucky. There’s no way of knowing,” Fabien shrugs. “True, we had a good fiscal policy, but the political cost was too high. We should have found a way not to piss off l’Allemand de base by being careful never to show disdain for the rules.” “But all’s well that ends well, right?” I offer. “You’re asking me, did it end well? No! All the carbon dioxide we’ve released with these decisions, it’s heating up the atmosphere. Our success [with budgetary surveillance] will mean the failure of eurozone reform.” “Is that a Catch-22?”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

,  

125

“Yes, absolutely. [Because of our flexible application of budgetary surveillance], we cannot move forward institutionally. But if we had done what was ‘right,’ it would have had a negative impact on growth.” Fabien’s correct. Attempts to reform the Economic and Monetary Union, discussed at greater length in chapter 7, are getting bogged down. Germany has less and less trust in the Commission’s ability to steer budgetary surveillance. At the same time, however, another crisis is looming on the horizon. It could enable the Commission to rebuild its credibility with the proponents of orthodoxy. The crisis begins in Rome on June 1, 2018.

Notes 1. Ashoka Mody, EuroTragedy: A Drama in Nine Acts (Oxford: Oxford University Press, 2018), 352. 2. Communication to the Parliament, the Council, the ECB, the EESC, the CoR, and the EIB, COM(2015) 12 final, January 13, 2015, https://ec.europa.eu/economy_finance/ economic_governance/sgp/pdf/2015-01-13_communication_sgp_flexibility_guide lines_en.pdf 3. Martin Sandbu, Europe’s Orphan: The Future of the Euro and the Politics of Debt (Princeton, NJ: Princeton University Press, 2015), 205–6; Dariusz Adamski, Redefining European Economic Integration (Cambridge: Cambridge University Press, 2018), 60. 4. Martin Heipertz and Amy Verdun, “The Stability and Growth Pact—Theorizing a Case in European Integration,” Journal of Common Market Studies 43, no. 5 (2005): 985–1008. 5. Adamski, Redefining European Economic Integration, 43–53. 6. Adam Tooze, Crashed: How a Decade of Financial Crises Changed the World (London: Penguin, 2018), 346–71. 7. Erik Jones, “The Collapse of the Brussels-Frankfurt Consensus and the Future of the Euro,” in Resilient Liberalism in Europe’s Political Economy, ed. Vivien A. Schmidt and Mark Thatcher (Cambridge: Cambridge University Press, 2013), 145–70. 8. Giandomenico Majone, Rethinking the Union of Europe Post-Crisis: Has Integration Gone Too Far? (Cambridge: Cambridge University Press, 2014). 9. Stéphanie Novak, “Europe: Un autre traité pour rien? Entretien avec Renaud Dehousse,” La vie des idées, April 10, 2012, https://laviedesidees.fr/Europe-un-autretraite-pour-rien.html 10. Ben Crum, “Parliamentary Accountability in Multilevel Governance: What Role for Parliaments in Post-crisis EU Economic Governance?,” Journal of European Public Policy 25, no. 2 (2018): 268–86; Jonathon Wayne Moses, Eurobondage: The Political Costs of European Monetary Union (Lanham, MD: Rowman and Littlefield, 2017). 11. Moses, Eurobondage, 70. 12. Randall C. Henning, Tangled Governance: International Regime Complexity, the Troika, and the Euro Crisis (Oxford: Oxford University Press, 2017), chs. 6–7. 13. Henning, Tangled Governance, 146.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

126

  

14. Adamski, Redefining European Economic Integration, 62. 15. Jean Quatremer, “La droite veut une Pacte de stabilité qui ne s’applique qu’à la gauche,” Les coulisses de Bruxelles (blog), November 4, 2015, http://bruxelles.blogs.liberation.fr/ 2015/11/04/la-droite-europeenne-veut-un-pacte-de-stabilite-qui-ne-sapplique-qu-lagauche/ 16. Communication to the Parliament, the Council, the ECB, the EESC, the CoR, and the EIB, COM(2016) 727 final, November 16, 2016, https://ec.europa.eu/transparency/ regdoc/rep/1/2016/EN/COM-2016-727-F1-EN-MAIN.PDF. 17. Luc Eyraud, Vitor Gaspar, and Tigran Poghosyan, “Fiscal Politics in the Euro Area,” IMF Working Paper 17/18 (Washington, DC: International Monetary Fund, 2017), https://www.imf.org/en/Publications/WP/Issues/2017/01/30/Fiscal-Politics-in-the-EuroArea-44601 18. European Fiscal Board, Annual Report 2018 (Brussels: Secretariat of the European Fiscal Board, 2018), https://ec.europa.eu/info/publications/2018-annual-reporteuropean-fiscal-board_en

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

6 Italian populists and the Pact At the end of the summer of 2018, the Commission faces its toughest confrontation with a member state since Grexit was aborted in 2015. At the time, Pierre Moscovici had tried to moderate the Eurogroup’s intransigence and find common ground with the left-wing Syriza government. In May 2018, the formation of a coalition government in Rome comprised of the Five Star Movement and the Lega—both determined to provoke Brussels—forces the commissioner to consider, more seriously than before, applying sanctions against Italy for breaching the Stability and Growth Pact. “When I look at the events of 2010 and 2015 in the light of today,” a Council official tells me, “I see that the problem was always Italy. Greece is extraordinarily small. Portugal is only slightly larger. In Italy, the amounts involved would be really huge.” As we saw in the previous chapter, the commissioner is rather dovish when it comes to budgetary surveillance. Faced with Spain and Portugal, his “smart interpretation” of the Pact was bolstered by conservatives and socialists who neutralized each other in the Commission and in the Council. This time, the commissioner and the grand coalition seem fully aligned against a new enemy: populism. Between 2014 and 2018, Jean-Claude Juncker and Pierre Moscovici sought to curb the rise of the anti-euro Five Star Movement in Italy—the far-right Lega seemed rather marginal at the time—by accommodating the Italian government. Their strategy was to offer the then ruling Democratic Party as much flexibility as possible within the framework of fiscal rules, which were stretched to the limit. In doing so, the Commission was more faithful to the letter of the Pact than to its spirit—a strategy opposed by many finance ministers in the Council, but also by conservatives and their influential allies in the Berlaymont, who believed that the Juncker–Moscovici doctrine undermined the eurozone. Through the budgetary surveillance of Italy, the third-largest economy in the eurozone, the legal, economic, and political significance of the Pact is being debated. At its core, the debate revolves around whether the commissioner’s political work vis-à-vis Spain and Portugal, which, according to the critics, emptied fiscal rules of their substance, could backfire. Was the Pact overpoliticized? Can it not be politicized in the face of the populist challenge? In Rome, government leaders are soon questioning Italy’s very membership in the European Union. As we will see in this chapter, the commissioner’s political work clashes with the equally political strategy of his opponents. On both sides, The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0007

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

128

  

the rules are flouted and the institutions are challenged. EU law and financial markets become weapons in an openly political struggle. In order to understand the origins of this conflict, we must go back to the formation of the Juncker Commission.

“We’re all making progress in Italian” Italy’s economy has been stagnating for almost twenty years. Joining the euro with a possibly overvalued lira and going through the Great Recession and the ensuing fiscal consolidation did not help matters.¹ In 2010, Italy’s economy was too large for what was then a still nascent financial assistance scheme, and so Italy was not subject to an adjustment program. Under pressure, however, Silvio Berlusconi’s government fell in November 2011, three days after George Papandreou resigned in Greece. He was replaced first by Mario Monti, a technocrat, and then by Enrico Letta, a Democrat. Both tried to implement an austerity program. Although Italy escaped the troika’s grip, unlike Ireland or Portugal, it has not managed to emerge from the recession. Unemployment remains high, the economic situation is almost deflationary, and public debt, which has piled up since the 1980s, is huge—over 130 percent of GDP. Because its debt is so high, Italy’s deficit cannot merely be slightly below the limit of 3 percent of GDP, like in France.² The Commission calls for a greater structural effort to reduce the debt below 60 percent of GDP in the long term. In February 2014, Matteo Renzi forces the departure of Enrico Letta, following a putsch within the Democratic Party. As soon as he moves into the Palazzo Chigi, the official residence of the president of the Council (as the prime minister is known in Italy), Renzi calls for an end to austerity. To the EU, Renzi says he no longer wants “an old, boring aunt telling us what to do.” His demands are bolstered by the Democratic Party’s triumph in the June European elections. Renzi wants to take advantage of the “flexibilities” that he believes a new interpretation of the Pact would offer. At the Ypres summit in June 2014, he conditions his support for Jean-Claude Juncker, then the Parliament’s presidential candidate but not yet by the Council’s, on obtaining such flexibilities. German chancellor Angela Merkel and Dutch prime minister Mark Rutte disagree. But by now Renzi enjoys the reputation of a winner. “We managed to impose the wording,” his adviser recalls. “Matteo asked for a ‘fresh new start’ and Juncker at least took up the idea of a ‘new start.’ ” By a happy coincidence, Italy holds the EU presidency in the autumn of 2014, when the Juncker Commission is being set up. Renzi uses this opportunity to shake up the European agenda. The Commission’s communication on flexibilities, which I mentioned in the previous chapter, is published just after that, in January 2015. It includes new language on the possibility of exempting certain investments

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

    

129

from the debt calculation. Renzi outlines the structural reforms he needs to carry out and the specific challenges facing his country. He argues forcefully that the refugee crisis, the dominant issue in European politics in 2015, justify a slightly expansionary fiscal policy, which would raise the projected deficit from 1.8 to 2.2 percent of GDP. In the College of Commissioners, I am told, some believe that Rome is asking too much. But the Moscos do not want to tank a center-left government while a right-wing government is being spared in Spain (as we saw in chapter 5). In October 2015, as the cabinet, following the standard timetable, is preparing the Commission’s opinion on the DBPs, Olivier shares his indignation: “Sure, the Italian budget is not fine either,” he concedes, “but why sanction them and not the others? From this point of view, we agreed with the Dombros. We will send a letter to the Italians signed by the DG, who is also an Italian.” A letter signed by a senior civil servant will send a low-intensity signal to the Italian government. “Pierre saw the trap when they [codeword for EPP networks] said they wanted the letter to the Italians to be signed at the political level.” While they are seen as Renzi’s advocates in Brussels, the Moscos actually have a hard time understanding the Italian government’s attitude. On the one hand, Finance Minister Pier Carlo Padoan develops the concept of a “narrow path” between growth and deficit reduction. The commissioner and most of his staffers adhere to this concept since, in exchange for an understanding attitude on their part, Rome commits itself to fiscal efforts. But, on the other hand, the president of the Council seems to disregard the “narrow path.” More than fiscal accommodation, Matteo Renzi is aiming for an ambitious stimulus package at the Italian and European level. The Juncker Plan that is then being put in place—a fund using the European budget to leverage public and private funding for infrastructure investment—evokes combined investments of €300 billion. Renzi would like to go further, and exclude much of public investment from the calculation of Italy’s debt. The commissioner is not hostile to this, but Italy has little support in the Council, especially from Northern countries. Should the Commission reject a budget that prima facie contravenes the Pact? Should it accept it while helping Padoan convince his colleagues in the Italian government to make concessions? It is not only Rome’s intentions that are difficult to decipher. On the tenth floor, the Italian strategy emanating from the thirteenth floor, that of the Juncker cabinet, is also not well understood. During a cabinet meeting, Olivier shows his irritation with the confusion around the dossier. He evokes leaks, civil servants using their parallel channels to discuss with Rome or Berlin. “We are all making progress in Italian,” he says. “There are a lot of little games in this story. How do you say téléphone arabe in English?” “Chinese whispers,” the press officer answers. “That’s just as racist,” Fabien laughs.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

130

  

“In any case,” concludes Olivier, “we have to find a solution for Italy. We haven’t made any progress for a week now.” At the end of the day, the Commission adopts a moderate tone in its opinion on the Italian budget, close to the commissioner’s preferences. Coming out of a meeting with Padoan, the commissioner tells the press about the importance of the rules, but adds, “There are reforms in Italy, and these reforms are bearing fruit, particularly on the labor market. They are positive and that must be taken into account.”³ A few days later, the Commission confirms that it will give the Democratic government a reprieve on account of the Pact’s flexibilities. This is not the first time that the Commission has issued an “understanding warning”: the same scenario played under Moscovici’s predecessor, Olli Rehn, in the autumn of 2014. And it will not be the last . . .

From Renzi to Gentiloni Unsurprisingly, the Italian question is back on the agenda in the autumn of 2016. Once again, the media anticipate the rejection of the draft budget presented by Rome. Once again, Renzi invokes migrants and now earthquakes to justify breaking fiscal rules. On the eve of a referendum campaign on constitutional reform, he wields anti-Brussels rhetoric and removes the European flag from his office. During the campaign, tensions mount. Renzi’s motives are electoral but, bound by the timetable of the European Semester, the Commission cannot avoid the fiscal issue. This time, a letter is sent by Valdis Dombrovskis and Pierre Moscovici to the Italian finance minister, Pier Carlo Padoan. Compared to last year, when the letter was signed by a civil servant, the importance of the issue moved up a notch, to the political level. Nevertheless, it is clear that, unlike some Eurogroup ministers, President Juncker does not wish to reject the Italian DBP. An earthquake has just occurred in Umbria and the Marches; “With the news in Italy, the thirteenth floor is going to be even more accommodating,” a staffer believes. Some people, following Vice President Dombrovskis’s hawkish line, are perplexed; others, not at all. The letter, sent on October 25, 2016, recalls the significant flexibilities granted to Italy the previous year and the discrepancy between the proposed budget plan and the rules of the Pact. But, as usual, it takes note of Italy’s arguments and proposes a “constructive dialogue.” Between rules and flexibility, between technical vocabulary and political innuendo, a letter of this type leaves room for all sorts of interpretations. During the drafting phase, I am told of a meeting between the Juncker, Dombrovskis, and Moscovici cabinets and the administrative services. Everyone agrees this is a Catch-22. It is increasingly difficult to claim that the Commission is applying the rules by not applying them. Between acceptance and rejection, the Moscos

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

    

131

take the “narrow path” charted by Padoan through a tense dialogue with the Italian authorities, in which everyone has to save face. Rome asks for flexibility for the current year, but promises to respect the Pact the following year. “Italy,” Olivier predicts, “will be our main problem throughout November.” As expected, the letter is widely commented on in the media. At a cabinet meeting in advance of a press conference on a tax-related proposal, the press attaché summarizes for Olivier the media’s expectations. “The media lists degrees of severity [between countries]. Italy is the worst. Renzi said he wouldn’t change one iota. And he started again with the migrants . . . . La Repubblica says the Commission will not reject the budget. Italian journalists are very experienced,” he says with a smile. “Yeah, we’ll get two questions on taxation and twelve on Italy,” Olivier says. “Pierre must not fall into the trap [of getting into the content]. It’s a constructive dialogue step. He will say, ‘I see you have specific questions. We haven’t finished the analysis, I can only answer questions on the process.’ ” At the press conference, the commissioner only gets one question on Italy, to which he replies: You know very well that this Commission does not consider the “stick” as its philosophy. Some people blame me for that, but I defend a smart interpretation of the rules. We must take these letters for what they are: a normal, a natural part of our dialogue. They do not prejudge the next step. We must not minimize, but we must not overdramatize either.

By not applying the rules more vigorously, the Commission wants to support a reformist government in the face of mounting opposition from Silvio Berlusconi’s Forza Italia and the Five Star Movement. But the Commission’s tolerance prompts Italians to ask for more. The cabinet often has to send out messages, asking Rome not to push its luck. Meanwhile, Italy’s debt continues to grow and the reforms promised to the Commission are still pending. “I can understand why they don’t want to pick a fight with Renzi,” a French observer tells me. “But the day there is a problem in the eurozone, the Commission’s proposals will be soft compared to market reactions.” On December 4, 2016, Matteo Renzi loses the referendum on constitutional reform. He resigns, but the Democratic government remains in place under Paolo Gentiloni, with Padoan staying on as finance minister. From less than 1 percent before 2016, growth goes up to to 1.5 percent in 2017. However, debt hovers around 130 percent of GDP and, in that context, the deficit remains too high according to the rules. In 2017, referring to migrants and earthquakes (sic), Gentiloni and Padoan plead again for the Commission’s understanding. It is more or less the same play as the previous year: the Commission reminds Rome of the rules, admonishes it, but recognizes Italian difficulties, and, in the end,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

132

  

recommends no sanctions. The language of flexibilities fits the political decision not to embarrass Rome. By then, the Commission’s conservatives and hardliners have given up the fight. As Ashoka Mody writes, “the impression gained ground that Italy . . . would receive special leeway.”⁴ In public, nobody dares to state the most compelling argument in favor of this strategy: if the Commission is too hard on the Democratic government, it may fall. The populist, anti-euro Five Star Movement is on the lookout; it is rising in the polls and feeding off the rising chorus of anti-austerity voices. The argument appeals to those, dominant in the Moscovici cabinet, who support a flexible interpretation of the rules based on a pragmatic reading of political and economic circumstances. But it angers the hardliners, a majority in the College and the Council, for whom the rules of the Pact are not subject to interpretation. Around this time I meet someone close to the Eurogroup who sums up this feeling: Italy has economic reasons to reduce its debt. They say, “We agreed to run a deficit of 1.5 percent, but we can’t.” The Commission replies, “OK, we are political, you can do 0.2 percent more. Except that, oops! It is against the rules. And oh, we are based on rules! So we make up a new rule . . . ” It has become toxic because the Commission is accused of being neoliberal in Italy and corrupt in Germany and the Netherlands. The Commission is unaware of the political shitstorm it is in. That undermines its legitimacy. How can you run fiscal policy if you do not know what the rules will be? In the Council, the finance ministers are being called idiots by their prime ministers because they forced them to limit spending, while the Italians got away with it. Either it is a rules-based system or it is a discretionary system, and you say that the rules should be ignored.

Political agreement, economic concerns Even if the Commission agrees with Rome on a flexible interpretation of the rules, economic concerns remain. The state of the Italian banks, which is not directly related to Pierre Moscovici’s portfolio, is worrying. They have an 18 percent rate of nonperforming loans.⁵ For Nicolas Véron, the Italian banking system is akin to a “zombie.” The Veneto and Monte dei Paschi banks, which failed the ECB’s stress tests, are particularly at risk. Since 2016, the government has been preparing a rescue plan that would allow banks to be cleaned up with public money while sparing small savers. The problem is that this plan contravenes the European rules adopted after 2010, which stipulate that creditors, and not taxpayers, must bail-in the bank. In Italy, however, small savers are often shareholders in the banks they use. Either the Commission forces the Italian government to let these banks fail, which could destabilize the banking sector and ruin ordinary citizens, or it authorizes a rescue that goes against banking supervision rules.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

    

133

Throughout 2017, Ioana, who is responsible for financial matters, and Simon, who covers Italy, closely follow the negotiations to ensure that Rome can clean up its banks without resorting to state aid or a an official bailout.⁶ They act as a liaison between the cabinet and the commissioners responsible for DG FISMA (financial stability) and DG COMP (competition). In June, the Commission finally gives the green light to the government’s rescue of the Veneto banks by creating an interbank deposit guarantee fund. Later, it does the same with Monte dei Paschi. From €341 billion in 2015, nonperforming loans are set to shrink to €200 billion in 2018. The problem continues to haunt the Italian economy, but the situation seems to be stabilizing. In any case, this is what the Moscos are hoping for. In February 2018, I chat with Ioana and Simon about their future projects. Simon is rather relaxed. After the autumn they have just experienced, things should calm down: the European Semester has become a bit routine, the tax agenda (see chapters 8 and 9) is coming to an end, 2018 will be the last full year of the cabinet. From the summer of 2018, the Commission enters its “lame duck” period. “With the European elections [scheduled for May 2019], the commissioner’s communication will become more political, less institutional,” he believes. We talk a bit about Italy, where parliamentary elections are also on the horizon, without dwelling on the subject.

The populists take Rome In the autumn of 2018, I meet Martin Selmayr, Jean-Claude Juncker’s powerful chef de cabinet who, a few months earlier and not without controversy, had transitioned into the equally powerful position of secretary-general of the Commission. He welcomes me to his new office, as close to Juncker’s as his previous one. Unsurprisingly, his appreciation of the “political,” “smart,” or “flexible” approach to the Pact since 2015 is positive. “Italy is the only country where we have been a little too patient. We helped Renzi, who told us it was the only way to keep populists out. We gave him flexibilities and we ended up with the populists anyway.” On June 1, 2018, three months after the stinging electoral defeat of the Democratic Party, a new government assumes power in Rome. Behind Professors Giuseppe Conte, prime minister, and Giovanni Tria, minister of finance, lies a coalition of less respectable personalities that shocks Europe: the Five Star Movement allied with the far-right Lega. Opposed in many ways, the two parties’ leaders, Luigi Di Maio and Matteo Salvini—the coalition’s real orchestrators—find common cause in their head-on opposition to the euro. During the summer, the migrants issue allows Salvini, interior minister, to dominate the government’s agenda. While Brussels feared a debate on euro membership, the single currency is put on the backburner. Rome’s conflict with

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

134

  

the Commission focuses instead on Salvini’s harsh treatment of asylum-seekers: Brussels blames Rome for not respecting the right to asylum and for pushing back ships carrying migrants across the Mediterranean, a policy which Salvini wears as a badge of honor. At the same time, the Italian government tables a draft budget that seems to be in line with the Commission’s recommendations. “Before the summer, it wasn’t clear what the temperature would be in the College,” says Olivier. “After four years of accommodating Renzi, Gentiloni . . . the letters—all that.” The June 13 ECOFIN Council approves Italy’s figures. Meanwhile, the Five Star Movement drops in the polls. In order to assuage voters to whom it had promised a sharp increase in social spending, the party raises the stakes by requiring the implementation of a “citizenship income.” The Lega, for its part, wants to go back on the retirement age, which had been raised by the previous government, as well as organize a tax amnesty and reduce taxes. In a few weeks, the Italian deficit forecast, which had been deemed acceptable, triples, from 0.8 percent to 2.4 percent. Everyone is aware that Italy needs a stimulus and social reforms. Are the government’s proposals likely to revive the economy in a sustainable way? Or is it a trick to allow the two rival parties to shore up their popularity in the short term? The commissioner’s strategy during the 2015–17 period was based on a tacit agreement with Padoan, a finance minister from his own center-left political family: the Commission would show flexibility provided the government undertook long-term structural reforms in a cooperative spirit. With the populists in power, this strategy becomes less feasible: they seem determined to submit proposals that they know are unacceptable, not only to the Commission but also to the Council. As early as August, DG ECFIN is informed through its contacts in Rome that the final budget will be much more in the red than the one announced in July. The DBP to be tabled in October will not be in line with fiscal rules. The atmosphere changes. At the end-of-summer rentrée, the commissioner asks his colleagues: Are they going to aggravate the populists, who have already raised the issue of refugees, or must they admit that flexibility has not had the desired effect? Together, the commissioners weigh their options: Should they display their concern about the political direction taken by the Italian government? If so, does the Commission risk being criticized for its flexible policy toward the previous government? Initially, I am told, opinions in the College are cautious. The government has just been elected and, even though neither the Five Star Movement nor the Lega has many friends among the commissioners, they must not give the impression that they are acting arbitrarily. Hence the idea of sticking to the rules. Technically speaking, the disagreement with Rome is about growth forecasts. For the Italians, new spending will stimulate the economy and thus help generate a modest deficit. For the Commission, this is unproductive spending that will

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

    

135

reduce tax revenues. While Rome promises a deficit of 2.4 percent, Brussels forecasts 2.9 percent. The issue is not just a matter of economic expertise; it is, rather, about policy. Even if in principle the Commission only gives an opinion on budgetary gaps, in practice it has to judge the merits of public policies insofar as they may affect the growth forecast, and hence the calculation of the deficit. In order to solve this equation, the multiplier used to calculate the impact of public expenditures on GDP, and therefore on government fiscal revenue, is fundamental.⁷ The Italian government believes that it will be very positive, whereas Commission economists believe that it could be negative: for every euro spent, Italy would lose GDP percentage points! The problem is that the real effect of the multiplier can only be known after the fact. “It’s an empirical question,” Reinhard and Fabien admit.

Hell breaks loose After weeks of discussion, the College decides to act. At the cabinet meeting and in the corridors, Italy becomes the dominant subject. A letter to Rome is in preparation: “A direct letter, rather harsh, you could say . . . well, direct,” Simon explains at the cabinet meeting. In it, the Commission expresses its “grave concern.” “Rome’s reaction,” Simon continues, “is not constructive. We are told of an earthquake that awaits us at the European elections. They are not [engaged] in the constructive dialogue referred to in the letter.” In the press, the commissioner, already incensed by the treatment of migrants, one day calls the Italian government “xenophobic.” That is all it takes for Matteo Salvini to take Jean-Claude Juncker and Pierre Moscovici to task. “Juncker and Moscovici have ruined Europe and our country,” he says on October 8, just after the letter is sent. Two days later, speaking alongside Marine Le Pen, he adds, “The real enemies of Europe are walled up in the bunker of Brussels. It is Juncker and Moscovici who have brought fear and job insecurity in Europe.” Not to be outdone, Di Maio accuses the Commission of “market terrorism.” A few months earlier, French president Emmanuel Macron had said he wanted to lead the “progressives” in a fight against the “populists.” Embracing this dichotomy, the Italian government portrays Macron, Juncker, and Moscovici as “disconnected elites.” Budgetary surveillance has never taken on such a controversial, partisan, and personal dimension. “Before the summer, we thought there would be nothing more to do after the autumn package. What a radical change!” Reinhard exclaims. “At the moment,” Fabien confirms, “you can’t get any more political than that about Italy. We’ve been beating around the bush for four years, and now this is it.” During a meal, Olivier wonders: “Perhaps Italy will mean the return of existential questions: if the spread increases, so does the risk of contagion.”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

136

  

While insults fly in the media, cabinet members try above all to calm things down. This involves increased contact with Italian leaders who are deemed to be reasonable, such as Giuseppe Conte and Giovanni Tria. But the approach has its limits: the president of the Council and the finance minister are the only formal interlocutors between the Commission and the Italians, but many question their ability to influence Salvini and Di Maio, who ultimately pull the strings in Rome. Salvini does not hesitate to say that neither Conte nor Tria has a mandate from the government to negotiate with the Commission. On October 8, a few hours after Salvini insulted him on social media, the commissioner meets the president of the Italian Chamber of Deputies, Roberto Fico. This meeting should make it possible to smooth things over. At the cabinet meeting before, Simon describes the Italian politician: Fico represents the left wing of the Five Star Movement, especially the social wing. On the budget, he’s not necessarily with us. We’re not sure what to expect. I don’t know if he’ll be confrontational. He asked for the meeting two months ago to talk about eurozone reform. Now it will only deal with the budgetary issue.

A DG ECFIN official, attending the cabinet meeting as part of the My Day at the Cabinet initiative, speaks up: “I have a friend in the Five Star Movement who tells me that Fico is a very moderate person who does not get on well with the Lega. He speaks very publicly on this subject.” “In any case,” says Olivier, “if there is a photo taken, I would like it to be in front of the European flag in the corridor. Not in front of the commissioner’s coat rack.” “Twelve stars instead of five!” Simon replies, triggering laughter. “Di Maio is talking about an earthquake,” Olivier reminds them. “His friend about a tsunami. They have very bad manners.” “That’s the theme of the week,” Fabien squeaks, referring to the tsunami that just struck Indonesia, where he is supposed to accompany the commissioner for a G20 meeting in Bali.

The Italian trap After the meeting with Fico, the commissioner tells Simon that he found the têteà-tête interesting. “I tried to separate Salvini and Di Maio,” he says with a wink. I take the opportunity to ask the commissioner for his assessment of the emerging Italian crisis. “We are trapped,” he says. “We have to do something because of the rules. But if we impose sanctions . . . it’s going to take a lot of tact. It’s all going to come down to the next few weeks. If we act, the markets will react, and we don’t necessarily want that. But the Italians need to reduce their debt. The country’s heavily in debt.”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

    

137

“Do you believe in this recipe, economically speaking?” “Yes, I believe in the rules, otherwise I wouldn’t have taken the job. You have to respect the rules, but not be too strict. In tennis, if the ball is inside the lines, it’s good. If it’s on the line, it’s still good. But if it’s in the corridor or in the seats, it’s out.” As is often the case, the commissioner is using me to try out a talking point that he will later use in public. “They’re going to say yes,” I offer, “but it’s just a one-percentage-point fiscal stimulus . . . ” “OK, but then it’s the end of the 2-pack, of the 6-pack, of the budgetary surveillance thing . . . . They are attacking the euro from the inside rather than from the outside. We’ll see later, there’s a range of nuances,” he shrugs. “This time, the Eurogroup is rather behind you, isn’t it?” “Italy has no friends around the table. It’s funny, finance ministers, now they’re telling me, ‘We’re with you.’ ” “They’re pushing you?” “No, they let me”—the commissioner makes a gesture like Pontius Pilate washing his hands. “They don’t push. Then they’ll come and criticize the Commission.” I feel that the commissioner and Olivier relish the fight with a government that represents everything they hate. In a restaurant, Olivier exudes confidence: “Italy is completely isolated. For once, we have the whole Eurogroup with us. We are going to apply the rules.” Over the following weeks, no cabinet meeting starts without mention of the Italian spread, which jumps to 340 points in November. This risk indicator means that the interest to be paid on an Italian government bond is three percentage points higher than on a German bond. In principle, the October 15 cabinet meeting is devoted to new opinions on DBPs, including the Italian one. Cabinet members, each one assigned to a different country, are expected to examine in one week all the opinions drafted by DG ECFIN: hundreds of pages, each sentence of which will be scrutinized by governments and the media. They prepare letters to communicate the Commission’s reaction. Simon has become accustomed to Italian draft budgets being sent at the last minute. “In the best case,” he explains, “the Italian DBPs reach us in the early hours of the next day. I won’t be refreshing my inbox every minute tonight.” “About the letter for Italy,” says Olivier, “I have to talk about it with Martin Selmayr at noon. He seems to want to send the letters after the College meeting. I think that wasting two days is risky. How much time do you give them? Fifteen days for dialogue? For the time being, we are aiming to launch the written procedure [formalizing the opinion on behalf of the College of Commissioners] on October 25. On Wednesday, Pierre presents the situation in Italy to the College, and the DBPs in general.” As a sign of the importance given to the Italian budget crisis, the commissioner plans to visit Rome, the pretext being an invitation from the Aspen Institute, a

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

138

  

think tank. The Italian government claims that the budget it has submitted is final. Arriving in Rome on the same day as the letter, sent by e-mail, the commissioner intends to remind them of the consequences of their refusal to cooperate, which would be the launch of the first excessive deficit procedure “for noncompliance with the debt rule.” Countries that do not comply with the debt rule (60 percent of GDP) are indeed required to make greater budgetary efforts than others. Even if Italy’s deficit does not exceed the nominal 3 percent of GDP, it may be subject to an excessive deficit procedure because of its debt burden, which is not decreasing. Olivier tells the cabinet, “We are going to Italy to negotiate—engage in dialogue, sorry—Thursday and Friday.” Simon, who will accompany the commissioner with Olivier, sketches out the program: There are quite a few meetings confirmed. He will see Minister Tria. There will be a nice bout of nostalgia with [former finance minister] Padoan. He will see some old friends from the PD [the Democratic Party]. In terms of media, it will be quite intense: RAI, etc. There will probably be a press conference before departure. The priority was to see President Mattarella. It’s not easy at all. But it should be useful. Within twenty minutes on Saturday, I got a call from our Representation in Rome to tell me that it was very sensitive and that I had to be discreet, and a message left on my voicemail from a journalist asking me to confirm the meeting!

Rémi, who handles relations with the French media in Étienne’s absence, confirms: he, too, has been contacted by Agence France-Presse, to which Fabien replies, “If even Agence France-Presse knows about it . . . ” Simon continues: “At Aspen it will be Chatham House rules”—in other words, no quotes can be attributed to participants. “I don’t know if we can translate Chatham House into Italian these days,” Olivier jokes. Simon, who speaks Italian, offers his best accent: “Casa Chatham!” “For me,” Olivier concludes, this is a mission for dialogue in-between the exchange of letters. We have to see how we do it knowing that there is a 99 percent chance that the Commission will give a negative opinion.” “It’s Japanese kabuki,” opines one staffer. “Everyone will be wearing their masks.” In the play that’s going on, no one has any interest in changing their strategy. With the May 2019 European elections in mind, Salvini and Di Maio have a political motive for staging their confrontation with Brussels. Moreover, it is possible that a budget deficit will result in a short-term economic stimulus. It all depends on the reaction of the market, which could either stand still or plunge Italy into recession. “But it’s going to burn on a low flame,” one cabinet member thinks. “Not like Greece . . . ”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

    

139

Two days later, the commissioner and Simon travel to Rome. Just before their departure, President Juncker tells the media, “We have been very kind to Italy. Because Italy is Italy.” The crack is reminiscent of his infamous phrase about France’s recurrent excessive deficits (“because it is France”; see chapter 4). And yet Juncker’s tone suggests that the Commission now intends to be less patient than it was with Paris. The possibility of launching the excessive deficit procedure is taken seriously. In Brussels, we take advantage of the commissioner’s absence to have a drink in his office. At one point, everyone gathers around Cecilia’s smartphone to watch the commissioner’s press conference with Minister Tria in Rome. One sentence catches my attention: “In the Commission, politics is left at the door.” The commissioner adds, “We are not here to intervene in Italian politics.” Next to me, someone laughs: “Well, a little bit anyway!” Upon his return, Simon gives me a debriefing. He tells me that the meeting was tense because Minister Tria had found the tone of the letter insulting. The commissioner had to explain the content and the subtext to him. But elsewhere the tension continues to rise: the Five Star Movement circulates a doctored video in which the president of the Eurogroup, Jeroen Dijsselbloem, asks the markets to “punish” the Italians. Luigi Di Maio praises Donald Trump’s policy, which he credits for strong economic growth in the United States, against that of the EU. It is clear that Rome will not budge, which reinforces the consensus in Brussels on the need to stand firm. “The Italians,” Olivier says, “helped us with their intransigence.”

Rules or politics? On October 23, 2018, Valdis Dombrovskis and Pierre Moscovici announce at a joint press conference in the Strasbourg Parliament that they reject the Italian budget. “We are not faced with a borderline case, but with a deviation that is clear, definite, assumed, and, by some, worn as a badge of honor,” the French commissioner says. He then gives the government three weeks to present a modified version of the budget plan. As the press conference ends, a Lega MEP, Angelo Ciocca, smashes his shoe on the commissioner’s documents. A social media battle ensues, with Ciocca’s tweet serving as the opening volley: “In Strasbourg, I walked (with a sole made in Italy!!!) on the mountain of lies that Moscovici wrote against our country!!! Italy deserves respect.” Still on Twitter, Di Maio ups the ante: “This is the first Italian budget that the EU does not like. I am not surprised: this is the first Italian budget that was drafted in Rome and not in Brussels!” A few hours later, the commissioner tweets his response. The style suggests he wrote it himself: “The ‘shoe made in Italy’ episode is grotesque. At first we smile and trivialize

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

140

  

because it’s ridiculous, then we get used to a deaf symbolic violence, and one day we wake up with fascism. Let’s stay vigilant! Democracy is a fragile treasure.” The commissioner’s economic portfolio intersects with his personal fight against populism. While his colleagues in the College follow the commissioner, Olivier predicts that Eurogroup ministers will adopt a more conciliatory tone. At a cabinet meeting in early November, he criticizes the draft Eurogroup communiqué: “There is vague language about dialogue, collaboration . . . . It gives the impression that there is room for discussion. That’s precisely what we want to avoid.” In the Eurogroup, the finance ministers end up siding with the commissioner. They do not publicly criticize their Italian colleague, but they do confirm the Commission’s analysis. “After four years of flexibility, they will see what they will see!” a satisfied cabinet member exclaims. The consensus forged at the College is not broken at the Eurogroup. Italy is isolated. I am told that Minister Tria was loyal to the government. But everyone suspects that he is not the master of the game in Rome. Until the November 21 press conference, when budgetary opinions, including the one on a revised plan for Italy, will be announced, the Commission must keep a low profile. A communication note prepared by Étienne and Simon states that, “even if it seems difficult to meet the ‘no-comment’ line until November 21, we recommend saying as little as possible.” Over the next few days, I hear of a series of meetings with DG ECFIN, the legal services, the secretary-general’s office, and the president’s cabinet. The excitement is palpable. A sensitive working session with legal experts, to which I do not have access, deals with the legal implications of the excessive deficit procedure they wish to apply. What policy changes should be prioritized? What instruments should be adopted and according to what timetable? And above all, since the EU is founded on law, on what legal basis should they intervene? “We’re improvising,” Fabien explains. The “debt-based excessive deficit procedure” has never been applied since its creation in 2011. The Commission must ensure that the procedural mechanism does not produce unexpected political effects. “We can gradually increase the pressure,” says Olivier. “It’s a very incremental approach. We asked ourselves questions, but only about the procedure. Nothing fundamental, but to avoid a political accident. In this arm wrestling, there is no real solution and the others [i.e., the Italian government] are strong. They are strong politically, but we are strong legally.” A major drawback of the debt-based excessive deficit procedure is that it is difficult to communicate to the public: How do you explain that a country with a deficit of less than 3 percent is subject to an excessive deficit procedure because its debt is too high, while other countries with higher deficits may not be sanctioned? “We are entering new territory because it may take several years to comply with the debt criterion. It’s hugely politically sensitive,” Reinhard explains. “We also

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

    

141

have to find the balance between the member states that want us to be tough and what would make economic sense.” At the end of the meeting with the lawyers, I ask the Moscos why they are taking the risk of an open conflict with Rome, which is obviously looking for confrontation. In unison, they answer, “Because it is the right thing to do. We are defending the collective interest.” I ask Simon why the commissioner, who has never, by his own admission, been a hawk on budgetary matters, is getting so personally involved this time. “Because he thinks he has no choice. He has to apply the rules and everyone is behind him. I think Pierre will want to go to Rome very much, probably before Christmas. He wants to be visible. In terms of media attention, it is not Greece yet, but there is a lot of interest.” After the shoe incident, the commissioner has received several messages of support. For Martin Selmayr, too, the stakes are much greater than fiscal rules. “The problem with Italy,” he says, is not whether the rules should be applied or not. The problem is that we have a country that challenges the system. It is not just a question of budget. Solidarity is not a one-way street. If we let this go, we are playing the game of Salvini, an agent provocateur who wants to destroy the European Union. This has nothing to do with the rules. Do we believe in solidarity? It’s a little narrow to see it as a budget dispute. President Juncker is not interested in that. It is the same with Poland; it is not just about the rule of law. If we give up, there will be a systemic conflict.

The commissioner, for his part, takes a more philosophical approach: For me, it’s a short fuse. We will go all the way, but we must not abuse our strength. We will not provoke them. If there is a rise in interest rates, if there is tension on the markets, what Marxists used to call “objective contradictions” will end up bursting in the midst of the European elections. This has been my thesis from the start. Here, people thought at the beginning that the populists were really going to propose a normal budget; I told them, “No, it will be an extraordinary budget.” Now they say, “It will be a financial crisis.” I don’t think so either.

“If there’s one thing to remember about your book project,” he concludes with a smile, “it’s that I’m always right.”

An outstretched hand, really? On November 21, the press conference on the opinions package, a crucial moment in the European Semester when the commissioner gives his verdict on the budget

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

142

  

plans, finally takes place. The room is packed. Commission spokesperson Margaritis Schinas introduces the three commissioners responsible for the Semester: Vice President Valdis Dombrovskis, Pierre Moscovici for budgetary matters, and Marianne Thyssen, who covers social issues. True to their standard “good cop, bad cop” routine, Dombrovskis declares, in a severe tone, that an excessive deficit procedure is required for Italy because of the debt criterion. In other words, the Commission rejects the Italian budget. Moscovici’s intervention, which addresses several aspects of the Annual Growth Survey, focuses on Italy. Originally, the Italian opinion highlighted the consequences of having too much debt. The final version elaborates less on the rules than on the cost of various measures included in the Italian budget, such as lowering the retirement age and the citizenship income. After welcoming what he calls the most favorable economic and fiscal situation in the euro area since 2014, the commissioner gives his assessment: We are now faced with the consequences of the decision taken by the Italian government. The Commission remains committed to dialogue. Valdis and I have met Minister Tria more times than I can remember. I spent two days in Rome. Yet our questions and doubts about growth, deficit, and debt persist. Valdis had some strong words on the subject. Where will the additional growth come from? Who’s going to foot the bill? This draft budget plan carries risks for businesses, savers, and taxpayers.

“But,” he adds, “dialogue and composure are more important than ever. As we move closer to an excessive deficit procedure, it is essential that the Italian government engage constructively.” Unsurprisingly, the question period focuses on Italy. The commissioner reminds the assembled journalists that the Commission has not yet launched the procedure; it is up to the member states to confirm its recommendation within two weeks. “I see no reason for them to disagree,” he says. “Then we will have to prepare the procedure and a new recommendation for Italy to correct its debt. We are going to respect the deadline set out in the texts. Much depends on the quality of the dialogue. We have to talk to each other, we have to respect each other—it is an absolute imperative.” After the tension of the past few weeks, the commissioner stretches his hand to Rome. At the same time, he sharpens the terms of the debate. That evening, I join him for a conference at the Friends of Europe association. The room is packed and the audience a little gray-haired. There seem to be a lot of retired European civil servants. This is an opportunity for the commissioner to develop his thinking by combining the procedural aspects of the Pact with his own political position, which emphasizes values:

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

    

143

About Italy, what can I say? There are two dimensions. There is a nationalist threat, a populist threat. When I see Salvini holding Le Pen by the hand, I don’t want that future for my child. For the eurozone, there is the excessive deficit procedure, which I would like to avoid. I hope we can find a solution, but time is running out. We asked them to follow the rules. They refused. We have no choice. This is not a conflict between Moscovici and Salvini or between the Commission and Italy. Italy is alone. Salvini sees himself as the one who is struggling with an unelected bureaucrat . . . . You know here that that is not true.

At that time, cabinet members believe that the launch of the excessive deficit procedure against Italy is inevitable. “The thorny question now,” according to Reinhard, “is not whether to launch the procedure, but when.” “Now things are clear,” Olivier adds. “Not how we’ll get out of it, but what we have to do.” The Stability and Growth Pact provides for the rapid activation of sanctions, which start with a deposit equivalent to 0.2 percent of GDP. After member states approve the Commission’s recommendations, Italy will have six months to modify its budget. In the summer of 2019, the Commission will judge whether there has been “effective action.” If the answer is no, it may launch infringement proceedings. “But the system allows you to exit the procedure at different times,” Reinhard tells me. “The idea is to keep the door open. We don’t want to rush anything. The Italians have time to think about the situation.” In fact, some cabinet staffers are concerned that the commissioner is not ready to fight the battle to the end. While his political disagreement with Rome seems to galvanize him, he is notoriously dovish when it comes to sanctions. What will happen if the Italians make a compromise that is deemed unacceptable by his fellow commissioners and finance ministers, but which the commissioner himself feels is sufficient? “[The proponents of orthodoxy] are stubborn,” Olivier muses. “Maybe we will help find a solution. The idea is that everyone wins. Italy has the most to lose: their spread will increase and growth will decrease. It’s not good at all. If Italy loses, deep down we all lose.” Beyond partisan and ideological viewpoints, political work is also based on a sober analysis of the economic and political situation in Italy. On the one hand, the Commission must not cause panic in the market, thereby provoking a crisis in the eurozone. On the other hand, it is clear that the Lega and the Five Star Movement seek to instrumentalize the Commission’s interventions to boost their support, particularly in view of the upcoming European elections. How can the populist government be forced to move without causing collateral damage? Without it ever being spelled out or coordinated, I see that the Moscos’ political work consists of counting on market reactions and division between coalition

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

144

  

parties to force the government to make concessions. As someone explains to me, they are trying to “create enough disruption in the system.” Indeed, it is the Five Star Movement that, fighting for its survival against a triumphant Salvini, pushes for more spending. A negative market reaction could lead Italy’s economic elites, especially the banks, to question the government’s brinksmanship. “Their indiscipline will impose costs,” another official explains. “The problem takes a different turn when four or five bankers tell the prime minister, ‘If you don’t change, we have problems.’ The whole nation is in trouble. Salvini is not the guy who created the deficit. It is not his favorite policy that is creating the deficit, it is his partner’s [Five Star] policy.”

The compromise of last resort Despite their obvious political passion for it, the Moscos are beginning to fear what is likely to be a lengthy process. They are entering the last year of their term of office, rumors of the commissioner’s imminent departure for a post in Paris have been spreading, many are beginning to think about their own future, and the prospect of the European elections does not make them want to engage in a major battle with Italy. “I think many [of us] didn’t realize that it would take years to go through the excessive deficit procedure,” Simon tells me. “On a personal note,” Olivier says, “I’m not thrilled about it. I want some calm . . . . [He spells out the dates of the procedure timetable.] It’s a serial novel. We won the lottery, really. It’s a very complete training program.” As expected, the markets, already nervous after the summer, are sending negative signals to the Italian government. They are the Commission’s silent accomplices. At the end of November 2018, the government tries to issue bonds but has difficulty finding buyers. The spread continues to rise, signaling that public debt is more expensive to finance. The pressure on bank balance sheets is increasing. Statistics will confirm a few weeks later that Italy has entered a recession. Soon, the ECB will put an Italian bank under supervision. This is the first time the Frankfurt institution exercises this responsibility. On both the thirteenth and the tenth floors, staffers redouble their efforts to find a solution that does not involve blindly applying the Pact’s rules. The Moscos are particularly adamant about the need to be creative. Between the first reference to the excessive deficit procedure at the beginning of November and the ECOFIN Council of December 4, 2018, meetings are held at the highest level. Jean-Claude Juncker and Prime Minister Giuseppe Conte have dinner together on November 24. The commissioner joins them at the G20 Summit in Buenos Aires a few days later. Around the same time, the commissioner and Finance Minister Giovanni Tria outline an agreement in the Berlaymont. They all agree to lower the pressure, to find a compromise.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

    

145

“Once it was agreed [at the political level],” Simon explains, “the DG and the Italian Treasury were given the mandate to find the technical solution: We delay investments—which, by the way, is not good for growth, mais bon—we postpone tax measures to April, which were unrealistic to launch in January . . . . In short, we make maximum use of flexibilities for an ‘unusual event.’ ” “Again?” I ask. He smiles. While the markets moderated Rome’s attitude, the explosive social situation in France also forces the commissioner to water down his determination. In November 2018, President Macron faces the yellow vest movement. On December 10, he pledges €10 billion to meet its demands, which increases the French budget deficit from 2.8 percent to 3.2 percent of GDP. Everyone wonders how the Commission will react to this extra spending. Arguing that the French situation is not comparable to the Italian case, since the debt is lower, the commissioner tells the media that the French overrun is “conceivable” on a “limited, temporary, and exceptional” basis. On the same day, Jean-Claude Juncker meets with Giuseppe Conte in Brussels. Returning home, the Italian prime minister announces that his government is ready to reduce the deficit to 2.04 percent rather than 2.4 percent. To do so, the government gives up €10 billion in spending and brings its growth forecasts into line with the Commission’s. In Rome I am told that 2.04 percent was the figure that Finance Minister Tria had been advocating inside his government from the outset; in the Berlaymont, some people claim the figure was theirs. Anyway, with Rome under market pressure and Brussels having to justify its stance vis-à-vis France, it becomes the new compromise. “As long as they make the minimum necessary efforts, we have made the decision to choose Italy over populism,” the commissioner explains. “We had support from the markets, of course, but we did not want to play them against Italy. Conte and Tria were courageous in this context. At the end of the day, we stuck to the Juncker–Moscovici doctrine [i.e., no sanctions].” “What if they hadn’t moved?” I wonder. “Then we would have gone for it. But I never thought they wouldn’t move.” A few days later, an agreement is reached with Italian authorities. Rome agrees to reduce its growth forecasts and increase its structural effort by postponing the implementation of its flagship reforms like the citizenship income and lowering the retirement age. In exchange, the Commission grants €3 billion in “flexibilities” for specific investments.⁸ “This is far from what they were supposed to do, but it puts them in a situation that is not very different from other member states,” Simon explains. Going from a deficit of 2.4 percent to 2.04 percent allows the Italian government to save face. In Italian, the difference in pronunciation between the two figures is apparently imperceptible. “Valdis was not happy,” Simon recalls. “At first, Pierre was almost more uncompromising than he was,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

146

  

but in the end Valdis wanted to start the procedure anyway. For Pierre, it doesn’t make sense under the circumstances.” On December 21, 2018, the commissioner publicly announces that the Commission and Rome have agreed to avoid the opening of an excessive deficit procedure. According to one of my interlocutors, the Italians “knew that we could not launch a procedure against Italy and say nothing against France.” The government commits to an automatic increase in VAT of 4 percent if the expected growth rate of 1.5 percent is not achieved. “After several weeks of difficult negotiations,” the commissioner says, “the Italian government has made sufficiently credible budgetary commitments to stabilize the level of Italian debt and postpone the prospect of a new procedure, along with possible financial sanctions.” “It was certainly a surprise,” Simon admits a few days later. “The pressure has subsided, at least until May 2019, when we will have the figures for 2018. But I don’t think we’re going to clash with them. And if we do, it might not be with the same people.”

The fall of the populist coalition In fact, the commissioner will soon have another opportunity to take on the Italian populists. In May 2019, Matteo Salvini’s Lega enjoys a landslide victory in the European elections. For several months now, the Italian economy has been running out of steam; indeed, the deficit has already risen to 2.4 percent—the figure rejected by Brussels a few months earlier. The debt could increase to more than 133 percent of GDP in 2019. On the strength of his electoral win, Salvini is calling on the government to adopt massive tax cuts. On May 29, the Commission sends a new letter to Rome, asking the government to explain the deterioration of public finances. With this letter, the process that had been put on ice last December resumes. “The time for small letters is over,” Salvini replies. But the Italian spread is again close to three hundred points. In mid-August, while the Italian Parliament is in recess, Salvini announces that he will bring forward a motion of no confidence against his own government to get rid of the Five Star Movement. New domestic legislative elections are expected to take place in the middle of the budget’s adoption. A clash with Brussels is part of the Lega’s electoral strategy. Aside from immigration, the campaign could revolve around the VAT increase, which was included in the December agreement with the Commission but which almost all parties want to stop: unsurprisingly, the Italian economy has not achieved the 1.5 percent growth hoped for. Salvini intends to make the EU’s budgetary straitjacket a key message of his campaign. But his coalition partner has everything to lose in an election. To everyone’s surprise, the Five Star Movement then allies itself with the Democratic Party to form a new coalition government, known as “Conte II” After this about-face,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

    

147

Salvini becomes leader of the opposition. A figure of the historic compromise between two rival parties now united by their hostility toward the Lega, the former Democratic prime minister, Paolo Gentiloni, is appointed by the new government to the role of European commissioner for economic and financial affairs in Ursula von der Leyen’s team. He replaces Pierre Moscovici on December 1, 2019. An Italian politician is now in charge of the eurozone’s biggest fiscal headache, Italy. * *

*

In October 2016, Olivier gathered the team to reflect on the commissioner’s midterm review. Speaking on his behalf, he asked, “My two years at the Commission, what have I done?” Fabien, with his usual sense of repartee, replied, “Billions of flexibilities!” To be precise, during the mandate, €30 billion in flexibilities were granted to Italy—derogations for earthquakes or for dealing with asylum-seekers; these enabled Rome to get its successive budgets through the Stability and Growth Pact. Faced with the third-largest economy in the eurozone, the Pact was negotiated, instrumentalized, interpreted, and reinterpreted. In both Rome and Brussels, a dance took place around this legal text in order to get the Italian government to move, to upset the finance ministry, to change the position of other ministers, to help or harm a political party, to change the internal balance within the Commission, to provoke certain member states in the Council, to influence the media, to reassure or to worry the markets—all of this, without ever explicitly questioning the Pact, EU law, or the institutions. If, like the Portuguese case, we can explain the politicization of the Pact in part by the partisan proximity between the commissioner and the Democratic government in Rome from 2014 to 2018, political work is rooted above all in a conception that puts political responsibility above the strict application of rules. In 2018, when a populist, anti-system, anti-European government was in power, Italy came very close to a disciplinary procedure, but there was de-escalation. Even in the absence of partisan affinities or diplomatic alliances, politics continued to take precedence over the law. According to the Moscos’ “smart interpretation” of the Pact, dialogue between the Commission and a member state, while it should be robust, must also be based on a pragmatic understanding of political reality: electoral deadlines and public opinion must be taken into account; commitments must be negotiated—for example, by giving a reformist government some slack; a new government must not be stifled; obviously, market reactions must be anticipated, lest they undermine the ultimate objective of consolidating public finances. Fabien sums up this political work in his own way: “It is a bit like the orthodox rabbi and the liberal rabbi. The orthodox thinks that the liberal is a nonbeliever, but that is not true: he is just more liberal.” “In Frankfurt,” he adds with indignation, “they say that the Stability Pact should be like an app on your

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

148

  

iPhone: hop! Rejected! They think that, in Brussels, we are too political. Can you believe that? Everyone thinks we are technocrats and they think we are politicians.” Today, Italy’s debt is still huge—and is only growing in the wake of the COVID19 pandemic—but one can take some comfort in the fact that the Commission’s actions did not put an even greater strain on the economy. As far as relations between the EU and Italy are concerned, the Moscos’ political work was rather effective: when the commissioner left office, there was a moderate and proEuropean government in Rome once again. However, his actions did leave one collateral victim: the project to strengthen the Economic and Monetary Union. At the low point of the cabinet’s confrontation with Rome, Olivier told me he was discouraged: “We are going to hear the argument, ‘These people are not responsible. Their leaders are not to be trusted. We cannot strengthen the eurozone without fiscal discipline.’ And after four years here, I have to say that I am beginning to understand.” Reinhard agreed: “Italy is providing those who oppose risk sharing with the best arguments.” We will see the consequences of this mindset in the next chapter.

Notes 1. Erik Jones, “Italy and the Euro in the Global Economic Crisis,” International Spectator 44, no. 4 (December 2009): 93–103; Jonathan Hopkin, “A Slow Fuse: Italy and the EU Debt Crisis,” International Spectator 47, no. 4 (December 2012): 37–48; Erik Jones, “Italy and the Completion of the Euro Area,” in The Future of the Economic and Monetary Union: Reform Perspectives in France, Germany, Italy and the Netherlands, ed. Jonas Eriksson (Stockholm: SIEPS, 2018), 26–38. 2. Article 126(3) of the Treaty requires the submission of a detailed report if the deficit or debt exceeds budgetary limits. This report may signal the transition from the preventive to the corrective arm of the Pact. 3. “L’Italie affûte son budget et ses arguments avant d’affronter Bruxelles,” La Croix, September 18, 2015, https://www.la-croix.com/Actualite/Economie-Entreprises/Economie/LItalie-affute-son-budget-et-ses-arguments-avant-d-affronter-Bruxelles-2015-09-18-1358167 4. Ashoka Mody, EuroTragedy: A Drama in Nine Acts (Oxford: Oxford University Press, 2018), 381. 5. Mody, EuroTragedy, 374. 6. Rachel A. Epstein, Banking On Markets: The Transformation of Bank-State Ties in Europe and Beyond (Oxford: Oxford University Press, 2017), 154–5; Silvia Merler, “La situation problématique des banques italiennes,” Confrontations Europe 114 (2016): 28. 7. Olivier Blanchard et al., Policy Brief 18–24: Impact of Italy’s Draft Budget on Growth and Fiscal Solvency (Washington, DC: Peterson Institute for International Economics, November 2018). 8. Gerardo Fortuna, “EU Freezes Budget Disciplinary Procedure against Italy,” Euractiv, December 19, 2018, https://www.euractiv.com/section/economic-governance/news/ commission-freezes-budget-disciplinary-procedure-against-italy/

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

7 The failed reform of the eurozone When Pierre Moscovici is appointed to the Commission in 2014, Jean-Claude Juncker tells him that, by the end of his mandate, he will be the finance minister of an entire continent, at the head of a European treasury. As we saw in chapter 5, the Commission increased its budgetary surveillance powers after the financial crisis. But the governance of the Economic and Monetary Union (EMU) remains an open question. “Without a real fiscal policy for the eurozone,” Mario Draghi concludes as he leaves the ECB in autumn 2019, this “union will remain a fragile construction.”¹ As soon as they move into the Berlaymont, the Moscos engage in a battle of ideas aimed at reforming the eurozone.² The conflict involves two opposing camps that are defined less by partisanship than by the intellectual tradition to which they belong. In one, the ordoliberals: they emphasize orthodox market rules and risk reduction. In the other, the solidarists: rather than risk reduction, they prefer risk sharing. Ordoliberals see fiscal discipline as a call to order; solidarists see it as a source of economic and political divergence. For Markus Brunnermeier, Harold James, and Jean-Pierre Landau, the battle of ideas pits economic decision-makers who are immersed in foreign cultures: rather Germanic on the one hand, rather Latin on the other. The former has, since the 1990s, dominated Brussels.³ The commissioner and his cabinet are among the solidarists. The former French finance minister arrived in Brussels with strong views on the need to develop a European gouvernement économique, an expression that is widely accepted in Paris but reminiscent of French-style dirigisme in Berlin. At the Berlaymont, the commissioner is supported by Ioana on financial matters, but above all by Reinhard and Fabien. As a “Brussels man,” Reinhard is familiar with the debates and the experts at DG ECFIN and the German Ministry of Finance, two institutions where he has worked. While he is also acquainted with the German economic community, Fabien is essentially a Parisian: he pushes French ideas and is often frustrated by the compromises they have to make in Brussels. Together, Reinhard and Fabien form a Franco-German couple who liaise with President Juncker’s advisers, the Dombrovskis cabinet, and the DG ECFIN economists, whose boss is the Italian Marco Buti. At the Commission, the Five Presidents’ Report frames priorities. It is the “bible,” says an economic adviser to Jean-Claude Juncker (who wrote part of it). Co-signed in 2015 by the five EU presidents (Jean-Claude Juncker at the Commission, Donald Tusk at the Council, Martin Schulz at the Parliament, The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0008

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

150

  

Mario Draghi at the Central Bank, and Jeroen Dijsselbloem at the Eurogroup), the report sets out a series of initiatives aimed at “completion of the euro area.” It refers to four “unions” that need to be built: fiscal, economic, financial, and political (see Box 7.1). For President Juncker, Europe must move from economic governance to economic government. Brussels must equip itself with the means to anticipate shocks, stimulate the economy, and reduce economic divergences. This implies a real eurozone budget and federal institutions comparable to those in the United States. These positions are close to those of solidarists like Pierre Moscovici. While the election of Emmanuel Macron in 2017 raises expectations among the solidarity camp, the travails of the governing coalition in Germany, the rise of Italian populism, and growing opposition from northern countries pour cold water on their hopes. From the autumn of 2017, proposals that seemed to have been taken for granted in 2015—even among proponents of orthodoxy such as Dijsselbloem—are losing ground. Ordoliberals reap victories by default by reducing economic governance to a system of market rules. The prospect of a genuine reform of the eurozone begins to fade. As we shall see, the Moscos, in this matter, accumulated various concessions and defeats. Faced with a set of institutions framed by monetarists and ordoliberals since the 1990s, their political work consisted in mobilizing Keynesian and fiscal federalist allies in France and Italy, the second- and third-largest economies, respectively, in the euro area. The Moscos also took their opponents at their word: several of them, such as Angela Merkel, Wolfgang Schäuble, or Jeroen Dijsselbloem, had, in the wake of the Greek crisis, subscribed in principle to a strengthening of the euro area. The Moscos tried to persuade them with balanced proposals and viable compromises. But in an institutional and diplomatic context in which any ambitious institutional reform requires unanimity, the Moscos hit a wall in 2017. While their solidarity-based ideas received strong support from professional economists and the southern countries, they were buried under an increasingly unfavorable political reality in both Germany, the “main shareholder” of the eurozone, and the Netherlands, the leader of the New Hanseatic League, soon to become the “frugal” camp.

Box 7.1 What is eurozone reform? Already in the 1990s, there was strong criticism of the then nascent Economic and Monetary Union. Famous economists like Milton Friedman and Robert Mundell criticized the single currency project for increasing conflict between

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

151

member states because the European economy, which is more heterogeneous than its US counterpart, is not an “optimal currency area.” The EMU’s original sin is to take away governments’ power to adjust their exchange rates and nominal interest rates. This is known as “Walter’s criticism,” named after an adviser to Margaret Thatcher who warned her against abandoning sterling. In France, Jean-Paul Fitoussi believes that the Maastricht Treaty creates a monetarist straitjacket that erodes the economic power of states without reconstituting it at the European level. The EU lacks an economic government capable of synchronizing national policies as well as mechanisms for equalization and social solidarity, as found in most federal states.⁴ While solid economic growth in the first decade of the twenty-first century silenced the sceptics, they returned in the wake of the 2008 crisis. In The Euro: How a Common Currency Threatens the Future of Europe, Joseph Stiglitz makes a strong case against EMU: “The euro,” he writes, “was a beautiful edifice built on weak foundations. The cracks were clear from the beginning, but after the 2008 crisis, those cracks became fissures . . . Europe had created a divergent system even as it thought it was putting together a convergent one.”⁵ For Kenneth Rogoff, the fact that the EU did not create a political union to flank monetary union is “a giant historic mistake.”⁶ Without a shockabsorbing mechanism subject to democratic control, the management of the 2010 eurozone crisis was based on loans that northern countries reluctantly granted to their southern counterparts, whose populations resented the resulting interference. “No one,” wrote Mario Draghi in 2013, “ever imagined that the monetary union could become a union divided between permanent creditors and permanent debtors, where the former would perpetually lend money and credibility to the latter.”⁷ As Marco Buti, the long-serving director-general of ECFIN explains, the challenge of eurozone reform is to change the policy mix at the European level. As it stands, the policy mix relies entirely on monetary policy and very little on fiscal policy. The most ambitious reform project, that of a fiscal union, would consist of creating a European treasury capable of borrowing on the market through “eurobonds” and supporting a substantial European budget. Evoking a “logic of insurance,” the Five Presidents’ Report proposes a stabilization mechanism to absorb asymmetric shocks.⁸ The aim would be to create a “fiscal capacity” and a “stabilization function” in the European budget, for one-off and targeted interventions. For symmetric shocks, such as a global economic crisis, economic stabilizers and monetary policy should be sufficient. In the absence of a fiscal union, during the eurozone crisis the Commission focused on putting in place the building blocks of an economic union. The European Semester, which I described in chapter 5, aims to bring national economic policies in line with guidelines identified at the European level: for Continued

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

152

  

Box 7.1 Continued example, a common fiscal stance or the coordination of social policy. Deepening EMU would mean increasing the effectiveness of the European Semester, which is considered too technocratic, complex, and without tangible effects on the member states. This aspect is not controversial. In the shorter term, the project of a banking union aims to cut the Gordian knot between banks and their national governments by creating a European system of banking supervision and resolution in case of bankruptcy. In the first years of the crisis, the supervisory system was created without too much trouble, by entrusting it to the ECB rather than to the Commission.⁹ The single resolution mechanism, which must be financed by the banks themselves, was set up as early as 2012.¹⁰ However, the question of who will finance the “backstop” of this resolution fund remains an issue throughout the Juncker Commission. While waiting for the bank-funded mechanism to become operational, a way must be found to resolve failing banks without the money coming directly from member states, since bank bailouts have become illegal.¹¹ Financed thanks to a guarantee from the member states, the European Stability Mechanism is a natural candidate to provide this backstop, but Germany is not enthusiastic about the idea of providing cover to foreign banks. A common bank deposit insurance scheme is also seen as necessary but problematic. While the Germans have agreed to it, they constantly postpone its implementation. With financial union, the Commission is trying to create a single capital market that will enable firms to reduce their dependence on national banks.¹² Two agencies, both located in Paris, are set up in the wake of the crisis: the European Banking Authority and the European Securities and Markets Authority. These are under the responsibility of Commissioner Dombrovskis and DG FISMA. Last but not least, the creation of a political union would crown a completed EMU. It would signal a shift from mere economic coordination to full fiscal federalism. Embodied by a European finance minister who would also be vice president of the Commission and president of the Eurogroup (like the high representative for foreign affairs, who is also vice president of the Commission and chair of the Foreign Affairs Council), political union would imply making European economic institutions (the Commission, the Eurogroup, the ESM) accountable to the European Parliament, which would in turn approve a budget in the name of European citizens. The idea is appealing, but suffers from a sequencing problem: for the French, “economic government” will be the natural outcome of the solidarity pooled in the fiscal union; for the Germans, it is first necessary to agree on the outlines of a federal political union before sharing risks in a fiscal union.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

153

Agreed reforms get bogged down For the Moscos, the Five Presidents’ Report may not be a bible, but it is a roadmap for eurozone reform. They believe in it, with less enthusiasm, however, than their colleagues on the thirteenth floor, where “achieving Economic and Monetary Union” is one of President Juncker’s ten priorities. Eurozone reform is a key point of the first State of the Union speech Jean-Claude Juncker delivered in September 2015. The Five Presidents’ Report envisions the reform taking place in two phases.¹³ Phase 1, deepening, is to take place from 2015 to 2017; it includes the banking union, the single resolution mechanism, and a European deposit insurance scheme. Phase 2, the “more revolutionary” completion phase, should establish a budgetary stabilization function and turn the European Stability Mechanism— created by an intergovernmental treaty in 2012—into an EU institution. It should also allow for a common external representation of the euro area (at the IMF, G7, G20) and a democratization of institutions that will eventually justify the creation of a European treasury. Between the two phases, the Commission must produce a white paper that will take stock of phase 1 and identify priorities for phase 2, in principle achieved by 2025. While phase 2 requires an amendment to the treaties, phase 1 is, in theory, easier to get through member states. The first, rather technocratic steps are to improve the European Semester, which the report calls “deepening by doing.” From autumn 2015, the Commission will prepare a first “EMU package,” a set of recommendations and legislative proposals that includes institutional changes stemming from the Five Presidents’ Report. “The Commission’s implementation took place very quickly, over five to six months from May 2015 to December 2015,” one of the policymakers recalls. “We had the plan for changes in the European Semester, but it became more problematic after that.” As is often the case, the EMU package is structured around a communication— that is, a document stating the Commission’s intentions. For the most part, the proposed reforms remain in the spirit of “convergence through coordination,” with the creation of a European Fiscal Board and consultative national competitiveness authorities. Without straining the point, the communication evokes a common representation of the eurozone in international institutions. “It was not warmly welcomed by all member states, but the discussion is now underway. We have created a prise de conscience,” says Luc Tholoniat, President Juncker’s adviser. “But who’s paying attention?” Indeed, the reception is lukewarm. On October 21, 2015, Pierre Moscovici and Valdis Dombrovskis introduce the EMU package at a press conference. Both the media and the Moscos find the package rather timid. The reforms seem unambitious and rather technocratic; they do not really increase the Commission’s competences. “Well, the EMU package was a big success,” Olivier says with a

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

154

  

twist of irony the next morning. At the cabinet meeting, he explains that the commissioner wants to “take a little distance from the package. You see, the commissioner is pro-Commission. It must be known off the record, but not too off and not before too long.” “In any case, it won’t go very far because of the member states,” Olivier prophesies. He is not wrong. Two weeks later, Vice President Dombrovskis presents the package to the Eurogroup. With a shrug, Fabien gives me a debriefing: “We gave our input, but it is difficult to do something de gauche because the biggest socialist government, France, is very jealous of its sovereignty. So we told the Dombros, ‘Go ahead and we’ll spin behind you to say that [the package] is too conservative but that we did some damage control.’ ”

A mobilization campaign Over the following months, the Moscos put their energy into raising the level of ambition. Their horizon is that of a genuine fiscal union, which would be a prelude to political union. Their strategy is to mobilize leaders sensitive to the solidarity argument, often but not always on the left, while reassuring ordoliberals, often but not always on the right, with a lucid discourse on debt. On February 3, 2016, I attend a working meeting with Olivier, Reinhard, Ioana, and Fabien. “It’s not a brainstorm, I want it to be operational,” Olivier warns. He believes that the gradual exit of several member states from the excessive deficit procedure, which began in 2015, opens up prospects for reform: With the deficit and debt levels peaking in 2014, do we want to use this opportunity to launch phase 2 of EMU? Can debt reduction be the price to pay for deeper integration? At mid-mandate, there will no longer be any countries under the excessive deficit procedure. So we can turn a new page. What becomes possible?

For Olivier, the reduction of deficits in the eurozone, from 6 percent in 2011 to 1.9 percent in 2015, is an opportunity to be seized. If growth is back, it may be possible to strengthen EMU while the fire is out. The challenge is to convince recalcitrant countries, such as Germany, that it is not a question of giving a blank check to indebted states. “In the S&D family, y a-t-il une chance à saisir [is there a window of opportunity?] Are there socialists, social democrats, or social liberals who would tackle the debt taboo?” “There’s no family,” Fabien warns. “It’s Germany and the Netherlands [where Social Democrats help make up the governing coalition] against France and Portugal [where the Socialists are in power]. Debt is where the family is divided.” “That is precisely where Pierre wants to put his finger. Is there a political price we are prepared to pay to move forward with EMU? In the College, it would be

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

155

good for Pierre to take the lead. He would break a taboo, change his image in Germany . . . ” “I see your point about tactics,” Fabien admits. “But the only way Pierre can convince the Germans is to talk about debt-reduction mechanisms. He’ll have to say Germany’s right.” Olivier is not deterred. “President [Juncker] is ready to accept new ideas,” he says. “After fourteen months, the College is exhausted, there are no new ideas. We’re just implementing Juncker’s 2014 speech. We need to show we’re on the ball. I saw Pierre’s eyes shine: we can help the [social democratic] family and build a bridge to Germany.” “Germany is a mess,” says Reinhard. “They fear that their main partner [France] is on a different path from their own. Pierre could propose a debtreduction strategy at the national level—for example, a wealth tax in Italy—and at the European level, an alternative strategy to the collapse of Europe.” “Absolument d’accord! Germany,” Fabien adds, “sees Italy as a patient who is too big to be treated. France is not strong enough to help them. The Germans will be afraid as long as Italy is une grenade dégoupillée [on the verge of blowing up].” “That confirms my idea that we need to write a note,” Olivier concludes. “We have to explain [to Pierre] that we have a credibility problem with [fiscal] rules. Pierre must show Schäuble that there is someone who understands him. But Schäuble will say, then, ‘OK, fine, but then what?’ The conclusion of the note must be a roadmap, with steps.” The first step in the campaign that Olivier wants to launch is to mobilize the leaders of the Left. On March 12, 2016, taking up the commissioner’s idea after some procrastination, French president François Hollande organizes a meeting at the Elysée Palace with Matteo Renzi, the Italian prime minister, and Martin Schulz, the president of the European Parliament, both from the social-democratic family. But, according to Audrey, the French president “did the minimum syndical: no communication, no doorstep briefing . . . . He messed up the meeting by not following the agenda, muddying the waters . . . . Typical Hollande, quoi.” Leaders nevertheless decided to prepare a reform proposal to be endorsed first by Hollande and Renzi and then signed by other social-democratic leaders. “The heart [of the proposal] is EMU with a bit of social policy: reviving a Europe that protects. We have the technical proposal, but we need political spin,” Olivier explains. “The project is to share the proposal at the end of June, at a meeting of the leaders of the European Left, so that Hollande can make a speech before July 14. Pierre can’t sign [the proposal] but he can say, ‘Here, I’m taking the ball, I’m responding to their request.’ ” In the end, it is decided that the proposal will be signed by Renzi, Schulz, and the commissioner, but not Hollande. “Renzi’s sherpa [or special adviser], Schulz’s head of cabinet, and I wrote three to four pages that could be presented to the June European Council,” Olivier tells me. There are three elements in the note. First,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

156

  

the importance of progressive reforms. “We need to stop cutting budgets and start creating wealth. Implement reforms based on human capital, innovation, renewable energies.” Second, EMU deepening: a real eurozone government (the political union) and a European treasury (the fiscal union). “Forcing the banks to show solidarity so that it does not always fall on the taxpayers. The idea is that Europe can create political ties, be a crucible of political integration.” Third, an acceptance of fiscal consolidation (the economic union) by social democrats, who need to reassure ordoliberals. “So that we stop being told that the Left can’t control their urges, that we’re all about spending.”

Brexit, interrupted Launched in the midst of the Brexit referendum, which takes place on June 23, 2016, the proposal doesn’t get much notice. I do not get the impression that the commissioner cares all that much either. In the weeks that follow, the attention of European leaders is turned to the United Kingdom. After the 2015 migrant crisis, Brexit changes priorities. We now hear about Frexit, Nexit, Dexit . . . The urgent need for eurozone reform pales next to the survival of the European Union itself. The prospect of Brexit is also a useful pretext for those governments most resistant to eurozone reform, such as the Netherlands. At the Berlaymont, however, people continue to work on a white paper set to be published in the winter of 2017. This strategic document, which according to the Five Presidents’ Report was to focus on eurozone reform, has in the meantime been enlarged to the whole “Future of Europe.” EMU deepening will make up only one section of the document, the responsibility for which has been entrusted to a “project team” led by Valdis Dombrovskis. A Secretariat-General official summarizes the terms of reference: “What are the elements of phase 2 that need to be addressed by the end of the mandate? There are no obstacles inside the Commission. But [we know that] there is little appetite in the Council for some measures: the bank deposit insurance scheme and risk pooling are moving very slowly.” At the Council, positions are more heterogeneous in 2016 than they were in 2015. Even the adoption of phase 1 is in jeopardy. “Right now, the internal decision-making process in the Council is fragmented,” laments one proponent of the reform. “The first stage of our agenda is still incomplete. It has become a protracted process.” An official from the Council Secretariat shares his analysis of the diplomatic dynamics: “On EMU deepening and the Five Presidents’ Report,” he says, we have seen no dramatic progress, no game changer. The Dutch Presidency [of the Council, in winter 2016] has no interest in pushing this issue. They wanted to make the link between risk sharing and risk reduction: if there is reduction, we

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

157

can discuss sharing. The debate will go on for years. At the moment, member states do not want to do anything serious.

Among the reform’s various elements, banking union is the main stumbling block. For the Commission, the aim of a bank deposit insurance scheme is to pool risk.¹⁴ For the Dutch and the Germans, before pooling can take place, the banking systems of certain countries, such as Italy, must first be cleaned up. This view is shared by important people within the Commission, especially among conservative and liberal commissioners. In order to overcome the disagreement, the Dutch Presidency has prepared a “road map” that accepts certain elements of reform but makes them conditional on further fiscal consolidation. In other words, solidarity-based ideas are ensconced in an ordoliberal straitjacket. “It is very clear that for the Germans and for ourselves,” a Dutch official tells me, it is impossible to make progress [on risk sharing] if we do not make progress on risk reduction. At the beginning, we thought we would go further. But it’s difficult for the Germans, with their elections, and for the Italians, with Renzi, to be constructive. Of course, we are going to do it, but perhaps not as the Commission would like.

Toward the white paper In almost every public speech, the commissioner talks about his ambition for the euro area. But he remains cautious: “We do not control all the parameters. Until the French elections [to be held in May 2017], not much can be done. After that, if in three years’ time we have set the scene for eurozone governance, a European budget, and a real economic policy, that would be good. Otherwise, it will be the end of the road.” After the failure of the strategy to mobilize socialist leaders, Olivier believes that the circle must be widened. “We have to raise the level. Find support. In Lisbon, with the Spaniards, the Italians . . . . We need to talk to the Dutch, who are a double problem: at the national level and as the presidency of the Eurogroup.” While Jeroen Dijsselbloem does not dispute the proposals in the Five Presidents’ Report he co-signed, he sides with the Germans, who believe that risk-sharing measures can only be implemented once all member states have converted to virtue. This sentiment is summed up a few months later in the Dutchman’s infamous comment to southern governments that “you can’t spend all the money on women and booze.”¹⁵ October 2016: the Moscos prepare for the commissioner’s participation in a debate that the Financial Times’ Peter Spiegel will moderate in Bratislava, where

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

158

  

he will meet French finance minister Michel Sapin, Italy’s Pier Carlo Padoan, and Slovakia’s Peter Kazimir, but above all Wolfgang Schäuble. At the cabinet meeting, Olivier wonders aloud whether to prepare an announcement for Pierre: “Maybe we can shake Wolfgang up with the support of Michel and Pier Carlo. On the fiscal stance? Or the communitarization of the Fiscal Compact?” The German finance minister did not welcome the Commission’s ideas, especially the proposal to appoint a European finance minister. When the commissioner talks about him, I no longer hear him say “my friend,” as he sometimes did before. Simon is not convinced: “There will be some journalists who are interested but not that interesting.” Olivier gives his instructions: “Pierre must be on the side of ambition without betraying the upcoming white paper in March, which will be less ambitious.” “Ambition, you say . . . in spite of our collective loss of motivation,” Fabien sighs. “I see two possible ways forward: either we have the commissioner tell them what a white book bien fichu would look like, or he can lecture them [the ministers]. It all depends on the choreography.” “It will be interactive,” says Ioana, who knows the script. “The specificity of Pierre in this debate—” Olivier begins to say, but he is cut off by a staffer. “He’s the only Frenchman who speaks English!” laughs the staffer, who is thinking of Michel Sapin. “He represents the general interest of the eurozone,” Olivier continues with a frown. “He can let the others speak before him. He has the time, he is not facing an election, he can plan ahead: develop phase 2 of EMU over several years. He has the concepts: deepening EMU, deepening trust, deepening reflection—this is the role of the Commission. His added value is threefold: vision, temps, perspective intellectuelle.” As usual, the staffers must prepare notes for the commissioner on a variety of topics: on the “European safe asset,” a means envisaged by DG ECFIN experts to issue common debt; on the fiscal capacity, a euphemism for eurozone budget; and on the positive fiscal stance soon to be announced by the Commission (see chapter 5). “You have the material and you are more political than the DG,” Olivier tells his staff. “So I do it and Simon revises my English?” Fabien asks. “You still speak English, Simon? It seems we’re going to ban it after Brexit,” Olivier jokes. “I’m learning Gaelic.” “Like Pierre is learning German?” (The commissioner had promised to learn the language, but is not making much progress.) “But don’t worry, an independent Scotland will ask for English [to be recognized as an official language of the EU]. Or will you become the negotiator for Jersey? Could I be your chef de cabinet?”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

159

Ambiguous or radioactive? On March 1, 2017, a few days before the sixtieth anniversary of the EU’s founding, the White Paper on the Future of Europe is released. Beautifully presented, not too heavy on the technical jargon—in fact, a bit light for its critics—the white paper presents five scenarios: continuity, a refocusing of the EU on the single market, a Franco-German hard core, selective withdrawal of the EU from certain sensitive areas, and “doing much more together.” As far as EMU is concerned, the last scenario is the only one that corresponds to the Five Presidents’ Report. For JeanClaude Juncker, even if one can guess that he would prefer a federalist future, the ball is in the court of the member states. The white paper acknowledges their lack of ambition and asks them to make up their minds. The risk is that the scenario of continuity will prevail by default. From the white paper, further “reflection papers” are to come out; these will be discussed by the College of Commissioners in the spring. The reflection paper on EMU deepening will be jointly presented by Dombrovskis and Moscovici. As with the drafting of the original paper, Reinhard, Fabien, and Ioana are integrated into an inter-cabinet project team whose job it is to prepare this new document. They draft notes and adapt others prepared by experts. In principle, Vice President Dombrovskis is at the helm, but the Moscos want to give the impetus, and the thirteenth floor is heavily involved. There will be an orientation debate in April, preceded by a meeting of the senior management. A first version of the reflection paper should be ready by mid-May. Over the next few weeks, I follow what Rebecca Adler-Nissen and Alena Drieschova call “track-change diplomacy”: how practitioners negotiate the meaning of a set of policies in a Word document, using the “track changes” function.¹⁶ I observe the first working meeting with Olivier, Reinhard, Fabien, Ioana, and Simon, as well as the senior management of DG ECFIN. They all have in front of them a draft document; it is marked with a flurry of different colors indicating the various proposed changes. The main question is how to present the opposition between risk reduction (what they call “responsibility”) and risk pooling (what they call “solidarity”). While everyone agrees that a balance must be found, the Moscos, who lean toward risk pooling, suspect the Dombros, absent from the meeting, of wanting to push for risk reduction. For the commissioner, the eurozone suffers from socioeconomic divergences that can only be tackled through greater solidarity. Since 2001, the gap in GDP, debt, and unemployment between northern and southern countries has widened, to the detriment of the latter.¹⁷ Olivier sets out his vision of the reflection paper: “On the structure, we have, (1) L’euro, à quoi ça sert dans nos daily lives? (2) Why do we need to complete EMU? For us, it is the divergences that are important. This is where Pierre builds his

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

160

  

narrative as a social-democratic ECFIN commissioner: The next crisis will come from within, because of the divergences.” “The presentation is not neutral,” Marco Buti, the DG of ECFIN, replies. “You have to be careful about the balance. The debate is frozen. The issue is very divisive and there is a risk of falling back on the [Dutch Presidency] road map on risk reduction. We have to find an entry point that is not open to skin [knee-jerk] reactions.” “I agree 200 percent,” Olivier says. “That’s why we come back to you. On responsibility versus solidarity, we need an intelligent way forward. We have to start with the preferences of the member states and help them to overcome the stalemate. For me, this is the fil rouge: we are not talking about two camps.” “Of course, we have to find a bridge between the risk sharers and the risk reducers. But proposals must be presented on their own merit, not because they belong to camps,” Marco Buti adds. In terms of track changes, the question is whether to divide the paper into two columns: responsibility on the one hand and solidarity on the other. These columns were introduced at Olivier’s request, following his discussions with the Dombrovskis cabinet. Responsibility is the ordoliberal logic of the Maastricht Treaty: binding rules reinforced by market discipline, without a collective insurance mechanism. Solidarity means a common fiscal stance and risk sharing in the banking union. Officials are not keen to distinguish between the two concepts, which they see as necessarily linked. Fabien tries to reassure them: “The final product will have no radioactive words. But we can’t use constructive ambiguity between us. Even if we’re blunt. Then we can accept a degraded signal.” “Your point is well-taken, but certain elements may be viewed with suspicion in one camp,” Buti says, adding some nuance. “The problem is that we don’t have two sides to convince but only one—the main shareholder that has the golden shares. Berlin does not like private or public risk sharing, or even banking union, as long as they feel that we have a problem with the credible application of the [fiscal] rules.” “On the substance, I agree 100 percent. If we cannot get them to change their minds, it will be difficult.” “We need to find something that the Germans want to buy,” Olivier says. “They see two camps and we’re stuck. The Commission’s message is how to reconcile the two philosophies. It has to be a win–win situation.” “Yes, we can tell a good story . . . presenting the two narratives and then show we can bridge the two,” a civil servant opines. “That’s a very good way forward. We agree, then.” With this point of form settled, even if it hasn’t really been finalized, the discussion moves on to a small but crucial, in the eyes of DG economists, technical element: the safe asset. The note contains new ideas on this solidarity instrument, which aims to pool government debts. Since the beginning of the crisis, many

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

161

proposals have been made to pool some of the member states’ debt, which would reduce the exposure of countries such as Italy or Greece to the vagaries of the market: eurobonds, blue bonds, etc.¹⁸ Each of these proposals was rejected by Germany, whose credibility would be used as the main guarantee. The safe asset is a new proposal, in exchange for which participating states would have to implement strict regulatory and technical standards. Officials want this proposal to be included in the reflection paper. “But the safe asset will be expensive in Berlin, Rome, and Paris,” Fabien tells them. “We are the only ones who are convinced. Nobody buys it.” “If we present it as a package, it could work,” a civil servant argues. “Why is there no buy-in?” Marco Buti asks rhetorically. “In Berlin because they see eurobonds through a back door. In Paris, because they think it’s fuzzy, it’s not really mutualized. It’s not robust enough to accept the standards [that come with it]. In Rome, they’re afraid that their debt will become junior.” Everybody agrees. The reflection paper will mention the safe assets and European bonds but on a rather distant horizon, in 2025, when standards will have come into effect. One official concludes, “It’s clear we didn’t crack that nut yet. If we can just convince people not to kill it, that’s good. For the Commission in 2024!” To cope with political vetoes, fonctionnaires like to view their work over the very long term. (In that case, their hopes were fulfilled: during the 2020 COVID-19 pandemic, the EU will discuss a €750 billion recovery plan based on joint borrowing, something that participants in this meeting would never have thought possible.) In private, Olivier tells me that there is a more important issue at stake: the Dombrovskis, who may feel that they were sidelined from the reflection paper. “We have to talk to them. They don’t believe too much in the safe asset and find even the name badly chosen.” In the cabinet, some members fear that technical proposals without political acceptability will simply be shelved.

Macron’s hope, Merkel’s cold shower A week before Easter, the EMU reflection paper is formally discussed in the College, with another paper on social policy, a topic which is also the responsibility of Vice President Dombrovskis. “The two debates will be merged, which is not very good. It will be wishy-washy. The upside is that it serves to highlight the social dimension in EMU. But the quality of a three-minute speech will be quite limited,” Olivier explains in the cabinet meeting. We are by this point in the midst of the French presidential campaign. Emmanuel Macron has put Europe at the top of his political priorities. His program is in line with the ambitions of Juncker and Moscovici. He proposes the creation of a European economic government with its own budget and

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

162

  

controlled by a eurozone parliament. He also believes that some public investments should be excluded from the Pact’s criteria. Openly federalist, this program anticipates future steps in the Five Presidents’ Report, to which it applies simpler words such as “euro area budget” rather than “stabilization function.” It naturally finds an echo in the commissioner, who defended the same ideas when he was finance minister in Paris. Macron’s election on May 7, 2017 generates great enthusiasm in Brussels and, for different reasons, in Berlin. A few days later, the EMU reflection paper is adopted by the College and made available online. Welcoming the emphasis on “convergence” and “solidarity,” former IMF economist Ashoka Mody nevertheless describes the paper as “watered down,” the result of a form of “groupthink” in which nobody wants to face economic reality.¹⁹ Simon shares his own impressions with me. He says, the reactions in the press have been quite good. More critical in the German press, as you might expect. But it came out at a good moment. The mood seems to be changing. Our message now is that a window of opportunity is opening. It can be completely open after the German elections; we put our ideas on the table. Macron’s victory has put everyone in a better mood.

Since the early days of the Juncker Commission, Pierre Moscovici’s problem has been as simple as it is intractable: while Germany (“our main shareholder”) is not opposed to EMU deepening, the broad outlines of which it approved to prevent the Greek crisis from metastasizing, Berlin makes the most important progress conditional on fiscal consolidation throughout the eurozone. With its chronic deficits, France, which has always been more ambitious in institutional terms, does not inspire trust. Arguing for the importance of reducing risks before sharing them, Berlin puts the brakes on several issues at the ECOFIN Council. The French commissioner is, in a way, the collateral victim of this mistrust. Take the ESM. In principle, everyone agrees that it should be used as a backstop for the single resolution mechanism—an important step toward achieving banking union.²⁰ Everyone also agrees that the ESM, which was created by an intergovernmental treaty at the time of the crisis, should be incorporated into EU law. At stake, however, is the question of who is going to control this huge pile of money: €700 billion. For solidarists like the Moscos, the ESM should form the nucleus of a European treasury, with real political leadership under parliamentary scrutiny. “Having the ESM as a European institution would be much more legitimate in the event of a crisis than if Germany calls the shots,” a cabinet member says. For ordoliberals and for Berlin, however, the ESM should be turned into a European Monetary Fund, under member-state control and, like the IMF in Washington, an ability to impose strict conditions for granting loans.²¹ “Program countries are countries

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

163

where the political system has failed. You bring in technocrats to replace the political system,” an advocate of this approach explains. Olivier tells civil servants that the idea of designing the ESM along the lines of the IMF is gaining ground: This is the top priority for the next two months, which will decide whether Pierre will be remembered or not. And you can help us. When Pierre arrived, President [Juncker] told him, you will be the head of the European treasury before the end of your mandate. But in the white paper, the only reference is made to the European Monetary Fund.

The stabilization function opens another front in the battle of ideas. “Convergence” is the commissioner’s leitmotif. He wants to demonstrate that Europe can help reduce inequalities between member states. DG ECFIN economists do not like this concept very much because they find it vague. This view, I gather, is shared by some cabinet members, who try to better define it. Unlike federal states, the EU budget is modest: around 1 percent of GDP. Most of the spending is devoted to agricultural policy and regional convergence (socalled structural funds). The idea of a stabilization function would be to leverage a eurozone budget to accelerate investment in countries that face an “asymmetric shock”—meaning a one-off economic difficulty. The stabilization function would allow the EU to be more proactive than it is with the structural funds, which are planned over ten-year cycles. It would complement another idea, that of a European unemployment insurance scheme, which would supplement national plans in the event of an asymmetric shock. These two budgetary instruments would give the EU real economic stabilizers. Although the stabilization function is a far cry from a US-style federal budget, the Germans are, here also, reluctant. Juncker and Moscovici “are very different from the previous Commission,” a German finance official complains. “They want to put solidarity everywhere: a budget facility, a contingency fund . . . . Why should we put so much solidarity on a foundation that is not solid? In our opinion, the Commission should be the guardian of the treaties, not a political actor.” Unsurprisingly, the autumn 2017 German election is followed with great interest. The president of the European Parliament, Martin Schulz, is standing as the SPD candidate. A convinced federalist, he campaigns on European priorities that are very close to those of Macron. Everybody remembers that he cosigned the Five Presidents’ Report. If he wins, the timetable for the completion of EMU could accelerate. Alas! On September 24, the SPD records one of the electoral worst results in its history. Two days later, with an unfortunate sense of timing, Macron delivers an important speech at the Sorbonne in which he lays out his European proposals with a particular emphasis on the revival of the Franco-German engine. He even

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

164

  

evokes a eurozone budget “worth several points of GDP.” Widely reported in the media during the autumn, these proposals find little sympathy in a Germany that, consumed with government coalition-building efforts for several months, has turned inwards. After a failed attempt at forming a coalition between the CDU, the Greens, and the Liberals, a new grosse Koalition is announced on February 7, 2018. Chancellor Merkel is reappointed to her post, but she is weakened. In the meantime, the SPD has lost more feathers, Schulz has left the party leadership, and, while the finance ministry is entrusted to a Social Democrat, Olaf Scholz, he seems to have an affinity for the economic philosophy of his predecessor, the conservative Wolfgang Schäuble, part of whose team he kept. “We are loyal, but first he has to convince us!” a German finance official jokes about his new boss. “There will be no paradigm shift,” confirms Reinhard, who worked in the German finance ministry. During the autumn, when the outcome of the coalition negotiations in Berlin is not yet known, the Moscos observe internal games that they do not find reassuring. The thirteenth floor, which had initially pushed for an ambitious role for the Commission, seems reconciled with German views on the ESM. Jeroen Dijsselbloem, the Eurogroup president who is close to Berlin, has been appointed special adviser to the ESM boss, Klaus Regling. “In the autumn,” Olivier later recalls, “nothing could be done to harm the German coalition. Everything had to be acceptable to the new government.” While relentlessly promoting their ideas within the Commission, the Moscos try to mobilize S&D MEPs to keep up the pressure on the SPD. At the same time, the commissioner allows rumors about his candidacy for the presidency of the Eurogroup, which Dijsselbloem will leave, to circulate. He presents double hatting as a means to democratize European economic governance.

The St. Nicholas package With no progress at the diplomatic level, cabinet members work on refining key concepts: about the governance of the ESM, how divergence and convergence fit together, and about the role of a stabilization function. I attend another session between the cabinet and ECFIN’s senior management in preparation for a meeting with the Secretariat-General. The aim is to reflect on the draft of a second EMU package, following the autumn 2015 package, which could be published in December 2017, before the eurozone summit. There may be a communication to introduce the package, which would include proposals on the ESM and the stabilization function. Olivier brings together a few DG ECFIN directors, along with Reinhard and Fabien, in his office. The draft focuses a lot on fiscal consolidation and a little on institutional reforms. Olivier explains the political context, which in his telling is

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

165

one of receding ambitions. It seems that the ESM will be strengthened but remain intergovernmental. Member states, which finance the ESM, do not want to give it to the Commission. That leaves the option of the European Monetary Fund, which Germany prefers. There will be a backstop for the banking union’s resolution mechanism but also increased conditionality. There will be a budgetary instrument, but it will be modest and devoted to structural reforms (the ordoliberal vision) rather than economic stabilization (the solidarity version). Finally, there will be a European deposit insurance scheme, but this will be conditional on the purging of nonperforming loans, within a time horizon to be determined.

The “dangers of a small package” On each of these elements, the Commission faces the risk of being left aside. Its role would be limited to budgetary surveillance, which it already has. “For us, the ESM is a trap,” Olivier begins. With conditionality, the ESM will create an empire of compliance and the stabilization function will be minuscule. Of course, the ESM will have a backstop [for the banking union]. But Germany will find that good enough and they will ask for an intergovernmental ESM. The French will call the stabilization function a “eurobudget.” . . . But if it’s only one line in the EU budget [and not a separate budget], it will be small and insignificant. Voilà un peu.

“Compared to what we had on the table, we are very far away,” Marco Buti confirms. “We need a clear mandate from the eurozone summit, independent of the Eurogroup channel. We have to act now. Not, as we say in Italy, après la musique.” “We are no longer relevant,” his colleague adds. “We are playing in the garden while someone else is cooking in the kitchen.” Another official asks, “If we talk to the ESM people, what do we tell them?” “The Community aspect should be strengthened,” Olivier replies. “Parliament and the Court of Justice should play a role.” “Are we talking about Parliament at this point?” “If we want to be credible, it has to be in our proposal. If we want allies in this debate . . . ” “You were at the Eurogroup,” Marco Buti reminds Olivier. “We don’t have anyone’s support. Or only in the long term. The Commission is the odd man out. We need a constituency. One way to get some commitment from Germany could be to agree on strengthening the ESM. The ESM, they know they will not get much this time. But being within the institutional framework of the EU would give them a more important role in five years’ time, when the creation of a European treasury is discussed.”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

166

  

“Or the ESM will become the treasury,” Olivier says, voicing one of his primary fears. “Pierre came back from the Eurogroup and said to me, ‘Olivier, nobody supports us. Merkel is going to ask to open the ESM Treaty, Macron is going to give it to her, and we will have the European Monetary Fund in June.’ ” The discussion then moves on to the stabilization function. “Merkel tells Macron that she agrees on a eurobudget. But it will be for structural reforms, not for a stabilization function,” a civil servant explains. “Ce sont les dangers d’un petit paquet. Macron will be seen as the guy who gave up on the ESM for a small budget.” “But the French see it as an embryo,” Olivier says. “An embryo gives something after nine months; if France gets nothing, it will show.” “Yes, French ambitions are shrinking. If they get the backstop . . . ” The preparatory meeting is over. I heard the next one, with the thirteenth floor, lasted three and a half hours. I don’t know if they agreed on the draft, or even if there will be a package. The next day, as usual, Olivier debriefs the cabinet on the College meeting, as he is the only one allowed to attend: Pierre was good this morning. He read the speaking points on EMU. He took up the president’s argument but added that the obstacles were political. He made them buy our lines: we need a stabilization function and democratization. He recalled our red lines: the Commission must remain at the heart of this process, it must not lose competences. Frans Timmermans said that EMU is the mother of all battles. He warned that Donald Tusk [the president of the Council] is taking over. It’s a tense moment. There may be a chance that Pierre will see President [Juncker] on Wednesday to talk about EMU. He needs a briefing on the political problems we face with the EMU package.

When I have a coffee with Lucie in the eleventh-floor cafeteria, it’s clear she shares the disappointment of many cabinet members. She’s about to go on maternity leave. “I don’t know if I’m going to stay until the end,” she tells me. We’re going into the descending phase. EMU, which was supposed to be the high point of the mandate, is going to be disappointing. From now on, we’re going to make changes to VAT; it’s not very sexy. We were more optimistic about EMU at the beginning. With the EMU package, we’ve lost on all fronts. Fabien and I wanted a stronger line on democratization: a role for Parliament. Mais ça va être cosmétique. The Commission wants to keep its powers vis-à-vis the member states, but it does not want to share them with Parliament. The package will give us an intergovernmental Monetary Fund, even if the word “intergovernmental” is a shocker here. Et après on va quand même se planter au Conseil [And we’ll fail in the Council anyway], so not much will come of it.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

167

Resisting conditionality The following week, I attend another working meeting on the EMU package, with the same protagonists. This time the focus is on the reform of budgetary surveillance and the stabilization function. Before the DG ECFIN officials arrive, cabinet members express their criticism of a note that came out from the inter-service coordination process. Olivier and Fabien do not much like the ordoliberal perfume hovering around the notion of “contracts,” which permeates the note. “We want to get out of the narrative where everyone does their homework and everything will be fine,” Fabien says. “Can you tell me what’s ECFIN’s contribution to this document?” Olivier asks the public servants. “You make choices, but they do not reflect the current state of discussions between cabinets.” “The contracts that you like so much are there,” a civil servant smiles, with a hint of irony. “Oh yes, they’re everywhere . . . . I didn’t recognize your fingerprint.” “It’s DG Budget’s . . . ” DG Budget falls within the portfolio of German conservative Günther Oettinger, the Left’s favorite punching bag inside the Commission. “We’re not really given a choice,” Olivier sighs. “Entre la peste et le choléra . . . No, we have to offer other options. An alternative. How do we build that?” “We don’t have any options, that’s the problem,” the civil servant answers. “The alternative is fuzzy. But contracts—that’s attractive. People understand.” “Why would we need contracts in addition to the country-specific recommendations [that already exist in the European Semester]?” “Member states could come up with their own ideas for reform. If they are in line with country-specific recommendations, there would be positive incentives. If not, we discuss. If we agree, we call it what we want, a contract, a seal of approval from the Commission . . . . And if the member states don’t apply them, there is no money.” “Hmm. Last thing, can we merge the documents into one package? Could there be a chapeau [a communication explaining the overall approach]?” “It could be a blueprint for the treasury,” a cabinet member says with a nod. “That’s the idea,” Olivier concludes.

Time to compromise The discussion moves on to strategy. Since the president of the Eurogroup, Jeroen Dijsselbloem, does not seem to be overly sympathetic to the Commission’s ideas, is it possible to go through the sherpas? Can they mobilize high-level networks ahead of the eurozone summit? It is agreed that the commissioner will organize a

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

168

  

lunch with the finance ministers. In the following months, he travels to various capitals and continues to meet with parliamentarians, especially socialist ones, who more or less share his twin ambition of Europeanizing and democratizing economic governance. On October 24, 2017, the commissioner delivers a warning to his “comrades” in which he summarizes the situation before them: On EMU deepening, I see a clear move backwards. In the Commission, in the Eurogroup, at the mid-December summit, some people push for an intergovernmental approach. They want to confiscate the debate. We must be ready. We need a convergence budget, a stabilization function, the issuing of joint debt, and democracy, with a finance minister controlled by Parliament. I see a risk: that the December EMU package will implement a disciplinary logic and postpone solidarity until tomorrow. There are two opposing views. There is a conservative conception: the ESM, and the backstop as the only concession. We would no longer need to reform the eurozone; everything would be in the ESM. You will not be consulted and the Commission will be pushed aside. Our own conception is “yes to the ESM,” but integrated into the Community system.

If the ESM is in the Community system, it means a greater role for the Commission, Parliament, and the Court of Justice. If it remains intergovernmental, national governments and some national parliaments keep the upper hand. The commissioner continues: [Then there is] the presidency of the Eurogroup. It must remain socialist and become more democratic. The options for the succession of Jeroen [Dijsselbloem] are we do not change anything, we create a permanent presidency, or the presidency is given to the commissioner. I don’t want to plead pro domo . . . but as a matter of principle we [socialists] must not lose the balance of power . . . and we must plead for more democratization. What we are doing involves the fate of tens of millions of people, but we are doing it in a closed circle.

In a restaurant, Reinhard gives me an update on the EMU package. He doesn’t seem very optimistic. On the stabilization function, the thirteenth floor wants something reasonable that fits within the current EU budget. The transposition of the ESM Treaty into EU law and its transformation into something like a European Monetary Fund is more or less agreed upon. “But for the rest, in terms of substance, there are still many things in brackets: the backstop for the single resolution mechanism, for example . . . . There is very little time left to prepare the communication.” On December 6, 2017, the Commission tables the new EMU package, which the Moscos christen the “St. Nicholas package” in honor of the patron saint of good

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

169

children. Headed by a communication entitled “Road map,” it contains proposals for the integration of the ESM and the Fiscal Compact (the Treaty on Stability, Coordination and Governance) into EU law, creating a kind of European Monetary Fund; a European deposit insurance scheme; a backstop for the banking union; a new budgetary instrument dedicated to the euro area (the stabilization function); and a support program for structural reforms. In addition, the package includes a second communication on the creation of a European finance minister position. The package is not very well received, either in Berlin or in Paris. For German finance officials, who currently have no government, it is too much. “The Commission is trying to get its hands on a lot of things at the same time,” one of them tells me. “If they want to introduce the Fiscal Compact in the EU to reduce the criteria, if they load the ESM with public investments . . . it’s just a no-go.” As for the idea of a rapid introduction of the bank deposit insurance scheme, they consider it a “provocation.” The discussion on the ESM backstop is, in their view, mortgaged by the Italians’ bad debt. Even on the single resolution mechanism, the Germans’ judgment is severe. In 2023, it will be fully funded by the banks themselves. Why put public money from the ESM on the line between now and then? “The timeline is 2023,” the finance official explains, “and only when there is a clear signal that there is risk reduction. The countries that want the backstop are those with the highest nonperforming loan ratio . . . . Once again, solidarity is, for some, responsibility for others.” For them, using the backstop must in any case be subject to approval by the Bundestag, as is the case with the ESM—which diminishes its effectiveness. “We are in no hurry,” they insist. “Macron managed to promote reforms and defeat Le Pen. He must use this momentum. We need to test Macron.” Olivier acknowledges that even their watered-down proposals were not taken up. “The package took the member states by surprise,” he explains. This idea of communitarizing everything was too much for them. What we should have done was to talk to the member states first. We were stubborn: neither France nor Germany wanted the communitarization of the Fiscal Compact. Redrafting the ESM Treaty . . . pas terrible. The communication on the finance minister . . . that had neither head nor tail.

Too ambitious for Berlin, the St. Nicholas package is not enough for the French, whose enthusiasm begins to cool. “In essence, we didn’t choose between an ideal EMU and a politically acceptable EMU,” Fabien says. Mixing metaphors, Olivier believes that the final result is not so bad: “[Like in Saint-Exupéry’s Little Prince], the French drew a sheep. At least we got the Germans to let it live. Pierre chose to seize the imperfect opportunity rather than build a chimera. We built a plane that flies. We’ll see if it lands.”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

170

  

I meet my contact at the Eurogroup, who shares his predictions about how member states will react. He thinks the Commission will get a small budget for reforms and investment. “The Germans will accept that.” But in his view, the Commission is unnecessarily pushy with the Germans. It will get nothing on deposit insurance or the European finance minister. As for the ESM, no one thinks it will end up under the Commission’s control. Even if it does not have the name, it will be an intergovernmental Monetary Fund built around conditionality. The question of budgetary surveillance is still open: Will the Commission have to share its responsibilities with the ESM? This would mean the end of a political approach in which the rules can be interpreted.

The New Hanseatic League faces the Franco-German axis After the autumn, the ordoliberal position hardens around a New Hanseatic League. In October 2017, Wopke Hoekstra, a Christian Democrat, replaces Labor’s Jeroen Dijsselbloem as Dutch finance minister. At his first ECOFIN Council meeting, he criticizes eurozone reform, stressing that, for him, fiscal discipline is paramount. He then convinces the ministers of eight countries, including Denmark, Sweden, Ireland, and the Baltic states, to sign a document supporting the transformation of the ESM into a European Monetary Fund, and reject any idea of risk sharing in the eurozone. In January 2018, Portuguese finance minister Mario Centeno replaces Dijsselbloem as president of the Eurogroup. The Moscos had for weeks given up hope that the commissioner would get the job, which would have allowed him to cast himself as a “European finance minister.” After the rejection of the eurozone’s solidarity items, this is a second disappointment for cabinet members. The commissioner thinks he has too few allies in the Council to succeed; some of his staffers believe he lacks the necessary will for political work. What is certain is that he looks less disappointed than they do. In February, Olivier gives me an update. I ask him if he consider the St. Nicholas package a failure. “Compared to the spring of 2017,” he says, it is true that expectations are lower. I wouldn’t say it’s a defeat for us, but the debate has become very German, very CDU. Something happened during the summer. Martin Selmayr wanted a balance between the French stabilization fund and German structural reforms. But the German line has now become dominant. Both the institutions and sources of funding are in the hands of Germans or people who share their doctrine, and Macron is unable to unlock that.

Olivier explains that, beyond domestic politics, the MFF, or multiannual financial framework—the EU’s “macro-budget” that governments negotiate

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

171

every seven years—has also monopolized the debate. With the departure of the British, the EU budget will shrink. Budget commissioner Günther Oettinger is considered a proponent of austerity. Even if this were not the case, he must anticipate the loss of the British contribution, around 15 percent of the budget. It is impossible in this context to make ambitious proposals for a eurozone budget: all the member states, including those outside the eurozone, must be part of the discussion. Even with the election of Macron, the Franco-German engine did not deliver the expected results. “The political stars are not completely aligned,” Ioana concludes. With the arrival of spring, the Commission president having made up his mind, the German government finally in place, the discussion moves on to Paris and Berlin. Emmanuel Macron and Angela Merkel are due to meet at a FrancoGerman summit in June 2018. The ball is no longer in Brussels’s court. In public, the commissioner says that “if it is not settled by June, it will be put off for years.” In private, he tells me he is “very pessimistic. They [Macron and Merkel] don’t agree on anything. There will be nothing in June. Personally, I prefer no agreement to a bad agreement.” The fear, shared by observers like Wolfgang Münchau of the Financial Times, is that Macron will be satisfied with little to save the appearance of a Franco-German compromise.

The Meseberg summit On June 19, 2018, Merkel and Macron meet at Meseberg Castle. The summit declaration, accompanied by a “Franco-German road map for the Eurozone,” refers to the eurozone budget Macron called for in his Sorbonne speech. Compared to the St. Nicholas package, which proposed a line in the overall EU budget, the declaration mentions a specific budget for the eurozone, topped up with new resources. But there is no order of magnitude for this budget, which, the declaration says, should not result in permanent transfers between countries. The Germans will stomach a small budget for investment, but not a real stabilization function. Merkel and Macron say they are open to a transformation of the ESM but remain evasive when it comes to the details, especially the question of how competences will be shared with the Commission. The latter may have to cede part of its current role to the ESM, whose intergovernmental structure would be preserved. The backstop and the principle of deposit insurance are once again enshrined, although leaders make clear that risk in the current national banking systems must be reduced before it can be pooled. The summit calls for the creation of a working group on unemployment insurance, which has become something of a signature for Olaf Scholz, but the idea of the safe asset, dear to DG ECFIN economists, is explicitly rejected.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

172

  

The Franco-German summit is followed at the end of the month by a eurozone summit. The resulting communiqué is succinct: “The summit agreed to make progress on the completion of the banking union and to strengthen the ESM, in particular by providing a backstop for the single resolution fund.” Once again, eurozone reform is overshadowed by migration issues as a new Italian government, born out of the coalition between the Five Star Movement and the Lega, makes its entry in European politics. More importantly, however, the New Hanseatic League, led by Hoekstra, the Dutch finance minister, leads the opposition to any kind of solidarity. Their sole objective is a strengthened and intergovernmental ESM arranged according to ordoliberal principles. For the Moscos, it is increasingly clear that the main threat is now institutional—namely, an encroachment of the ESM on the Commission’s competences. The New Hanseatic League would like to see a transfer of the Commission’s programs to the ESM, which would also involve entrusting it with some responsibility for budgetary surveillance. “This complicates the discussions,” a cabinet member explains, “because we have to work on our relations with the ESM without taking into account our proposals, which are not to entrust supervision to the ESM.” The thirteenth floor does not necessarily share this fear: “For us, we have everything to gain, it’s a win–win situation, says a member of Juncker’s staff. Of course, we must not give them budgetary surveillance. But our powers are in the treaties, so we are safe.” Luc Tholoniat, President Juncker’s adviser, tries to find the positive side of what seems to me to be a disappointment: Our ambitions were strong but relatively limited. About the democratization of the institutional framework, we made proposals that were . . . no doubt sometimes ahead of their time. With the banking union, we made a lot of progress in practice. With the budgetary instrument for the eurozone, we made innovative proposals that could become part of the multiannual financial framework. The stabilization function is not so far removed from the spirit of Meseberg. The external representation, the international role of the euro: that’s not quite ready or finished, but there is an awareness on the part of others who will carry out these projects. Of course, I have the feeling that we could have achieved more on EMU if we had been followed. Out of more than forty legislative initiatives, only seven have been adopted at this stage. But twelve million jobs have been created since the beginning of the mandate, and unemployment is now at its lowest level since the beginning of the century. As President Juncker says, if those twelve million jobs had been destroyed, people would say that it is our fault.

*

*

*

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

173

After the Meseberg summit, the debate seems, to use Marco Buti’s expression, “frozen.” Another eurozone summit is scheduled for December 2018. A few weeks before, Macron and Merkel meet in Berlin to follow up on the proposals made at Meseberg. The French and the Germans draft a very brief joint paper that they refer to as the Meseberg road map. In the cabinet, members continue to prepare Eurogroup meetings, without really believing in it. They pretend to resist the New Hanseatic League (who wants to push the backstop to 2023), to clarify relations with the ESM, and to define the parameters of a putative eurozone budget. But the Italian situation is on everyone’s lips. It does not make the risk-sharing agenda any easier. The commissioner adapts his speaking points accordingly; they become less ambitious. Before the Friends of Europe association, he takes note of the emerging consensus on the banking union, the ESM, and the eurozone budget, judging the progress to be too slow. But he does not hesitate to criticize the German obsession with risk reduction. Above all, he continues to hammer home the importance of democratizing economic governance and opening up a greater decision-making role for Parliament and the Commission. In European circles, among MEPs, this argument carries weight. “These men—most of them are men—answer to no one,” the commissioner explains. “We need a finance minister who will be Mr. or Mrs. Europe and we need a Mr. or Mrs. Europe who will be accountable to Parliament.” The discussion continues until the June 2019 summit, which is expected to detail and approve the eurozone budget. In the winter, Macron publishes an open letter to the citizens of the EU in dozens of newspapers across the Continent. In it, he develops his ideas on Schengen, security, and the environment. In a radical change of direction from the Sorbonne speech, the letter does not even mention the reform of the eurozone. In the run-up to the European elections, although phase 1 of the deepening process has been partly achieved, the solidarist ambition seems to be dead. In any case, it will not be completed under the Juncker Commission. After this most recent battle of ideas, only one thing remains: the Budgetary Instrument for Convergence and Competitiveness. Most of the proposed new resources will go to support structural reforms according to the ordoliberals’ contractual logic: precisely what the Moscos did not want. But the French insisted on adding a small “investment function.” The budget is modest: €17 billion over seven years, potentially to be doubled with external revenues. This is a far cry from the Commission’s original plan for a stabilization function or Macron’s “several points of GDP” eurozone budget. For the French, this is a step in the right direction, an embryonic eurozone budget. For the commissioner, however, “it is a flop. We are torturing fruit flies.” Economic governance is a concept that fascinates Financial Times columnists and DG ECFIN economists, but during the Juncker Commission it failed to make

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

174

  

its mark on the European political agenda. Created during the economic and financial crisis, euro area summits were emptied of their substance during the recovery.²² After the 2015 Greek crisis, the last jolt in the eurozone crisis, the sense of urgency disappeared. As the literature on the role of ideas explains, the failure of political work is partly due to the opposition of ordoliberal decision-makers who, from 2015 to 2019, remain dominant in the diplomatic arena: in Germany, the Netherlands, Finland, and the eastern countries.²³ At the end of the day, institutional inertia and the New Hanseatic League vetoed solidarist innovations. But there is another, more prosaic reason. The functioning of the ESM, the stabilization function, the safe asset—these are technical proposals that are difficult to transform into political arguments when there is no crisis. “EMU deepening is difficult to explain,” Lucie says. “When Pierre goes to a citizens’ debate, he doesn’t talk about it. He talks about the Juncker plan, maybe about taxation; you can say, ‘You pay your taxes and the other guy doesn’t.’ But nobody is interested in inter-institutional games . . . ” Until a real crisis happens, that is. Last time I spoke to him, Luc Tholoniat, Juncker’s adviser, speculated: “A possible crisis would force us to speed things up; we do not want it, but we have the toolkit on the table. The day will come when we will be able to use it.” That is exactly what happened in March 2020, four months after the Moscos had left the Berlaymont, when the COVID-19 hit Europe and the need for economic solidarity became more acute than ever before.

Notes 1. Mario Draghi, “Stabilization Policies in a Monetary Union” (speech, University of Athens, October 1, 2019). 2. Markus K. Brunnermeier, Harold James, and Jean-Pierre Landau, The Euro and the Battle of Ideas (Princeton, NJ: Princeton University Press, 2018). While the ordoliberal camp is generally recognized as such, the opposing camp is not always qualified in a consistent way. Brunnermeier, James, and Landau describe it without giving it a name. Several political economists in Europe prefer to speak of “fiscal federalists.” I follow Grégoire Mallard, who describes “neo-Maussian” economists (from Marcel Mauss, the sociologist of the “gift”) concerned about solidarity in the eurozone. See Grégoire Mallard, Gift Exchange: The Transnational History of a Political Idea (Cambridge: Cambridge University Press 2019), ch. 7. 3. Mark Blyth, Austerity: The History of a Dangerous Idea (Oxford: Oxford University Press, 2013); Waltraud Schelkle, The Political Economy of Monetary Solidarity: Understanding the Euro Experiment (Oxford: Oxford University Press, 2017). 4. Kathleen McNamara, The Currency of Ideas: Monetary Politics in the European Union (Ithaca, NY: Cornell University Press, 1998). 5. Joseph E. Stiglitz, The Euro: How a Common Currency Threatens the Future of Europe (New York: Norton, 2016), 124.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

     

175

6. “Davos 2014: Eurozone ‘Giant Historic Mistake’ ” (Kenneth Rogoff, interview at Davos World Economic Forum), New York Times, January 23, 2014, https://www. nytimes.com/video/multimedia/100000002666789/davos-2014-eurozone-giant-historicmistake.html 7. Mario Draghi, “The Euro, Monetary Policy and Reforms,” European Central Bank, 6 May 2013. 8. Dariusz Adamski, Redefining European Economic Integration (Cambridge: Cambridge University Press, 2018), 158. 9. Dermot Hodson, “Eurozone Governance: From the Greek Drama of 2015 to the Five Presidents’ Report,” Journal of Common Market Studies 54, no. 1 (2016): 150–66; David Howarth and Lucia Quaglia, “The Steep Road to European Banking Union: Constructing the Single Resolution Mechanism,” Journal of Common Market Studies 52, no. 1 (2014): 125–40. 10. Nicolas Véron, “Europe’s Radical Banking Union,” Bruegel Essays and Lecture Series 5 (2015), https://www.bruegel.org/wp-content/uploads/imported/publications/essay_ NV_CMU.pdf 11. Cornelia Woll, “Bank Rescue Schemes in Continental Europe: The Power of Collective Inaction,” Government and Opposition 49, no. 3 (2014): 426–51; Epstein, Banking on Markets, 131. 12. Epstein, Banking on Markets, 131. 13. Jean-Claude Juncker “in close cooperation with” Donald Tusk, Martin Schulz, Mario Draghi, and Jeroen Dijsselbloem, Completing Europe’s Economic and Monetary Union (Brussels: European Commission, 2015), https://ec.europa.eu/commission/sites/betapolitical/files/5-presidents-report_en.pdf 14. Juncker et al., Completing. 15. Mehreen Kahn and Paul McClean, “Dijsselbloem Under Fire after Saying Eurozone Countries Wasted Money on Alcohol and Women,” Financial Times, March 21, 2017. 16. Rebecca Adler-Nissen and Alena Drieschova, “Track-Change Diplomacy: Technology, Affordances, and the Practice of International Negotiations,” International Studies Quarterly, 63, no. 3 (2019): 531–45. 17. Jason Beckfield, Unequal Europe: Regional Integration and the Rise of European Inequality (Oxford: Oxford University Press, 2019). 18. Agnès Bénassy-Quéré et al., “Reconciling Risk Sharing with Market Discipline: A Constructive Approach to Euro Area Reform,” CEPR Policy Insight No. 91 (January 2018), https://cepr.org/active/publications/policy_insights/viewpi.php?pino=91 19. Ashoka Mody, EuroTragedy: A Drama in Nine Acts (Oxford: Oxford University Press, 2018), 438. 20. Véron, Europe’s Radical Banking Union; Rachel A. Epstein, Banking on Markets: The Transformation of Bank-State Ties in Europe and Beyond (Oxford: Oxford University Press, 2017). 21. Brunnermeier, James, and Landau, The Euro and the Battle of Ideas, 210–34. 22. Luuk van Middelaar, Alarums and Excursions (New York: Columbia University Press, 2019). 23. See Brunnermeier, James, and Landau, The Euro and the Battle of Ideas.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

8 No representation without taxation Fighting tax avoidance

The spirit of Simone Veil, president of the first directly elected European Parliament in 1979, hovers over Jean-Claude Juncker’s appointment to the Commission in 2014. Like Veil, Juncker comes to power after a democratic process. However, unlike the 1979 election, his ascension is marred by scandal and takes place in a context in which a “constraining dissensus” has replaced the “permissive consensus” that prevailed until the 1990s.¹ In November 2014, a few days after the Juncker Commission took office, the International Consortium of Investigative Journalists breaks the LuxLeaks scandal. Several major media outlets reveal that, from 2002 to 2010, the Government of Luxembourg, then under the leadership of Prime Minister Juncker, facilitated tax evasion for more than three hundred firms through “tax rulings” that allowed multinationals to negotiate secret tax-reduction agreements. Further revelations about tax havens follow, including the 2016 Panama Papers and the 2017 Paradise Papers. The “hidden wealth of nations,” to use Gabriel Zucman’s expression, shocks the public.² While the Panama and Paradise scandals, unlike LuxLeaks, have no explicit links to Juncker’s past, these controversies, taken together, nonetheless open a window of opportunity through which the commissioner is only too eager to pass. The Consortium’s revelations lend a newfound salience to the issue of tax avoidance. From the first months of his mandate, the commissioner publishes a blacklist of tax havens that attracts media attention. He relaunches bold proposals that had been lying dormant on the shelves of DG TAXUD for years. While Margrethe Vestager, the competition commissioner, multiplies legal proceedings against tax-evading multinationals, Pierre Moscovici brings forth progressive proposals on transparency, the fight against evasion, and even tax harmonization that, according to one DG TAXUD official, “go further than what was accomplished in the previous twenty years.” Unlike budgetary surveillance or eurozone reform, taxation is a subject that lends itself to legislative activity; and indeed, the European Parliament is to some extent involved in this arena. During his mandate, the commissioner will push through fourteen European laws, or directives, on transparency and tax evasion. While nurturing his left-wing profile, he insists on the democratic nature of his proposals and broad support from the public. The Moscos’ political work takes place in a The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0009

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

   

177

favorable context in which Parliament and the media play a decisive role. As Rémi explains, “budget flexibilities are known in the Brussels bubble and the capitals but the citizen in Toulouse doesn’t care what the European Semester is. [For the commissioner,] the most promising aspect is taxation: you can show progress on transparency, tax havens, [and so forth].” Cultivating relationships with journalists and NGOs involved in tax justice, the commissioner forms alliances with MEPs, especially from the Left, but not only. “For Pierre, it’s perfect,” a senior official confirms. “Fairness, and all that . . . . He uses [these] political moments.” While the political context proves favorable, the institutions are much less so. Taxation is one of the few areas where legislative initiatives must be approved unanimously by the Council. Initially, member states are reluctant to express their opposition. Most initiatives on tax evasion are adopted at the beginning of the mandate. However, after being on the fast track for 2015–16, several dossiers get bogged down. A handful of governments manage to veto Moscovici’s efforts in the Council. As early as 2017, Germany also becomes lukewarm on VAT reform, an old project that was thought to be close to completion.

“We had forgotten about taxation!” Thanks to the scandals, taxation, which had long been on the European backburner (see Box 8.1), becomes an explosive political issue.³ In the wake of LuxLeaks, a group of MEPs call for a vote of no confidence on the Juncker Commission. The attempt does not succeed but, in February 2015, Parliament sets up the “TAXE” special committee to examine tax rulings in the European Union. Without any real power of investigation, it multiplies hearings, including with the commissioner, to force the Commission to act. The chairman of the TAXE committee, Alain Lamassoure, one of the few conservative MEPs who is passionate about tax harmonization, admits that several of his colleagues had the ulterior motive of “destabilizing” Jean-Claude Juncker. “In the European Parliament,” he says, opposition MEPs, especially the Greens, the Far Left, and the Far Right, wanted to set up a war machine against Juncker. The [center-right and center-left] majority’s response was to find a way out from above: the European Parliament has no legal competence in tax matters, but it can investigate, inform, hear, and put pressure on governments by relaying the indignation of citizens incensed by the scandals. The political pressure was such that member states could not refuse us anything.

In this tense political context, the Juncker Commission wants to make a strong statement with a vigorous attack on tax evasion. As one of President Juncker’s

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

178

  

Box 8.1 Tax policy and the EU Along with foreign affairs and defense, taxation is one of the few policy areas subject to the EU’s unanimity rule. Parliament plays a role but qualified majority voting is almost impossible in the Council. According to the treaties, tax harmonization can only be justified by the rules of the internal market. This limits the Commission’s intervention to regulating VAT rates and cases of unfair competition. On other tax matters, the unanimity requirement forces the commissioner to seek the lowest common denominator. Now, a group of six member states opposes European ambitions in this area: the Netherlands, Ireland, Belgium, Luxembourg, Malta, and Cyprus. Because of these governments, which offer global financial flows a home port in the European market, tax competition is fierce in the EU.⁴ As long as it does not levy its own taxes, the EU will suffer from “fiscal impotence.”⁵ Still, the EU increasingly regulates national taxation policies.⁶ Contrary to North American federations, the EU does not tax citizens and businesses directly, but it nonetheless shapes the fiscal framework in which member states operate. For example, VAT rates are harmonized and certain tax practices are prohibited if they distort competition. This is not necessarily the case in the United States or Canada.

advisers tells me, “We had completely forgotten about taxation! Pierre learned about his portfolio at a press conference!” The commissioner, too, had little interest in European taxation before his arrival in Brussels: “I wasn’t expecting it,” he admits. “I didn’t ask for the tax portfolio. Juncker needed a socialist. At first, I thought it was a dry subject. When I was finance minister, I thought there was no point in meeting the tax commissioner. But then LuxLeaks came along. It turns out that it’s very interesting!” In the Barroso Commission, there was a full-time tax commissioner, the Lithuanian Algirdas Semetas. Not much happened. On the tax front, the action took place in Washington, at the G8, the G20, and the OECD. When Moscovici arrived, only the financial transaction tax, launched under the previous Commission, was in the pipeline. The Moscos call it a “zombie” or “stillborn” tax, because the “enhanced cooperation” that was supposed to make it possible among leading countries is proving elusive. Administrative services are also working on an energy tax to combat climate change. But it does not go much further. The thirteenth floor wants to show that the Commission isn’t hostage to an exprime minister’s political past in Luxembourg. Alongside Pierre Moscovici, who

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

   

179

shapes tax rules, Margrethe Vestager, the Danish liberal commissioner, prosecutes multinationals that take unfair advantage of tax competition between member states. In the first year, Vestager launches a series of legal proceedings against several firms, including Fiat, Starbucks, and Ikea, for circumventing intellectual property rules—for example, through patent boxes allowing multinationals to concentrate their income in one country in order to “optimize” their tax returns. Vestager also prosecutes states, such as Ireland, for unfair tax practices, which she considers a form of state aid, and demands that they make companies like Apple pay their fair share. Even if their relations seem cordial and their political projects complementary, at least as far as taxation is concerned, there is some friction between Vestager and Moscovici. The Dane is in the spotlight, which does not always please Moscovici’s communication people. In the words of the French commissioner, “she takes care of the past or the present, I prepare the future. She does repression, I do prevention.” Or, as he often repeats, “Vestager repairs and I prepare.” By this he means the tax rulings, which Vestager punishes under the current rules but against which he proposes a legislative framework at the European level. Vestager and Moscovici, two strong personalities in the College, don’t meet very often oneon-one, but they retweet each other a lot. While the commissioner pushes his administrative services to be more ambitious, technical issues do not seem to fascinate him. In the cabinet, he relies first on Elena and Franck, then on David and Maud. The jour fixe, which is supposed to bring together DG TAXUD senior management and the commissioner on a regular basis, is in fact “not very fixed,” an official complains. But thanks to the commissioner’s growing interest, experts have a unique opportunity to do politics on seemingly technical issues. “The first two years have been exceptional,” says one. “The president told Pierre, ‘You have to do something because of LuxLeaks.’ With that in your pocket, you can go into any meeting and say, ‘This is what my commissioner wants.’ At the same time, he doesn’t get involved in the details. It’s very easy.”

A winter of bliss In the first few months of the mandate, the Moscos are busy with three major dossiers: banking secrecy, a list of tax havens, and an anti-avoidance directive.

Tax rulings and banking secrecy As early as March 2015, the commissioner tables his first legislative package on tax transparency. This package introduces the automatic exchange of information

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

180

  

between national administrations on tax rulings, a practice that LuxLeaks made public. The package goes off without a hitch. In Lamassoure’s view, Parliament played an important role: “Our parallel and concerted action contributed to Pierre’s great success: his first directive on tax rulings only took six months!” At the same time, the SwissLeaks scandal, concerning a tax-evasion system set up by HSBC in the Alpine country, erupts. Evoking corrupt elites who entrust their assets to unscrupulous bankers in order to evade taxes, banking secrecy concerns first and foremost the small border states of Switzerland, Liechtenstein, and Monaco, with which Germany and France have disputes over their “tax expatriates.” The commissioner wants to use SwissLeaks to deal a fatal blow to banking secrecy in Europe. A lot of the preparatory work was done by DG TAXUD under his predecessor: it’s a matter of putting the final nail in the coffin—and, just as important, of letting people know about it. In reality, the EU is lagging behind. As early as 2010, the United States passed FATCA, which, using extraterritorial jurisdiction, obliges foreign banks to report their customer lists to the Internal Revenue Service. This law changes the global situation by compelling US partners to exchange the relevant information.⁷ But Olivier wants to ensure that the EU’s action does not go unnoticed, and that the commissioner takes credit for it. To apply political pressure on border states, he has Moscovici travel to Bern, Vaduz, and Monte Carlo. “Others talk about it; he is doing it,” Olivier says to Simon, offering his colleague in charge of media relations a perfect sound bite. We have to attract journalists. Pierre signing the banking secrecy ruling in Monaco, that’s worth twelve points! And I want twelve points. We’re not just going to give them a technical briefing . . . . We need to create a buzz in Paris about Pierre ending bank secrecy. We can’t have them just talking about Pierre en balade to Monaco to see Prince Albert.

“And Pierre,” Olivier continues, “will be in Liechtenstein next week to sign the agreement on banking secrecy. It would be good to stimulate interest in the German press. C’est un peu leur Monaco à eux . . . ”

The list of tax havens By 2015, banking secrecy is on the way out in Europe. But the issue of “tax havens”—microstates that allow tax avoidance and/or evasion on the part of foreign nationals—remains. Early on, the G7 Financial Action Task Force established criteria for determining whether a jurisdiction is a tax haven. In the wake of the 2008 economic and financial crisis, several states developed their own blacklist. But while the Portuguese list includes more than seventy states, the German

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

   

181

list is empty. The OECD also has its own list, which includes only Trinidad and Tobago. The commissioner wants the EU to have its own tax haven blacklist, using the weight of the European market to bend recalcitrant jurisdictions around the world. This is, according to Maud, the commissioner’s “hobbyhorse.” The argument he makes to the member states is that the different lists need to be brought into alignment. To this end, in June 2015 the commissioner announces the EU’s first ever blacklist, which includes thirty countries referred to as “non-cooperative tax jurisdictions.” The first version is a simple compilation of the national lists drawn up by the states. As one DG TAXUD official recalls, The list was one of the most stressful moments of my career. There had been several attempts to push the member states to do something in this area. And every time they were opposed to it. So we played on their own contradictions: I took the national lists and put them together, without trying to understand what was behind each of them—basic methodology, zero refinement, eh!—and we pulled this out, bam! Without telling our member states! The commissioner’s and President Juncker’s cabinets thought it was gooooood. But what a mess! Reactions in the member states were virulent. Aaaah, I didn’t feel so well!

Redrafted several times, the list is based on three inclusion criteria: opacity, unfair competition, and failure to apply the OECD’s good practices. DG TAXUD produces a scoreboard that includes two hundred and fifty indicators. “Afterwards, a real list was drawn up, with a rigorous methodology and dialogue with stakeholders and everything,” my interlocutor from DG TAXUD continues. “The experience of the first compilation enabled us to say that our commissioner was not afraid. It was useful. In retrospect, I liked it. But, at the time, quelle angoisse!” Within the Commission, the list is not unanimously embraced. One day in a cabinet meeting, as Elena denounces the internal pressures being exerted on DG TAXUD to water down the list, Olivier stands firm: “You have the protection and the authority of the commissioner to resist.” In any case, a Council working group will make the final selection. Some countries appear on a blacklist, others on more of a gray list. In order to be removed from the blacklist, they must make concrete commitments to transparency. These commitments are not necessarily made public. The list provides an answer to those who deplore the EU’s inaction. It encourages friendly states such as Switzerland and Liechtenstein to cooperate and puts pressure on those that refuse to apply a minimum level of transparency. A new list is published every year. The December 2017 list, published just after the Paradise Papers break, includes only seventeen jurisdictions out of the thirty initially proposed, including Grenada, South Korea, Macao, Mongolia, Trinidad and

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

182

  

Tobago, Tunisia, the United Arab Emirates, Panama, and Barbados. Two months later, eight of these countries disappear from the list, but the Bahamas, the United States Virgin Islands, and Saint Kitts and Nevis are added.

A technical . . . and political list Of course, the evolution of the list reflects a refinement of the criteria (some are added, such as measures against “aggressive planning” on the part of tax advisers) and the commitments made by states to cooperate with the EU. But alleged tax havens also lobby EU member states, which have to approve the final list. For example, one large country (which I will not name) tries a few times to have “friends” removed from the list. “They’re after me about the list of tax havens,” Olivier complains during a cabinet meeting. “They are a candidate for the [UN] Security Council and want to make friends by downgrading a few countries.” The discussion about the list is, in other words, politicized. “What matters,” Franck explains, is the gray list, the one where there are gaps and governments are asked to provide answers, by 2019 for rich countries and 2020 for the poor. Tunisia, for example, is on the list but they have lobbied hard to be removed from it. The issue at stake is whether we are making a list based on technical criteria—in which case Tunisia is on the list—or political criteria—in which case we say that it is a democracy, so . . .

The Panama Papers, released in 2016, and the Paradise Papers, in 2017, give the commissioner’s presentation of the blacklist to the media remarkable salience. For their part, cabinet members are as interested in the commissioner’s positioning as they are in the content of the list. Should he take ownership of the list formally adopted by the Council or should he let the member states do it? “In the end,” says Simon, “we decided that it should be clear that it is the list of the member states: the commissioner strongly supports it but he does not take too much responsibility.” This willingness to remain discreet, which is unusual on the part of the Moscos, puzzles me since the list was mostly prepared by Commission services. I ask for an explanation: On the one hand, Pierre had pushed a lot for it. On the other hand, the number of [targeted] countries went down from 30 to 17. There was a lot of pressure from certain countries, commitments made five minutes before midnight . . . . We changed the list again in January and we went down again to 9. There was no reason to say no, but from a communication point of view, a list of 100 countries that become 30, 17, and then 9 . . . it didn’t look great. The commissioner had to

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

   

183

find a balance, welcoming the list but insisting that it was not the Commission that decided. Pierre did quite well in Parliament and with the NGOs. He was seen as the one who pushed for an ambitious list.

Politically, the list is a game changer but, between 2015 and 2019, the Council never agrees on sanctions for tax havens. For some countries, such as France and Italy, sanctions should take the form of a withholding tax on financial flows. For others, naming and shaming is sufficient. In the end, the only sanction imposed— and decided by the Commission alone—was the impossibility of channeling EU funds through delinquent foreign countries. The list’s impact, then, is reputational. In the commissioner’s view, the list made it possible to abolish some one hundred “harmful” tax regimes. It is regularly updated and included in the European Semester, which increases transparency. By 2018, only microstates with weak relations with the EU remain on the blacklist. I am told, for example, that a government anxious to preserve its economic relations with the United Arab Emirates had the Gulf country withdrawn from the list at the last minute. But above all, people notice that no EU member state has ever been on the list. Are all EU countries beyond reproach?

The “transparency revolution” In 2012, the G20 gave the OECD a mandate to formulate an action plan against tax-base erosion and profit shifting, commonly referred to as the “BEPS action plan.” Governments that accumulated a lot of debt during the economic crisis became more concerned about the strategies put in place by multinationals to evade taxes. A year later, the Paris-based organization presented fifteen proposals. Its action plan is largely based on the exchange of information between tax administrations, as well as the prohibition of certain forms of abuse such as the “double Irish,” which allows profits to be transferred to a tax haven through Ireland. The action plan aims to combat “tax optimization” strategies that allow profits to be transferred to a country where taxes are virtually zero, and losses to a country where they can be deducted. In addition, the OECD adopted the Common Reporting Standard, which provides for the automatic exchange of tax information.⁸ Welcomed at the G20 summit, the BEPS action plan has no legal force. Moreover, Gabriel Zucman’s work shows that among the worst offenders are several European countries that can be qualified in part as tax havens: Belgium, the Netherlands, Luxembourg, Malta, Cyprus, and especially Ireland. Buoyed by their success throughout 2015, the Moscos are eager for the EU to clean up its own act and take a global leadership role. More prosaically, they are keen to demonstrate

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

184

  

that they can do better than the OECD, which they often talk about as if it were a rival organization. The idea quickly forms to not only enshrine the BEPS action plan in EU law, but also to strengthen European legislation in relation to other OECD countries.⁹ On January 28, 2016, after a year’s work, the Commission submits a legislative package on combating tax evasion.¹⁰ Inspired by the BEPS action plan, the package contains three texts. The first is a draft directive against tax avoidance, known as ATAD, comprising six measures aimed at harmonizing rules on nontaxation (e.g., on income from third countries, transfer of assets, etc.). This is the heart of the package. The second text is a recommendation aimed at eliminating treaty shopping, which allows multinational firms to exploit double-taxation conventions in order, practically, not to be taxed at all.¹¹ The recommendation lists a set of measures to prevent so-called aggressive tax planning. The third text is a proposal to amend the directive on administrative cooperation, to which the Commission proposes the addition of automatic country-by-country reporting for firms with a €750-million turnover or more. When Olivier tells the cabinet that the College of Commissioners has agreed on the package that will be submitted to Parliament and the Council, there is a round of applause. The previous Monday, the OECD made an important announcement and the Moscos do not want to give the impression that the Commission is lagging behind. Journalists are given an informal briefing and a press conference is quickly organized in the basement’s salle de presse. There are nearly a hundred journalists in the room. The commissioner, at ease, hammers out a few talking points that he will often repeat: “The European Parliament has estimated the cost of tax evasion at €50 to €70 billion, five times the amount spent on the migrant crisis.” “What some people don’t pay is a burden on others.” “We need to rebalance the tax game in Europe.” “Multinationals must be subject to the same taxes and rules as other companies.” In its details, the tax-avoidance package is technical and dry. Country-bycountry reporting is the easiest measure to communicate, but also the most controversial among member states. For the time being, the Commission does not go further than the OECD: any corporate information shared will be treated confidentially by tax administrations. But the commissioner, cultivating his support among left-wing parties and civil-society organizations such as Transparency International, says he would like to go further. “My personal position,” he tells them, “is that reports should be made public. But first things first. We will go further if transparency does not harm competitiveness. It’s a matter of time, it’s our historical destiny.” Since unanimity is required, the Commission has internalized the diplomatic constraints of the Council, where some member states believe that the public disclosure of information would harm business competitiveness.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

   

185

Between Parliament and the Council The following week, the commissioner presents the anti-avoidance package to Parliament in Strasbourg. In front of MEPs, he insists on the final objective—the harmonization of corporate tax rules (not rates) in Europe: “We need to fight economic inefficiency that leads to social injustice. These are fiscal resources lost to schools and hospitals.” Social democrats and most center-right MEPs assure the commissioner of their support and insist that the EU should go further than the OECD. Unsurprisingly, Eurosceptics reject any increase in the tax burden, while the Greens and the Far Left feel that the Commission’s proposals do not go far enough. But all agree on the importance of combating tax evasion. Google, which pays almost no tax in Europe, is on everyone’s lips. For the colorful green MEP Philippe Lamberts, “France is the homeland of love. We know the importance of foreplay. But, at some point, you have to act, at the risk of seeing the object of your desire disappointed. The act must be consummated—go ahead!” While the commissioner tries to woo MEPs in public, Audrey, the parliamentary assistant, is busy lobbying party staffers, especially in the S&D group. Two weeks later, however, before a joint meeting of the TAXE committee and the economic and financial affairs committee, the discussion starts to harden. Elena had warned me, “Everyone was surprised that it went so well two weeks ago when the tax package was tabled.” The new TAXUD director-general, Stephen Quest, sits next to the commissioner, who insists from the outset that the Commission followed the Parliament’s proposals, including on treaty shopping: You would have preferred these measures to be binding, but there are legal questions pertaining to national sovereignty. That is why we have opted for a recommendation. Your Parliament is very well-positioned to exert political pressure. Some governments say, “Let’s start by implementing BEPS.” But we are the EU, we have to go further. Beware of the risk of unravelling the package, which would then be limited to BEPS. I am counting on Parliament’s support to keep up the political pressure. Without you, this package would not be what it is, it is not demagogic for me to say it!

For the rest, the commissioner repeats his main talking point: the “transparency revolution,” which covers the need to put an end to the practices, often legal, that allow firms to hide their real profits from tax authorities and taxpayers. In discussions with parliamentarians, I get the feeling that S&D, Green, and ALDE MEPs are all in favor of the text but that the EPP is divided along national lines. German MEPs, in particular, seem to have cooled on the idea since the last sitting. Country-by-country reporting seems problematic for a number of speakers. In the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

186

  

first votes in committee, the Far Left and the Greens go against a text that, in their view, lacks ambition, while liberal democrats and social democrats seem in favor. In the EPP, many MEPs abstain but the text goes through easily.

“We’re playing against the clock” The release of the Panama Papers, in April 2016, is an opportunity to increase the pressure on governments, who also need to approve unanimously the taxavoidance package in the Council. Although the scandal is more about money laundering than tax avoidance, it draws public attention to the lack of transparency. Yet, in the Council, the package is still a B-point in May. In Council jargon, this means that there is no consensus in the working groups that prepare ministerial meetings. Despite the Commission’s initial fears, the Dutch Presidency is pushing for adoption. The conservative VVD prime minister Mark Rutte is not very keen, but Jeroen Dijsselbloem, his coalition partner from the Labor Party, wants to push the text through. “We had to show that, contrary to public perception, we are not a tax haven,” a Dutch official explains. The British are in favor of the tax-avoidance package and want to vote quickly, before the June referendum campaign on Brexit. Talking with a British Green MEP, the commissioner scoffs: “On country-by-country reporting, George Osborne [the conservative chancellor of the exchequer] is now a member of the Green Party . . . . It was not like that a year ago!” But the package is slowed down at the working-group level, where civil servants are more in control. “For them,” one observer explains, “it’s a change in tax laws that will cost jobs and treasure.” Even countries like Austria and Belgium are procrastinating. Some officials are cautious, to be sure, but they also get political cover. The Czech finance minister, Andrej Babis, is a businessman who doesn’t like taxes. Franck explains the situation: “It’s a big deal. The Irish and now the Czechs are resisting. The risk is getting bogged down. We’re playing against the clock.” For the first time since LuxLeaks, resistance is coalescing. On June 7, 2016, I join the commissioner for a parliamentary hearing in Strasbourg. He is once again invited to speak on the tax-avoidance package. Parliament has proposed amendments that, going further than the Commission’s proposal, would be even more unacceptable to the Council. As we get out of the car, we meet a DG TAXUD official who gives the commissioner a briefing. He explains that the commissioner must resist the MEPs. We are in the middle of the Brexit campaign and they must avoid giving arguments to British Leavers, who criticize European tax initiatives as infringements on UK sovereignty.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

   

187

To my surprise, the hémicycle is sparsely populated, with no more than twenty MEPs. The rapporteur, a French Socialist, speaks first. The commissioner thanks him for an “excellent report” and goes back over some of the amendments. While the Greens now seem to be in favor of the text, a UKIP MEP lambasts what he sees as a new tax. Nonetheless, he reasons, “we should not be troubled by these proposals because we’re about to leave.” A parliamentary assistant tells me that German conservatives are rather in favor, as are the French, but there is reluctance in several countries. The commissioner tries to reassure them: “This is not a fight against business. We are not preventing tax competition, but we want it to be harmonious.” Above all, he tries to seduce the parliamentarians by appealing to their sense of mission: “You represent the people, [but it is] the states [that] decide. They must be put under pressure, and I am counting on you for that. We are here to make strong and courageous proposals that put governments face to face with their responsibilities.”

Majority in Parliament, unanimity in Council On June 21, Czech resistance is defeated at last and the agreement is finalized in the Council. An adviser to the Dutch finance minister, who chaired the meeting, tells me about the importance of publicly staging the deliberations by which the ministers arrived at this happy outcome. My minister said, “This is a political issue. What is important is the transparency of the discussion.” So he decided to broadcast the ECOFIN meeting in public. A lot of countries were saying, “You shouldn’t do this in public.” My minister decided to do it anyway, in livestream. It was hard [for opponents] to say publicly that they were in favor of tax avoidance!

Originally comprising six measures, the most important item of the package— the ATAD directive—has been reduced to five in the end. Items such as public reporting had been dropped early on, to the displeasure of civil-society groups.¹² Since the spring, the Moscos know that the Council will not retain the “switchover clause,” which would have made it possible to prohibit certain foreign income exemptions. The commissioner never misses an opportunity to express his disappointment about this before Parliament, where the Left obviously supports this measure. Still, the final result is, by and large, satisfactory to the Moscos. As far as experts are concerned, ATAD is the most significant directive to be adopted in many years. “Tax havens, banking secrecy, it’s easier to explain . . . . But the ATAD directive,” an official argues, “really changes the way administrations operate.” Later, this directive will be supplemented by the ATAD 2 directive, but above all

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

188

  

by another one, the DAC 6 directive, which forces intermediaries, such as financial advisers, to declare the international transactions of their clients that are likely to constitute a form of “aggressive planning.” Tabled in 2017, this directive, also part of the “transparency revolution,” is adopted by the Council and Parliament in May 2018.

The unattainable VAT reform One subject that never disappears from the agenda of a European tax commissioner is the value added tax. “VAT is my passion,” Elena says. Not everyone shares her enthusiasm. The commissioner talks about it as little as possible. The political dimension of VAT is difficult to highlight, and Parliament has little control over it. “To explain what is at stake with VAT,” Maud says with a smile, thinking of the briefing notes she has to write, “I don’t know how many bullet points you need!” “The problem with VAT,” adds David, who replaces Elena in 2016, “is that it’s so complicated. Politicians aren’t interested in it, so they leave it to their VAT experts, who obviously don’t see any point in changing the system.” Since the end of the 1960s, VAT has been considered a national indirect tax subject to some European harmonization. Each country is free to adopt its own rate as long as it lies within a preestablished range and in accordance with the harmonized VAT code. Some exemptions exist, but, to avoid unfair competition, they must be approved by the EU and are even included in the accession treaty for new members. The completion of the single market in 1993 was, in principle, supposed to lead to the disappearance of borders within the EU. Customers would pay VAT on a product or service in the country of origin, and tax authorities would transfer a share to the country of destination. In practice, this “definitive regime” was never adopted, and the EU has been living under a “transitional” system since the 1990s.¹³ However, the transitional system encourages so-called carousel fraud.¹⁴ By creating fictitious intermediaries, a vendor can claim a VAT deduction in the country of origin or transit on the grounds that the product is exported, but never pay the tax in the country of destination; in other words, he obtains a tax refund without paying any tax. This would be impossible under the definitive regime since the tax would be paid in the country of origin. However, some governments, such as Germany, do not trust other countries’ tax authorities, which would have to transfer part of the tax to them. According to Commission figures, €50 billion disappears every year because of VAT fraud. That is why the Commission has prepared a communication and a “political” (i.e., relatively nontechnical) action plan on the reform of the VAT system. “We want it to be digestible,” I am told. In April 2016, the Commission presents this action plan, Towards a single VAT area in the Union, which includes a communication entitled Time to decide.¹⁵ It

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

   

189

includes several initiatives of a more or less administrative nature: on e-commerce, reverse charge, reduced rates, etc. Officials and observers alike have long anticipated this moment. The arguments are solid and well-founded. However, the dossier is not moving forward. At the end of 2016, the TAXUD director-general is already beginning to have doubts. “We wanted to raise the level, to politicize more,” he explains. But we didn’t have the time. VAT is something complicated. It’s harder to attach it to a politically charged message, even though we have more tax evasion on the VAT side than on the corporate tax side. The solutions are difficult to implement. There’s no appetite, especially among the Germans. I feel stuck, to tell you the truth. In 1993 they devised a transitional system. Here we are, in 2016, preparing the definitive regime for 2017—twenty-five years! That makes me optimistic for Brexit.

“Will the plan be adopted in 2017?” I ask. “Hmm. The system is a good idea, but I’m not optimistic politically. On some things we can hope to move forward before 2019.” A few months later, David tells me, “I recently renovated my roof and found a brochure in my attic dating from 1997. [It was entitled]: ‘The definitive system, we’re close to the goal!’ Eh ben . . . ” If anything, the goal now seems to be getting further away.

Europe’s fault Exemptions requested by some member states are another VAT-related issue that comes up routinely. Consider the tax on tampons. The women’s movement has made this a political issue in the UK. It is true that taxing tampons is a form of gender discrimination. The Commission is not against the idea of granting a VAT exemption, except that these sorts of sanitary items are not on the list specifically requested by London when it joined the EU in the 1970s. In order to abolish the so-called tampon tax, a comprehensive list of products subject to reduced VAT in Europe would have to be produced. This amendment would require the approval of all member states—a long and complicated process. Instead, the Moscos’ preferred option is to enshrine the principle that each member state chooses which products it applies a reduced rate to. In other words, they want to abolish the list of reduced VAT. “It’s ridiculous,” Elena explains. We spend months preparing infringements on the six countries that don’t tax children’s nappies. So I think we’re going to abolish the list of reduced VAT [negotiated at the time of accession] and let the states do what they want. This is

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

190

  

what several states are asking for in individual cases, and it will please the people. But, in fact, states do not really want that, because they will no longer be able to resist lobbyists’ demands for special VAT rates. Today, they can say, “It is Europe’s fault.”

During a meeting with a British Green MEP who came to talk to him about the tampon tax, the commissioner takes up Elena’s argument. He does not want to change the list of reduced VAT, but rather to abolish it. “I am in favor of a very high degree of subsidiarity,” he explains. “Establishing a new list would be a pain in the ass. But there are conflicts within the member states. I saw this when I was finance minister. Member states resist flexibility because they cannot resist their lobbies.” Indeed, even if there is agreement in principle in the Council, several ministers are reluctant to abolish the common list of reduced VAT. As it stands, this legal constraint protects them from the demands of various interest groups. Without a common list, governments will no longer be able to blame Europe when they are asked to reduce the tax on a product or service. In October 2017, the new rules of the definitive system are ready and made available to the public. The Time to decide communication is followed in 2017 by Time to act.¹⁶ Faced with a frustrating situation in the Council and a Parliament that seems disinterested, the Moscos have only one ally: citizens’ groups. In order to raise public awareness, Maud organizes a viewing at a Brussels cinema, the Bouche à Oreille. Two independent directors, Bø Elkjaer and Sander Rietveld, present their documentaries on VAT carousel fraud, tax evasion, and such issues as the financing of terrorism. The commissioner is present at the screening and talks with the journalists. Maud is proud of this event, which takes her out of the usual institutional channels. But it has to be said that the VAT code remains a confidential matter. Two months later, the commissioner tables the VAT package, which combines the definitive regime and the abolition of the common list of reduced rates. Member states will be able to choose their own rates. If adopted, the scheme will not enter into force before 2022. But Berlin drags the discussions out. “We’re fed up with the Germans!” says one staffer. After 2017, this is a sentence I hear more and more often during my time in the cabinet. And sure enough, this dossier remains unresolved at the end of the commissioner’s mandate. *

*

*

Initially neglected or even despised, taxation gave the commissioner his greatest political victories: the end of tax rulings, the end of banking secrecy, the list of tax havens, the anti-tax-avoidance package. From this point of view, the partial failure of the definitive VAT regime is the lesser evil. Taxation is an issue of justice and efficiency, a subject that appeals to the Left and that can sometimes rally the Right.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

   

191

The scandals that have marked public opinion, the mobilization of civil society, and the maturing of certain projects enabled the commissioner to launch proposals and get several of them through. Despite the unanimity rule, there was no great conflict between national governments, which, despite their fiscal idiosyncrasies, found it difficult to push back publicly on tax evasion and fraud. To conduct political work, the European Parliament was a convenient partner which, from the Center-Right to the Far Left and with strong support from the S&D, always welcomed the commissioner, pushed him to go further, and acted as a relay for his proposals. While cabinet members and civil servants worked with the member states and the Council, political assistants forged alliances with journalists and parliamentarians who could support the commissioner and spread the message. To go further and get around the veto points, however, it would have been necessary to switch taxation to the “ordinary legislative procedure”—that is, qualified majority voting in the Council. At a talk in November 2018 before the Friends of Europe association, the commissioner takes stock: We have done more on taxation in one area: tax evasion and transparency. I am very proud of that. I did not expect this. We have done a lot. But the financial transaction tax, the energy tax, which is crucial, we cannot do that. That’s why I will [soon bring] . . . a proposal for qualified majority voting. It will not be adopted, but it will be my legacy. Qualified majority voting is vital. Otherwise we will always be blocked by one country [or another].

However, there is resistance from commissioners who find this proposal too bold, even provocative. After a debate in the College, President Juncker decides in favor of it. Rumor has it that he said, “only fools can oppose this communication.” Two months later, the commissioner therefore presents one of his latest proposals on the transition to qualified majority voting in taxation, Towards a more efficient and democratic decision-making in EU tax policy.¹⁷ The ulterior motive is to convince political parties to incorporate qualified majority voting on fiscal matters into their electoral platforms, with a view to shaping the legislative agenda of the next Commission. “Are we going to make it this time? I think it will be an issue—not the main issue—for the election and that it will stay on the table,” David hopes.

Addendum: Brexit, a nonpolitical issue “Décidez les premiers, messieurs les Anglais” Administered by DG TAXUD, the customs union is also under the commissioner’s remit. Seen as a technocratic issue, customs only emerged late in the cabinet’s

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

192

  

life, and it was not subject to much political work. From 2015 to 2016, I believe I only heard about it once, during a visit the commissioner made to a Dutch port. After the Brexit referendum in June 2016, and especially after the invocation of Article 50 by Prime Minister Theresa May in March 2017, the customs union, however, becomes a key issue in the negotiations between Brussels and London.

Brexit and the customs union The main question after the Brexit referendum is which continental architecture the United Kingdom will remain part of. There are three options: (1) the outright withdrawal of the United Kingdom, which would then be considered as a third country bound by a free trade agreement; (2) maintaining the United Kingdom in the internal market with its four freedoms of movement (goods, services, capital, and persons); and (3) between these two options, the participation of the United Kingdom in the customs union, which would force it to apply European customs duties but not European regulations in general. In the Commission, Michel Barnier conducts negotiations in complete secrecy— a traditional characteristic of diplomacy. A former commissioner and former French foreign minister, this Gaullist leads a team that succeeds the task force of Jonathan Faull, a British-born European civil servant who had negotiated with David Cameron’s government the institutional reform that British voters ultimately rejected in the referendum. The negotiations cover a wide range of topics, from budgetary issues (how much the UK will have to contribute to expenditures already incurred under the multiannual financial framework ending in 2021) to the rights of EU nationals on British territory after the UK’s withdrawal. According to the treaties, an exit agreement must be reached within two years of Article 50 being triggered (i.e., before March 29, 2019). For Michel Barnier, whom I interview in March 2017, “this will be a considerable event that many people underestimate. In two years’ time, the United Kingdom will be a third state. There will be a general unravelling of relations between the United Kingdom and the European Union. I think we’re talking about this very lightly . . . ” In November 2017, a first memorandum of understanding is signed by both parties. Setting out the parameters of the future exit agreement, it insists on three EU red lines: a British contribution to the European budget during the transition period, respect for the rights of European citizens in the United Kingdom and of British citizens within the EU, and the absence of a physical border between the Republic of Ireland, which will remain in the EU, and Northern Ireland, which will leave along with the United Kingdom. This last condition, which few observers had anticipated, is imposed by Brussels in order to secure the 1998 Good Friday Agreement between Protestants and Catholics in Northern Ireland and between the Republic of Ireland and the United

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

   

193

Kingdom. A major source of conflict among British political forces in Westminster, it also becomes the main bone of contention between London and Brussels, which supports Dublin’s position against a physical border.

The cabinet in observation mode Presented as an essential condition for the preservation of peace in Ireland, the absence of a physical border is, technically speaking, a customs issue. Hence the involvement of the Moscovici cabinet through Maud, who liaises with Michel Barnier’s team. Between 2017 and 2019, her functions become more important. As a British citizen who was shocked by the result of the referendum (and perhaps by the fact that some members of the cabinet seem to be happy about it), Simon is also a valuable source of information on political developments in London. DG TAXUD’s chief executive, Stephen Quest, is also British; it is decided that the analysis he provides to the task force will not be shared with the cabinet. Without being able to reveal all the secrets of the negotiations to which she herself often does not have access, Maud keeps me updated. Initially, she believes that a soft Brexit is emerging. In this scenario, the UK will continue to be part of the internal market, but on its own terms. In the autumn of 2016, it is not certain that Europeans will remain united against the British government. Many observers believe that the UK will use these divisions to impose its preferred positions, which will lead to a weakening of the EU. “I’m afraid we’ll chicken out and sacrifice the four freedoms,” Maud tells me. But on the contrary, Merkel convinces EU leaders that the single market is nonnegotiable: either the UK participates in the four freedoms of movement that are part of the internal market or it gets none. For Europeans, this will remain a red line. As Michel Barnier explains, “Brexit is part of other events—migrants, the geopolitical context . . . . It has given the EU a real jolt. European leaders are certainly very vigilant. They are more united than I would have thought.” President Juncker’s chief of staff, Martin Selmayr, agrees: “The unity of the twenty-seven is more important than getting a deal with the United Kingdom.” On March 29, 2017, Theresa May notifies the EU through Article 50, which opens exit negotiations. She sets out her own red lines: no to the internal market, no to the customs union. I am in the Berlaymont during this period; every day, a new technical pitfall is discovered. “Yesterday, it was passports for cats and dogs,” Olivier complains in a mocking tone at a cabinet meeting. In June 2017, May triggers early elections. She comes out of the campaign with a minority government, the Democratic Unionist Party making the government pay dearly for its support. The proposal she submits in July—the so-called Chequers plan—provides for UK access to the internal market for goods and “customs arrangements” that avoid a physical border between Northern Ireland and the Republic of Ireland, but

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

194

  

also between the island and the rest of the United Kingdom. Badly received in London, Chequers is considered impractical in Brussels. Meanwhile, the Commission refines its contingency plan. It includes the possibility of a no-deal Brexit, even if Brussels does not communicate that point publicly. The customs code is part of it: Which tariffs should be applied? On which products? “The objective,” Maud explains, “is to ensure that the customs aspect does not come back to haunt us.” No one knows how to put in place customs arrangements that would not amount to reestablishing a physical border, either within Ireland or between Ireland and the rest of the United Kingdom. It all depends on whether or not Northern Ireland is integrated into the customs union. If it is not, it will be necessary to establish controls with the Republic of Ireland to charge import duties and to check the compliance of products with phytosanitary rules: so, a physical border, which the EU rejects. But if Northern Ireland is included in the customs union, this will involve border controls between the north of the island and the rest of the UK, which the British reject.

The backstop, a political issue . . . in London and Dublin Hence Theresa May’s idea of keeping the whole of the United Kingdom in the customs union for a transitional period. Brussels accepts in principle but, in order to ensure its credibility, requires a backstop, which will guarantee this arrangement as long as an agreement on future relations between the UK and the EU is not signed. On November 14, 2018, London and Brussels reach a technical agreement on divorce. It is based on the principle of a customs union between the UK and the EU. “Our focus,” Olivier explains in a cabinet meeting, “is the backstop if we don’t have a future agreement. This is our insurance policy. We have the principles, but practically we don’t know how to do it. The implementation makes me the most doubtful.” A technical problem in Brussels, the backstop is a political bomb in Westminster, where the draft agreement is rejected three times by Parliament during the winter of 2019. Several members of Theresa May’s own party see the backstop as an affront to British sovereignty: since it has no expiry date, it means that the customs union could apply indefinitely to the UK. Faced with the stalemate in London, May resigns in June 2019. She is replaced by Boris Johnson, who promises an effective Brexit. Intensive negotiations take place in October in Brussels. They are concluded at the European summit of October 17–18, 2019 with a new formulation of the November 2018 clauses on the customs union. Northern Ireland will not be part of the European customs union but will be integrated into a “European regulatory area” aimed at facilitating trade in goods. In other words, British customs duties will be applied in Northern Ireland, but health and regulatory controls will be carried out between the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

   

195

United Kingdom and Northern Ireland, thus avoiding the reestablishment of a physical border on the island. However, the agreement is again rejected by the British Parliament on October 19. There are twelve days left before the October 31 cutoff date, and Boris Johnson does not want to ask for a new deadline. At the Monday cabinet meeting, the agenda is light. Olivier asks Simon, Maud, and Vanessa, a member of the Spokesperson Service, to sum up the situation. Everything indicates that Boris Johnson is going to call an early election on the agreement. Unable to get the agreement adopted by Parliament, he asks for an extension to allow for parliamentary elections. Held on December 12, 2019, the vote gives him a comfortable majority. In line with his campaign slogan, Johnson now has a mandate to “get Brexit done” by January 31, 2020.

Notes 1. Liesbet Hooghe and Gary Marks, “A Postfunctionalist Theory of European Integration: From Permissive Consensus to Constraining Dissensus,” British Journal of Political Science 39, no. 1 (2009): 1–23. 2. Gabriel Zucman, The Hidden Wealth of Nations (Chicago: University of Chicago Press, 2015). 3. Henning Schmidtke, “The Differentiated Politicisation of European Tax Governance,” West European Politics 39, no. 1 (2016): 64–83; Rasmus Colin Christensen, “The Rise of the EU in International Tax Policy,” in Global Networks and European Actors: Navigating and Managing Complexity, ed. George Christou and Jacob Hasselbalch (London: Routledge, 2019). 4. Fabio Wasserfallen, “Contextual Variation in Interdependent Policy Making: The Case of Tax Competition,” European Journal of Political Research 53, no. 4 (2014): 822–39. 5. See Giandomenico Majone, Regulating Europe (London: Routledge, 1996). 6. Philipp Genschel and Markus Jachtenfuchs, “How the European Union Constrains the State: Multilevel Governance of Taxation,” European Journal of Political Research 50, no. 3 (2011): 297. 7. Lukas Hakelberg, “The Power Politics of International Tax Co-operation: Luxembourg, Austria and the Automatic Exchange of Information,” Journal of European Public Policy 22, no. 3 (2015): 409–28. 8. Peter Dietsch, Catching Capital: The Ethics of Tax Competition (Oxford: Oxford University Press, 2015); Lukas Hakelberg, “Coercion in International Tax Cooperation: Identifying the Prerequisites for Sanction Threats by a Great Power,” Review of International Political Economy 23, no. 3 (2016): 511–41. 9. Christensen, “The EU in International Tax Policy.” 10. The package is available at https://ec.europa.eu/taxation_customs/business/companytax/anti-tax-avoidance-package/anti-tax-avoidance-directive_en 11. Thomas Rixen, “From Double Tax Avoidance to Tax Competition: Explaining the Institutional Trajectory of International Tax Governance,” Review of International Political Economy 18, no. 2 (2011): 197–227.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

196

  

12. Lucinda Pearson, “Transparency International EU Outraged at Failure to Break Council Deadlock on Tax Transparency,” Transparency International EU, November 28, 2019, https://transparency.eu/transparency-international-eu-outraged-at-failureto-break-council-deadlock-on-tax-transparency/ 13. Philipp Genschel, “Why No Mutual Recognition of VAT? Regulation, Taxation and the Integration of the EU’s Internal Market for Goods,” Journal of European Public Policy 14, no. 5 (2007): 743–61. 14. See the investigation by the journalists’ collective CORRECTIV, “Grand Theft Europe: A Cross-Border Investigation,” CORRECTIV, May 7, 2019, https://correctiv.org/ en/top-stories-en/2019/05/07/grand-theft-europe/ 15. Communication to the Parliament, the Council and the EESC, COM (2016) 148 final, April 7, 2016, https://ec.europa.eu/taxation_customs/sites/taxation/files/com_2016_ 148_en.pdf 16. Communication to the Parliament, the Council and the EESC, COM (2017) 566 final, October 4, 2017, https://ec.europa.eu/taxation_customs/sites/taxation/files/ communication_-_towards_a_single_vat_area_en.pdf 17. Communication to the Parliament, the Council and the European Council, COM (2019) 8 final, January 15, 2019, https://ec.europa.eu/taxation_customs/sites/taxation/ files/15_01_2019_communication_towards_a_more_efficient_democratic_decision_ making_eu_tax_policy_en.pdf

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

9 Tax justice The GAFAs and corporate taxation

During the 2017 French presidential campaign, Emmanuel Macron pledges to tax the GAFAs (Google, Apple, Facebook, and Amazon). Once elected, his finance minister, Bruno Le Maire, announces that France will impose a turnover tax on digital firms that pay almost no corporate tax in Europe. Arguing for the need to avoid a patchwork of national initiatives, but responding above all to pressure from Paris, the Commission enters the fray. Digital taxation is harnessed to resurrect an older and more ambitious dream: a level playing field for corporate taxation in Europe. Be they Parisians or Brussels people, the Moscos are excited by corporate taxation, especially digital taxation, which carries the promise of greater tax justice. They spontaneously understand it as part of a progressive and modern—“socialdemocratic,” as the commissioner calls it—fiscal policy. In 2015–16, the commissioner surfed on a wave of political momentum toward tax transparency. According to one observer, the EU “moved from an embryonic expert setting to a highly heterogeneous, contested, and unstable setting with broad public and political involvement.”¹ In his effort to bypass veto points, the commissioner had a strong ally: the European Parliament, where almost all parties, not to mention public opinion, were in favor of transparency. Can the Moscos replicate the political work they did on transparency in the area of corporate taxation? Of course, Parliament cannot force the Council to act, but it represents a European public that is highly receptive to issues of tax justice. In particular, the commissioner mobilizes an alliance of social democrats, Greens, and some liberals and conservatives to support his agenda. Assistants help him enlist sympathetic MEPs and the media. However, several governments stand in the way. They have friends within the College, where some conservative and liberal commissioners play the role of business advocates. Above all, however, the joint opposition of low-tax countries and governments concerned about a negative reaction from the United States leads the Council to put corporate tax on the back burner. In a fraught diplomatic and institutional context, many governments are tempted to shift the debate to the more US-friendly OECD and to the global G20, taking away from the commissioner what could have been one of his greatest achievements.

The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0010

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

198

  

Harmonizing corporate taxation rules Although the EU can harmonize tax rules, it does not levy its own taxes, either on individuals or firms. This results in significant differences in tax systems that favor competition between member states, and thus tax-optimization strategies on the part of multinational firms. Many of them have established their headquarters in Ireland, where they negotiate lower taxes, depriving other countries of revenues to which they would otherwise be entitled. Attractive to both federalists and the Left, the idea of a European corporate tax has never really been on the agenda. Instead, the Commission proposes a Common Consolidated Corporate Tax Base (CCCTB). The CCCTB is common because the corporate tax base (sales, assets, employment) is calculated in the same way in all member states, thus avoiding the manipulation of deductions and exemptions. It is consolidated in the sense that, although each country can determine its own tax rate, a firm’s overall tax is distributed according to the firm’s geographic activities; it can no longer be paid entirely in the country that has the lowest rate.² With the CCCTB, the aim is not to harmonize rates, but to prevent a company from shifting its profits from one country to another. When the Barroso Commission first submitted the project in 2011, it was killed almost immediately by the resolute opposition of a number of member states.

The relaunch of the CCCTB The commissioner wants to use tax scandals (see chapter 8) as an opportunity to relaunch the project. As early as June 2015, he submits a communication entitled Action plan for fair and efficient corporate taxation in the EU.³ The CCCTB is at the heart of this action plan. The political context seems more favorable than in 2011. “LuxLeaks was the trigger,” MEP Alain Lamassoure remembers. “This boring subject became a matter of public interest from one day to the next. So, vive émotion! It was an unhoped-for opportunity for us to get the CCCTB out of the fridge, and Pierre presented it in a slightly different way than in 2011 to save the face of the finance ministers.” Hoisted to the top of the Commission’s agenda, the proposal reawakens ambitions and arouses enthusiasm, especially among civil servants. One of President Juncker’s advisers recalls the “250,000” e-mails he exchanged with the Moscovici cabinet and DG TAXUD. “At TAXUD,” he explains, there was great frustration. They had an agenda but because of the political vetoes they no longer had an appetite. The services, at the beginning, told us, “But we already tried!” They had to be re-energized. Now we have to make it digestible

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

199

for the politicians. We’re starting modestly. We’re aiming for a common base within twenty years. In 2011, they had come with a masterpiece but . . .

This time, the Moscos and DG TAXUD officials believe, it is more difficult for recalcitrant governments to oppose tax justice, especially when it is presented as “pro-business.” Their argument is that firms should like having a one-stop shop and a level playing field. However, the issue remains thorny since the adoption of the CCCTB depends on unanimity in the Council, starting with the Eurogroup comprised of eurozone finance ministers. Even though the Eurogroup president, Jeroen Dijsselbloem, is a Labor Party politician, he is also the finance minister of a country—the Netherlands—that is often accused of unfair tax competition. The same goes for Luxembourg, run by socialists who do not like corporate tax so much. After a good start, the dossier stalls. At the end of October 2016, the commissioner finally submits the draft CCCTB directive, which is, as usual, part of a legislative package. After being approved by chefs de cabinet during the hebdo, the text must be adopted by the College and then presented to Parliament on the same day. At the cabinet meeting, Olivier orchestrates the media strategy: “So adoption tomorrow, presentation to Parliament at 6:30 p.m.” “It’s late for the media, they will be unhappy,” regrets Vanessa, from the Spokesperson’s Service. “Didn’t we agree to give Parliament the scoop?” Olivier asks. “The API [International Press Association] wants us to announce it on the day of the adoption. Well, we’ll publish as soon as [we can] after the College and we’ll put the speech under embargo, ‘check against delivery?’ ” (Written speeches are often shared with journalists beforehand, but only the oral delivery can be quoted.) “There will be three moments: the press material, Pierre in Parliament, and the press conference on Wednesday. Journalists will have had time to read and they will have more difficult questions. But then there will be less interest for budget opinions [which are to be presented on the same day].” “Faisons contre mauvaise fortune bon cœur [Let’s make the best of a bad situation]. Le ‘teasing’ [said with a French accent] can take place ahead of time, it’s going to be fine. Is there really no point in talking to Ryan [Heath, of Politico] about the CCCTB for his Playbook? It’d be nice if he talked about it . . . ” For some time now, Politico’s Brussels Playbook e-mail newsletter, a daily mix of gossip and policy intelligence, has become the media reference in Brussels. Simon doesn’t seem convinced that it would be useful. “Yes,” Olivier insists, “that would be useful! A ‘pro-growth, anti-avoidance package’ is a good sound bite.” “On taxation, Pierre has done more in two years than the whole Commission has done in fifteen,” Elena agrees.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

200

  

“There are things we can say and things we can’t say,” Olivier reminds her. “It’s better if it’s the others who say it. Pierre, for his part, has to talk about ‘all that remains for me to do.’ ” After the package is presented to Parliament, Olivier asks David, who went along with the commissioner, whether the presentation went well. “On the whole, yes. In plenary he was applauded before he even started. There were only the usual mauvais coucheurs [the Greens, part of the Left].” Olivier affects a nasal voice: “It’s not enough!” Laughing, David reports the words of a UKIP MEP who said that the CCCTB was good for the UK because it would “wreck [the EU’s] tax system.” “So we need a defensive for the Times,” Olivier concludes.

Business-friendly tax justice At 11:00 a.m., much of the cabinet goes downstairs for the press conference. The slogan is displayed on the stage: “corporate tax reform: pro-business, antievasion.” As usual, the commissioner begins in French before switching to English. He highlights his achievements and his motivation: When I took office two years ago, I indicated that I wanted to reform the tax system to make it fairer and more efficient. We have come a long way in pursuit of this ambition. This can be measured by all the barriers that have fallen: most importantly, the end of banking secrecy, but also the transparency of tax practices. We have an obsession: that multinationals pay their taxes where they make their profits. This is a citizens’ demand.

Then the commissioner underlines the “pro-business” dimension of the CCCTB: The scandals gave us a boost. First we tackled the champions of tax evasion. Now is the time to help all companies that pay their taxes. There are too many obstacles in the way. The principle is simple: a single declaration, a single tax administration—in short, a major simplification for business.

Opponents must be reassured: This project does not threaten tax sovereignty. First, we are creating the common base; one year later, consolidation. We go step by step.

When tabling a package, mentioning the consultations that the Commission carried out is now de rigueur: We have adopted a two-step approach. We have listened and learned, we have taken concerns into account.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

201

Finally, the commissioner hammers home his key message, the “transparency revolution”: My message to the member states is this: let us seize this opportunity quickly to put in place a more efficient and fairer tax system. This is the transparency revolution. This is a business-friendly proposal, not an anti-competition one. Some might want tax harmonization, but we are not there yet. They will be disappointed, others will be reassured.

Circumventing obstacles It is already clear that, while the adoption of common rules seems rather consensual, some governments are opposed to the consolidation of taxable income, which is postponed for one year. They are in no hurry to share their tax base with others. In March 2017, Elena gives me an update: We separated the common tax base from consolidation because the unicum text was blocked by those who don’t want consolidation: Ireland, small countries . . . So we said, “We can at least agree on the common base, we take consolidation out of the proposal and we can discuss it calmly. If consolidation can’t be adopted, then we go through enhanced cooperation.”

On tax issues, partisan conflict is not as salient as it is for budgetary surveillance. In the European Parliament, there is a majority in favor of moving forward on tax matters; as is the case at the national level, the Left is naturally in favor and the Right has to deal with public opinion.⁴ As for member states, they define their positions according to specific interests that benefit their national firms or the multinationals they host. For example, Cyprus, although led by a socialist government, is less in favor of tax harmonization than conservative Spain. A DG TAXUD official describes the balance of power in the Council. “Overall,” he explains, the French are allies. Not because Pierre is French but because they are not a tax haven . . . . The Germans are very difficult historically. Luxembourg, the Netherlands, Cyprus, Malta—this whole bunch is negative, but there is international pressure and public opinion. During the Dutch Presidency, Dijsselbloem had to deliver something. We took huge steps. The same thing happened under the Luxembourg Presidency.

In the months that follow, a wave of skepticism nevertheless washes over the cabinet. Unanimity in the Council seems to be out of reach. For small states like Ireland, Cyprus, or Malta, consolidation is of little interest: the tiny tax they

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

202

  

apply to the turnover of a multinational company means a lot of money. The only possible strategy is for big countries to isolate them. “It will be long and unpleasant, but if the big ones hold out, the others will follow,” Alain Lamassoure hopes. “I share a fear with Pierre: that the pressure will subside. Sometimes I think what we need is another scandal. At the same time, if there are too many scandals, people will no longer pay attention. They’ll feel like we’re not doing anything.”

The impatience of some, the veto of others One year after the CCCTB proposal was tabled, the project remains popular in Parliament. On March 15, 2018, MEPs vote in favor of the directive. However, the commissioner has a love–hate relationship with the Greens, who may support him in private but, in public, complain about the timidity of his proposals. In this party, MEPs Philippe Lamberts and Eva Joly are his main interlocutors. A cabinet member tells me, laughing, about the last meeting with the latter: “Pierre lui a foutu une baffe [humiliated her] when she arrived. There were cameras and he said, ‘So, in front of the cameras, are you going to criticize me as usual?’ ” But even the S&D group is getting impatient. At a reception in Strasbourg, I hear several MEPs challenging “Pierre.” “We need to be in the lead of global corporate taxation,” says one. “There is no momentum in the Council and we have to call their bluff,” says another. The commissioner tempers their zeal: “We won many battles in a favorable context. Now we’re getting into more difficult issues. Sharing tax information was a reform on a human scale. To achieve the CCCTB, there will be resistance.” Consolidation remains stalled in the Council. David sums up the cabinet’s growing pessimism: It is not making much progress in the Council because of opposition from Ireland, the Netherlands, and also Luxembourg. The common rules are fine, but consolidation would cost them a lot of money. We do not know how much because the first step would be to give us the information, and no member state government is even ready to do that.

Faced with these veto points, the Moscos come to the realization that the CCCTB will not be adopted by the Council during their mandate. The commissioner’s successful political work in Parliament has not overcome the resistance of a handful of member states in the Council: “We won’t find such a favorable configuration for a long time,” says a staffer. But for Franck, “It still does move the debate forward and could be part of the 2019 campaign. In the meantime, we can test our proposals on digital taxation.”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

203

Digital taxation, EU style In just a few months, digital taxation rose to the top of the European agenda. Even though the Commission, the OECD, and the G20 have worked on the issue for several years, the election of Emmanuel Macron is a game changer. On the campaign trail, Macron establishes a link between GAFA practices and tax avoidance and proposes “a tax on the turnover made in our countries for electronic services.”⁵ Other countries are also beginning to adopt taxes that target US web giants. Macron’s election promise is made more pressing by a legal case in France. Shortly after his victory, in May 2017, Google wins a lawsuit against French tax authorities, which slashed a €1-billion tax adjustment the year before.⁶ The court rules that since the firm does not have a “permanent establishment” in France, it did not have to pay corporate tax there. “Since this ruling,” Maud explains, “the French finance ministry has been putting a lot of pressure on the tax system to change.” Between the OECD, the French government, and the Commission, a FrancoFrench triangle pushes the digital tax agenda globally: the protagonists are Pascal Saint-Amans (head of taxation at the OECD), Bruno Le Maire (Macron’s finance minister), and Pierre Moscovici. Each wants to tax digital companies. But their strategies diverge: France and the OECD would be content with an easy-toimplement turnover tax on the digital giants, while the commissioner insists on a “structural” approach likely to radically transform corporate taxation, thereby ushering in the CCCTB. In September 2017, President Juncker takes up Macron’s demands in his State of the Union speech. Together with other cabinets, the Moscos must prepare and quickly roll out a communication. The result is A fair and efficient tax system in the Union for the digital single market.⁷ It is rather well received: “We prepared it in ten days—it was exciting,” Maud recalls. For us it is a way of testing CCCTB principles. If we get it right, it could make a difference. A kind of precedent . . . ”

How to tax the GAFAs The French and EU proposals address a key challenge of the twenty-first century: because it is based on the principle of a permanent physical establishment, corporate taxation does not adequately take into account activities that rely on intangible assets, such as data. This is even more the case when firms are domiciled abroad: via the Internet, they can sell services or collect data without being taxed at all on their profits.⁸ For example, France cannot tax Google’s profits from the sale of French personal data to advertisers who are themselves based in Ireland or the United States. As a result, the GAFAs are taxed much less than

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

204

  

traditional companies, anywhere from two-thirds to a third of the usual rate, according to the Commission. The communication presents two options: a “targeted” approach, which would consist of an immediate tax on content revenues, and a “structural” approach, which would consist of applying the CCCTB to GAFAs whose establishment would be considered “virtual” rather than physical. In the long term, the Commission prefers the structural approach, which involves reshaping international rules on fiscal presence and double taxation conventions. “The CCCTB is what we want. With the digital world, we have a degree of political attention that we have never had before,” an official tells me. “But it’s going to be a long haul,” a colleague from the cabinet cautions. In the short term, the Commission is open to the targeted approach promoted by France: although it is less efficient, a turnover tax would be easier to adopt and implement. French finance minister Bruno Le Maire has made it his priority, and Emmanuel Macron proposes to turn it into an “own resource” to feed the EU budget. For the commissioner’s entourage, the focus on digital taxation casts him in a favorable light in the struggle against the GAFAs. The Moscos see the “GAFA tax” as “populist in the good sense of the word.” The commissioner, they hope, can use the momentum to bolster his progressive credentials. (In 2018, the “GAFA tax” became a rallying cry of the yellow vest movement in France.) That is why the Commission wants to table legislative proposals sooner rather than later—that is, before the OECD. In principle, the OECD has been working on this issue for quite some time. The Paris-based organization has the comparative advantage of being close to the G20 and of managing the tax treaties that will be affected by a transformation of international rules.⁹ But among the OECD’s members, of course, is the United States, which is opposed to substantial digital taxation. It is no coincidence, then, that the OECD’s proposals are modest, based on advertising revenues. In the Commission, some people criticize the organization for interfering in European affairs. Emulation between the two organizations sometimes borders on rivalry. “Ah, the OECD,” a DG TAXUD official laughs. “I feel so much stronger and so much more legitimate! Here we make law, real law. With the OECD, governments can implement, or not, or pretend that they do.”

Preparing the Council In the autumn of 2017, digital taxation is at the heart of a jour fixe with DG TAXUD’s senior management. Some member states, especially Ireland, say they are being “bullied” by France and the Commission. Many don’t understand why the timetable has been squeezed: Shouldn’t the Europeans wait for the issue to be settled at the OECD and the G20, with the Americans? “Political pressure is increasing,” the commissioner tells his officials.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

205

I have expressed doubts about the targeted approach. I am not sure that it will go any faster. If it is a quick fix, it clearly needs to lead to a structural solution. It must not jeopardize the CCCTB. So I’m asking you, how do we do that? Through enhanced cooperation? Qualified majority? We need to make it clearer, to detechnicize it. The CCCTB is a marvelous cathedral, but it’s not clear what it is . . . . If we could visualize the future taxation of a company, it would be great not only for the citizens but also for me. I already told you: I understand better than 90 percent of people and I still get lost myself. Well, I don’t show it . . .

“It’s the same with me, I’m just pretending,” smiles Steven Quest, the directorgeneral. “That’s why you’re the director-general,” the commissioner replies. “You have to explain to the citizen what we have today and what we would have tomorrow.” “The targeted solution, we know how to do it,” a DG TAXUD official adds. It generates revenue and it is compatible with the treaties. We can calibrate the tax so that it is not VAT, geolocalize turnover . . . . The real question is, do we do it just to do it or to put more pressure on what we really want to do, [that is,] the long-term solution? Getting short-term revenue, that’s what the French want. But it doesn’t help us to deepen the EU’s internal market.

“Is it impossible to do both at the same time?” the commissioner asks. “A new tax that would also set a precedent? Because we if ask the question like you do, the answer will be easy [getting short-term revenue]. What I mean is that the thing needs to be powerful enough so that it does not look ridiculous.” “Anyway I’m not sure there’s a difference,” Olivier interjects. “Both options require unanimity. There’s pressure to move fast from some member states, but it could get bogged down in the Council. We’re going to run into a political problem. For the moment we are face to face with a few states that are putting pressure on us.” Indeed, like all tax issues, both the targeted and the structural approach will have to be adopted unanimously in the Council. On the digital front, the Moscos face the same opposition as they did with the CCCTB (Ireland, Cyprus, Malta, Luxembourg) but also Scandinavian countries, who do not want to penalize startups and consumers. To get around this obstacle, some people in DG TAXUD push for a bold strategy, that of moving to qualified majority voting on tax proposals. This requires a change in the “legal basis,” which has to be approved by the EU’s legal advisers and accepted unanimously by the member states. Article 116 of the treaty provides that qualified majority voting is possible if the aim is to eliminate competitive distortions due to disparities in tax rules. As far as Director-General Steven Quest is concerned, “It’s getting tactical, political even. Should we provoke the member states? Tell them, ‘You cannot at the same time veto with unanimity

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

206

  

and veto the use of an innovative legal basis’? With a decision on the scope and the legal basis, we could move forward fairly quickly.” “In the Council, seven or eight governments will veto,” Olivier reckons. “We can approach these seven or eight to tell them, ‘We will not go with Article 116 and qualified majority yet; if you want to avoid it, help us get to a structural solution, the CCCTB.’ Ireland, Luxembourg—we must bring [these countries] back to us or we will always run into them.” “We have no right to bad faith or laziness,” the commissioner says. “We have to keep a certain ambition while walking a fine line. The right output at the end of the day is a short-term solution that facilitates the CCCTB in the long term. That would be a political success. Otherwise it’s going to be a meaningless piece of shit.” “Article 116 is not a magic wand,” Steven Quest warns. “It can provoke opposition from others. Same thing with the scope: if you limit it, it’s easier to go fast. But if it’s too limited, we won’t be able to do anything substantial. If the Council doesn’t move fast enough, at least we will have acted ‘in good faith.’ I retain that term.” “Of course, we have to act in good faith,” the most experienced DG TAXUD official intervenes, “but we must also be careful not to pile on robust proposals that are never adopted. We could have the CCCTB, the spinoff, digital taxation, lots of smart proposals that everyone will understand but that the Council will never adopt—zero impact. If our interlocutors are not pushed . . . some member states [will] poison the discussion—” “Who do you mean?” the commissioner interrupts. “Luxembourg, Malta, Cyprus, Ireland, who talk all the time about sovereignty. The Netherlands and Belgium are changing, but—” “How can we stop them?” “France is going to hit them like crazy,” Olivier says. “We have to let France brutalize them, and then we’ll let them come to us.” The commissioner doesn’t seem convinced: “Bruno Le Maire and I had a disagreement. The French talk about something for two weeks and then they take it back. I spoke to them yesterday and asked them for specific proposals . . . . I also asked them to be a little less pushy.” The day after the jour fixe, I ask a couple of the participants if they thought the meeting was conclusive. One pretends to be dying: “Aaaarrrghh . . . ” “We do as we said we would,” the other smiles, repeating an expression I often hear at the end of an unproductive meeting. What should they focus on? I ask. The targeted approach? The structural one? Neither the director-general nor the commissioner expressed a clear preference. “What are we going to do? But we’ll do both of course!” exclaims David. The targeted and the structural. The problem is that we don’t yet know how we’re going to “structure” the “targeted.” I’m going to push for a recommendation, so

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

207

we don’t have to waste three years in the Council [which could be the case with a directive, a legislative proposal]. Some governments will not implement it. Then we will be able to say, “Well, we are seeing competitive distortions, this justifies using the ordinary legislative procedure [i.e., qualified majority voting on a different legal basis].”

In any case, the Commission’s proposals must be adopted by the finance ministers in December 2017 and submitted to European leaders in March 2018. In April, they must “converge” with more modest OECD proposals at the G20 summit. “That’s why we have to push our package forward,” Olivier explains.

“Give the French the means to tax Google” During the winter of 2018, David gives me an update. The proposal has not yet been written—some are still pushing for a directive (a law that must be transposed by the member states), others for a recommendation (unenforceable)—but work continues on the methodology. With the structural approach, governments could force digital firms to share data on contracting and user interactions. The methodology would apply to social networks (e.g., Facebook), search engines (e.g., Google), and marketplaces (e.g., Airbnb) that collect and resell data, but not to subscriptions or transaction-based e-commerce. The EU would determine each member state’s share of the taxable revenue, which would in turn decide their tax rate. The targeted approach, more rudimentary, would have a smaller but faster impact: it would be a tax on turnover rather than profits. “We will try to get it passed before Parliament enters in recess,” David explains. “The principle of this Commission is that no business should be left unfinished. This is the excuse we are given to prevent us from bringing forward anything after May [2018, when the Commission, in its final year, will stop submitting legislative proposals]. In theory, it could be done. In practice, it’s going to be complicated.” “Are you confident?” I ask. “No. But as soon as we make the proposal, we will have changed the rules of the game . . . . If today a member state wanted to apply a tax like that, it could be deemed incompatible with EU law. Our tax will be compatible and if member states want to apply it early, the Commission will not need to prosecute them. The aim is to avoid internal market fragmentation.” The Moscos’ initial enthusiasm, when some thought they could get the CCCTB in through the back door, has subsided. In the short term, the mindset is one of pragmatism. The commissioner meets with the CEOs of major digital firms to reassure them of the modest cost of the proposed tax. Meanwhile, the official in

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

208

  

charge of the file at DG TAXUD is “having a blast.” The challenge, he explains, is to establish who has sovereignty over data: What we want is to establish the principle of fiscal geolocation to completely transform the way we tax. I just went before the regulatory scrutiny board, which asked me questions about the burden on business. The burden! There is such granularity of information in what digital firms are already collecting! The auditors themselves are impressed by what they have. They’re just going to have to open up their data as they’re asked to open up their books for auditors. Then, of course, common reporting standards will have to be developed. With the targeted solution, we are opening the way.

However, he, too, doubts that the Commission’s proposals will be adopted during the current mandate: What we are trying to do is to make a directive that is conceptually disruptive: disruptive innovation. We are setting up a legal framework for those member states who want to implement a tax in their own countries without the agreement of the others. We are going to give the French the means to tax Google, which will then ask its Irish headquarters to deduct it from its accounts. That will cause a mess. Right now, it’s too easy for the GAFAs; America is strong, Ireland has a vested interest to keep things as they are . . . . We want to instill legal and political insecurity, to sow doubt.

Skepticism in Washington On March 21, 2018, the Commission tables its “digital tax” package, which includes two directives. The first is an interim tax of 3 percent on the revenues of data-collection firms whose turnover exceeds €750 million at the global level (and €50 million in Europe). This is the targeted approach. With the second directive, the Commission proposes to broaden the definition of permanent establishment to include the number of interface users and signed contracts. This is the beginning of a structural approach. “My battle until November 2019,” the commissioner explains, “will be taxation. We need to convince twenty-eight member states, so I will be very active between now and the end of my mandate. My Luxembourg and Irish friends? In fact, they hate me . . . . But I have bitten the bone and I am not going to let it go.” In April, I join the commissioner on his trip to Washington. Venue for the IMF’s Spring Meetings, the US capital is the ideal place to talk with business and policy leaders. At each of the bilateral meetings held in preparation for the G20 summit in Buenos Aires, the commissioner raises digital and corporate

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

209

taxation. He highlights recent EU proposals and, from Argentina to South Africa, seems to find several allies. Unsurprisingly, the United States is standing firm against his proposals. While not closing the door to a long-term structural approach, US treasury secretary Steven Mnuchin opposes the targeted approach that will mainly affect US digital firms. The commissioner also meets members of the American Enterprise Institute, a think tank close to the business community. The room is packed, the presentation is informal. The commissioner begins without preamble: The digital economy brings unprecedented challenges. Corporate taxation has not been able to keep pace, and there is a gap between where profits are generated and where they are taxed. It is a question of fairness, but also of securing our tax bases. Ideally, this discussion should take place at the global level and tonight we will have a G20 meeting where we will discuss this. My message here is that our proposals do not target the United States. We are pushing for a global approach. But progress at the international level does not make me optimistic. Our aim is to give impetus to the global debate while avoiding market fragmentation in Europe. We want to capture new forms of value creation such as user participation. Our flagship proposal is the CCCTB. We have also put forward something more spectacular but less fundamental. It is an interim turnover tax, a tax on digital services, to avoid the risk of a proliferation of measures that would undermine market competition.

Following his presentation, the commissioner participates in a tough Q&A. His interlocutor argues that the targeted (“spectacular”) approach is a hidden import tariff on US technology companies, which contravenes World Trade Organization rules. “I cannot deny that the United States is a leader, but,” the commissioner insists, “our tax is not anti-GAFA, it is not anti-American. We need a targeted approach because we cannot wait. Interim means interim. You know Alien, the movie? I don’t want to create a monster. We’re going to raise €5 billion. It’s significant but it’s not monstrous. It’s not going to kill anyone.” Someone in the room is worried about adding a third tax on top of VAT and income tax. The commissioner agrees it’s a problem, but points to national initiatives that risk fragmenting the single market. “We will ensure that there is no double taxation. But if we don’t do the interim tax, member states will.” He then concludes by sharing his analysis of diplomatic dynamics in the Council: It is no secret that Ireland and Luxembourg are reluctant. Unanimity is not yet there. For those who fear the tax, there is hope! The press only talks about the reluctant countries, but in fact there is very strong support: twenty governments support us, the other eight not yet. We need to invest a lot of political capital

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

210

  

and energy. Our proposals are never take it or leave it. There is a reasonable chance—or a risk! [he smiles]—that the proposal will be adopted.

Dithering in Berlin Had they been able to predict events in the second half of 2018, the audience at the American Enterprise Institute would not have been too worried. Digital taxation gets bogged down in the Council. My interlocutors describe the situation at ECOFIN, where there are three main groups. Championing the digital tax are France and the Commission. Four governments are against: Ireland, Luxembourg, Denmark, and Sweden. And two hesitate: Malta and Finland. “The Nordic countries,” I am told, “do not want to irritate the Americans and fear for the development of digital business. They are not going to pull out the bazooka for a symbolic proposal.” But the real worry now is Berlin. Although Germany was initially in favor of the measure—Wolfgang Schäuble had even signed a letter of support—it is now changing course. According to my informants, the new finance minister, Olaf Scholz, is following in Schäuble’s footsteps, but Angela Merkel does not want to offend Donald Trump at a time when Germany is in the midst of a trade battle with the United States. Shifting the discussion to the G20 and OECD is one way for the Germans to avoid a sensitive subject. Olivier worries: “As long as we don’t bring Germany back to us for good [the commissioner’s proposal is in danger] . . . . At the moment, we are doing our best to explain things better.” Since the autumn 2017 elections, the CDU–SPD coalition in Berlin has been an increasingly stubborn partner for France and the Commission. Bruno Le Maire wants to fulfill an electoral pledge as quickly as possible. This requires a targeted approach that is easier to implement than a structural one. To the Germans he proposes that the EU adopt the directive now, with entry into force in 2021 unless an agreement is reached at the OECD. But the Germans prefer to take their time, even if it means eventually implementing the structural approach in the event the OECD fails to reach agreement. “For the past six months,” says one observer, “the French and Germans have been saying they agree when in fact they don’t. They don’t understand the same thing.” We saw in chapter 7 the obstacles that Berlin was able to mount to eurozone reform beginning in 2017. They are more or less the same with regard to digital taxation. In October 2018, a DG TAXUD official tells me: Two weeks ago, I flew to Berlin with my team. We came to talk to them about digital taxation. On the plane, there was a delegation from DG ECFIN that was going to do the same thing on EMU. “Really? You too? They told you that?” It’s the same thing. On the way back, they were like us, they looked depressed.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

211

Nothing’s moving. The Germans have a regional election every two weeks, they have coalition problems . . . . It’s unbearable.

In fact, the official has limited regrets. He says the targeted approach, favored by the Council, is not great in terms of economics. One country, France, decided overnight that it had to be done, they convinced a dozen of them to follow suit; we don’t know why they did, and now we have to take care of it. Without much time to analyze it, without our analysis pushing in that direction . . . . But it showed that we could make the Commission work as a truly political institution.

In the cabinet, I find the same state of mind. The targeted approach was never very popular among the Moscos: it’s associated a little too closely with the French agenda. At the same time, they would have liked to pull off a major coup. “The GAFA tax is economically stupid,” says one cabinet member. “But if you want to beat the populists . . . [you need to] tax companies that make billions in profit! And it would be the first European harmonized tax in decades.”

The OECD takes over Passing David in the hallway at the beginning of the winter, the commissioner tells him bluntly, “your GAFA tax is dead.” David prefers to remain optimistic. Bruno Le Maire, he explains, insists on reaching an agreement with the Germans. The French finance minister reminds the Germans that Schäuble had supported the initiative. “Since LuxLeaks, I have never seen such political pressure,” an official confirms. If Berlin gives in, anything becomes possible. “If Germany turns, Sweden and Denmark will have no choice. Nobody will understand their arguments.” In the meantime, the Austrian Presidency is pushing the issue in the Council. At ECOFIN, Le Maire and Moscovici try to outdo each other as the most ardent bearer of a putative European success. As one Council official tells me, The same three member states are still opposed: Sweden, Denmark, and Ireland. The Swedish minister, you see, expressed his opposition, but he answered the Austrian’s technical questions. In principle, you do not need to explain how you would implement a proposal to which you are opposed. So it wasn’t so bad. The Germans continue to say that the solution is the global approach. Yesterday’s meeting was not binding. It was just a discussion. We’ll see. I honestly don’t believe it’s going to work. The Germans equivocate. It’s

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

212

  

becoming clearer and clearer that they’re opposed. There’s a possible way out with the Swedes, that’s what we saw yesterday. But the Danes are firmly opposed. All the opponents say that they are in favor of a global solution, but they know that it will not be found because the Americans are against it.

As with eurozone reform, digital taxation becomes a Franco-German issue. Faced with deadlock in the Council, Le Maire tries to reach out to Berlin. On December 4, 2018, he and Scholz agree in principle on a 3 percent digital tax, the targeted approach. But, while France wants to pre-legislate for a conditional implementation in 2021, Germany insists that no final decision should be taken before the OECD has had a chance to weigh in. The compromise with Berlin waters down the Commission’s proposals, and even France’s more modest ones. The Paris-based organization seizes this opportunity on January 29, 2019, when 127 countries agree to adopt new global tax rules by 2020. If adopted, these rules would replace national initiatives. The Council takes advantage of this hypothetical breakthrough to kick the can down the road, and in the end, it decides nothing. Berlin’s lack of enthusiasm does not lead to the desired conversion of opponents. After postponing the decision in December, Sweden and Denmark use the OECD’s political declaration as a pretext to reject the EU directive in the March 2019 Council. Drawing lessons from this failure, France adopts its own tax, as Spain and Italy have begun to do. The Commission, for its part, is no longer really in the loop. *

*

*

Despite strong institutional constraints in the area of taxation, a window of opportunity opened up in 2015–16 in the fight for transparency. It gradually closed during the second part of the mandate, when a less favorable political context jeopardized tax justice. The Moscos’ political work, carried out with the enlistment of civil-society organizations, the media, and Parliament, stumbled in the face of an institutional obstacle—that of unanimity, which allows a single member state to veto progress in Brussels. The full CCCTB thus failed. Even digital taxation, which initially seemed to be an object of consensus, was doomed by the Germans’ lack of enthusiasm. By 2017, the various tax scandals’ impact had waned somewhat, leading to a loss of media interest; the new French government—no longer Socialist—pushed for a digital tax that was different than the Commission’s preferred policy; and, in the age of Trump, the German coalition was paralyzed by the fear of US retaliation. In that context, it was tempting to shift the venue to the OECD, where the United States is strong. In the end, political work eroded institutional constraints, but the edifice did not collapse. The commissioner, David, Maud, and DG TAXUD officials take solace in the fact that they have shaken up the member states and, together

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

 

213

with the French, forced the OECD to keep the issue on the global agenda. Scholars confirm the efficacy of the Commission’s entrepreneurship during this period; in this book’s terms, then, we can speak of partially successful political work.¹⁰ As far as the Moscos are concerned, the challenge in 2019 is no longer to get proposals adopted, but to prepare the agenda for the next Commission. During this last year of its mandate, the Commission enters its lame-duck period. Not much happens anymore. As early as January, a DG TAXUD official offers a sort of closing summation: Already now I have told my staff, “Let’s prepare scenarios for the future. We have to be ready to present an agenda to the next commissioner, whether he’s a Maltese EPP or a Portuguese S&D.” Honestly, with transparency and the legislation against fiscal optimization, we have made huge progress and it will continue. The rest is the icing on the cake. But we know that in the end we will have worked to improve the EU on a subject that is very visible to its citizens.

Notes 1. Rasmus Colin Christensen, “The Rise of the EU in International Tax Policy,” in Global Networks and European Actors: Navigating and Managing Complexity, ed. George Christou and Jacob Hasselbach (London: Routledge, 2019). 2. Peter Dietsch, Catching Capital: The Ethics of Tax Competition (Oxford: Oxford University Press, 2015), ch. 2. 3. Communication to Parliament and Council, COM (2015) 302 final, June 17, 2015, https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/tax ation/company_tax/fairer_corporate_taxation/com_2015_302_en.pdf 4. Thomas Plümper, Vera E. Troeger, and Hannes Winner, “Why Is There No Race to the Bottom in Capital Taxation?,” International Studies Quarterly 53, no. 3 (2009): 761–86. 5. See “Le programme d’Emmanuel Macron pour le numérique,” available at https://enmarche.fr/emmanuel-macron/le-programme/numerique 6. Lucie Ronfaut, “La justice annule le redressement fiscal de Google en France,” Le Figaro, July 12, 2017, https://www.lefigaro.fr/secteur/high-tech/2017/07/12/ 32001-20170712ARTFIG00246-la-justice-annule-le-redressement-fiscal-de-googleen-france.php 7. Communication to the Parliament and the Council, A fair and efficient tax system in the Union for the digital single market, COM (2017) 547 final, September 21, 2017, https:// ec.europa.eu/taxation_customs/sites/taxation/files/1_en_act_part1_v10_en.pdf 8. Peter Dietsch and Thomas Rixen, “Global Tax Governance: What It Is and Why It Matters,” in Global Tax Governance: What Is Wrong with It and How to Fix It, ed. Peter Dietsch and Thomas Rixen (London: ECPR Press, 2016). 9. Allison Christians, “Taxation in a Time of Crisis: Policy Leadership from the OECD to the G20,” Northwestern Journal of Law and Social Policy 5, no. 1 (2010): 19–40; Martin

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

214

  

Hearson, “Transnational Expertise and the Expansion of the International Tax Regime: Imposing ‘Acceptable’ Standards,” Review of International Political Economy 25, no. 5 (2018): 647–71. 10. See, for example, Wouter Lips, “The EU Commission’s Digital Tax Proposals and its Cross-Platform Impact in the EU and the OECD,” Journal of European Integration, December 23, 2019, https://doi.org/10.1080/07036337.2019.1705800

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

Conclusion Before the pandemic

This ethnographic narrative ends when the Juncker Commission does, in 2019. In principle, the College’s mandate is terminated on October 31. In Ursula von der Leyen’s new team, appointed that autumn, former Italian prime minister Paolo Gentiloni replaces Pierre Moscovici for the portfolio of economic and financial affairs, taxation, and the customs union. The cabinet dissolves, some members returning to their Commission directorates-general and others having to look for a new job. The commissioner’s professional future is still uncertain. Less present in the media, he gives lectures, continues to represent the institution at the G20, visits Athens one last time to meet the new prime minister, Kyriakos Mitsotakis, a conservative who has replaced his friend Alexis Tsipras. To mark the end of the mandate, staffers and former staffers meet in the Forêt de Soignes, on the outskirts of Brussels. The commissioner joins them for lunch. A collective discussion of my book manuscript, which I shared with them, provides an opportunity to look back over the last five years. To take stock too. Unsurprisingly, the Moscos find my analysis of their handling of the Greek crisis a bit harsh. They do not necessarily agree with the divisions between Parisians and Brussels people that I perceived within the cabinet. Still, on the whole, they recognize themselves in the narrative. On the very evening of our arrival in Soignes, however, news from Brussels dashes the Moscos’ hopes for a rapid transition. Because of a possible indictment in a party financing affair, as well as alleged conflicts of interest, France’s prospective candidate for the internal market portfolio, Sylvie Goulard, is rejected by the European Parliament. The commissioner’s driver, Stéphane, escorted her out of the parliamentary hearing. There is shock in Brussels and Paris, where President Macron, who proposed Goulard, blames Ursula von der Leyen for the mess. Since the College of Commissioners must be approved en bloc, the handover is delayed. In the Forêt de Soignes, the commissioner tells his cabinet that their term of office will be extended until at least December, perhaps even January. “We will have another month together,” Olivier sighs. This delay means that some files, which were to be transferred to the Gentiloni team, will be handled by the cabinet itself. According to the European Semester’s timetable, member states must submit their draft budgetary plans on October 15 (see chapter 5). The commissioner was The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0011

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

216

  

going to share his first assessment, but he will now have to provide a formal opinion in November. In addition to this somewhat messy transition—indicative of the dynamics of political Europe—Brexit goes through several new twists and turns. Having replaced Theresa May as prime minister during the summer, the flamboyant Boris Johnson keeps Europeans on the edge of their seats by calling early elections. These should enable him to obtain a clear majority to approve the exit agreement he renegotiated with Brussels in mid-October. To conclude this book, I will attempt a twofold assessment of the Moscos: the first a sociology of international political work, the second a more general reflection on the cabinet’s place in European politics writ large. This will enable me to answer the question asked in the introduction: What is a political Commission? And more broadly: What does it mean to do politics in an international organization like the European Union?

From the political Commission to the geopolitical Commission In 2014, Jean-Claude Juncker imagined a “political Commission” based less on philosophical considerations than a cold analysis of political forces. When he was appointed, the European Parliament was dominated by two large families: the EPP and the S&D. Between them, these two families enjoyed an absolute majority, both in Parliament and in the Council, where governments were either conservative (the UK, Spain) or socialist (France, Italy), or a coalition of both (Germany, Netherlands). Imposing the Spitzenkandidaten principle during the 2014 election campaign allowed these political families to crown Juncker. In exchange, Juncker proposed a “Social-Christian” program, a balance between the moderate Right and the moderate Left. This Brussels-style grosse Koalition worked well during the first two years of the mandate, when Martin Schulz of the S&D group was president of the Parliament and Donald Tusk of the EPP was president of the Council. Conservatives and social democrats divided up the posts and made programmatic compromises. The 2019 elections do not produce such a clear political configuration. Conservative and social-democratic leaders still lead most member states, but in Parliament, the EPP and S&D no longer have a majority, even with the support of the ALDE. The EPP has a plurality of the seats but its leader, Manfred Weber, does not enjoy great prestige. The arrival of the Macronist party Renaissance strengthens the liberal family, which is henceforth renamed Renew, but it also makes it more heterogeneous. The presence of Eurosceptic MEPs remains limited, but the Greens, whose numbers have also jumped, are not used to compromising with traditional parties. This fragmented Parliament does not succeed in forcing

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



217

Spitzenkandidaten on member-state leaders, who appoint Ursula von der Leyen on a more or less improvised basis. Emmanuel Macron’s gamble, which was to break the hegemony of the EPP–S&D tandem on European politics, pays off. Some MEPs, from all political families, are tempted to avenge this affront. Coming within a hair’s breadth of seeing her own candidacy rejected during the confirmation process in July, Ursula von der Leyen does not focus her efforts on a distinctive policy program. The ten priorities of the Juncker program are whittled down to six. So slim is von der Leyen’s majority that most observers doubt her ability to pass policy legislation during the mandate. Turning to international relations instead, she proposes a “geopolitical Commission” focused on forging a role for Europe in the world. Is this a way to get around politics, or an admission of her inability to govern? Without denying the extent of the challenge, Pierre Moscovici has his own views. Three days after the rejection of Goulard’s candidacy, he meets with French journalists in Brussels. Out of the blue, he says that he almost canceled the interview, claiming that because of the extension of the Commission, he has nothing to say. In any case, he warns, their conversation will be off the record. Jokingly, the journalists ask him if he could be France’s substitute candidate after Goulard’s debacle. The commissioner insists that, beyond personalities, a stable political coalition must be found that will bring together “three, ideally four” groups: conservatives, social democrats, and liberals, but also the Greens. In the cabinet, where people expressed little sympathy for the EPP Spitzenkandidat Manfred Weber in the spring, I now hear some regrets. Perhaps the Spitzenkandidaten process was not so bad after all. At the same time, it was European citizens’ decision to elect a fragmented Parliament. It will be up to the new EU leaders—Ursula von der Leyen (from the conservative family), Council president Charles Michel (a Belgian liberal), and Parliament president David Sassoli (an Italian social democrat)—to build a coalition that can stand the test of time. This is what von der Leyen does by launching the “European Green Deal,” an ecological transition project aimed at attracting the support of environmentalists and centrists. In parallel, Angela Merkel and Emmanuel Macron try to convince their counterparts and European party leaders to avoid a situation in which Parliament would reject the College. There is a sigh of relief on November 14 when MEPs approve Thierry Breton, France’s substitute candidate, a businessman and former finance minister who moved from the Gaullist Right to Macron’s La République En Marche! He takes over the large internal market portfolio planned for Goulard. With the last two candidates, the Romanian Adina-Ioana Valean and the Hungarian Oliver Varhelyi, having also passed the parliamentary test, the von der Leyen Commission is approved en bloc on November 27, 2019. This time, parliamentary support is broad-based: a comfortable majority of 461 MEPs out of 751. While the Greens abstain, von der Leyen obtains the support of the EPP,

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

218

  

S&D, and Renew. The new Commission takes office on December 1, 2019, one month later than scheduled.¹

The return of the political Commission? Has the grand coalition been renewed for the next five years? If so, will Ursula von der Leyen be willing and able to lead a political Commission? For some, the idea is dead in the water: a weakened Commission must learn to give way to the Council, the only body that is really responsible for European policy. In February 2019, Dutch foreign minister Stef Blok gave his verdict: “A Commission that prides itself on being political undermines its own objectivity.”² For others, there can be no turning back. The weakness of the new Commission president and the Goulard episode show that Parliament is not going to give back the powers it has acquired over the last five years. Yet one thing is certain: whether the Commission is political or not, without substantial political work, there is a danger of paralysis. For quite some time now, deals struck between Berlin and Paris have failed to propel the other twenty-five to move forward. At the end of Juncker’s reign, Angela Merkel’s Germany was no longer Europe’s engine; it had even become a brake. On economic issues, the formation of the New Hanseatic League consolidated a blocking minority that must be dealt with. In 2020, four of these countries—the Netherlands, Sweden, Austria, and Denmark—became the “frugals” who tried to prevent fiscal solidarity with COVID-19-afflicted countries. Hence the idea of doing geopolitics rather than politics, including on climate issues. If the Commission has difficulty in forging coalitions around public policies, why not respond to the citizens’ demand for a stronger Europe on the international stage, in order to advance the EU’s agenda on international trade, the fight against climate change, international peace and security, collective defense, and, after 2020, global public health? Faced with Donald Trump’s United States, with an assertive China and a troublesome Russia, the idea of going global is tempting. Nevertheless, even to do geopolitics political conditions must be met. With regards to climate change or international trade, the Commission has real competences. But Brussels suffers from growing isolation in a world in which multilateral cooperation has become difficult. As for health, foreign, or defense policy, the treaties give the Commission few resources; it is, at best, the agent of the Council’s desire for cooperation. From this point of view, Brexit was an exception: the Commission played a key role, helped by an unexpected consensus among leaders that, from 2016 to 2019, never cracked. Between Michel Barnier’s traditional diplomacy and Moscovici’s political work as I have described it here, there was sometimes very little difference.

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



219

In 2020, the COVID-19 pandemic brought politics, diplomacy, and geopolitics closer than ever. Faced with the worst economic recession since the Second World War, a collapsing Schengen regime, rising China–US tensions, and the threat of European disintegration, Angela Merkel and Emmanuel Macron proposed on May 18 a €500 billion recovery fund that included European borrowing and substantial transfers to COVID-19-afflicted member states. A few days later, Ursula von der Leyen upped the ante with the €750 billion Next Generation EU recovery plan—a substantial jump in the EU budget, with new revenues for the EU, and subsidies and loans funded by European bonds. The volte-face on the part of Germany, historically the leader of the ordoliberal camp, marginalized the four “frugals” in Council negotiations. The solidarist ideas of fiscal union and risk sharing that Juncker and Moscovici could not get approved in theory were about to become an empirical reality.

Political work and reflexivity During our collective reading of the manuscript, I was surprised to find that the Moscos shared, in broad outline, my assessment of the political work they engaged in. In media interviews he gave at the end of his term of office, the commissioner sometimes used words that could have been mine. I was initially concerned about this. Did I fail in my critical task? Did I neglect the epistemological break that is necessary for social scientists to unveil deep social forces unknown to the actors themselves? On reflection, though, I think that the convergence of our points of view is a normal outcome of the ethnographic experience. After years of embedded observation, I am not surprised to have incorporated the cabinet’s “common sense”: their concerns ended up being mine, their failures also. To be sure, I also internalized their space of freedom, the political limits and possibilities that they came to think were theirs. It is also possible that the Moscos, confronted with my inquisitive gaze, sharpened their own reflexivity, their ability to think critically about their practices and the output of these practices. Our discussions in the Forêt de Soignes bear witness to this. In the Greek case, the Moscos’ political work produced results—disappointing for many, but concrete for most. Ioana and Leila insist on the importance of breaking away from a narrow focus on the “Varoufakis moment.” This episode was, in their view, not representative of the Commission’s action: a distraction that wasted a lot of time, money, and goodwill on both sides. They find that my narrative gives too much credit to the Greek “hero.” Other cabinet members agree, however, that Varoufakis’s version of events, enshrined in his book Adults in the Room—brought to the screen by director Costa-Gavras as we were reading the manuscript—framed public perceptions in a way that is not favorable to the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

220

  

Commission. Some Moscos, especially Parisians, are also harsh toward the Commission. For their part Ioana and Leila prefer to think about the rather more positive climate that took hold between the Commission and the Tsipras government after the summer of 2015, or about the IMF’s technocratic approach, which the commissioner sought to counteract with a more politically sensitive one. Giving the Greek government an “alternative within the program” helped the country to get out of it in 2018, while mitigating the social damage—for example, on pensions. Their pride in having made history, even if their version of it is not the most popular, is palpable. On budgetary surveillance, feelings are also mixed. “Perhaps we were wrong politically, but we were right economically,” Fabien says: a flexible application of the Stability and Growth Pact allowed Spain and Portugal to reduce their deficits while returning to economic growth. On Italy, Olivier emphasizes that their efforts forced the populist government to reduce its anticipated deficit by €10 billion in 2019. In contrast to the 2010–13 period, when a drastic reduction in public spending worsened the economic situation in the eurozone, Moscovici’s “smart interpretation” of the Pact avoided the worst. “The strategy,” the commissioner explains, “was to reduce deficits. Not through sanctions but through dialogue. And that has been extremely effective. I wonder what would have been the point of shooting down two or three countries to achieve the same result? We were not satisfied with the rule; we interpreted it, we took initiatives, we put things on the agenda.” At the same time, Fabien cautions, member states gradually internalized the Commission’s political work, especially the flexibility it was willing to countenance vis-à-vis borderline cases: the draft budgetary plans submitted by Italy and a few others now assume that the Commission will be lenient, which undermines belief in the rules and thus their impact. “Before,” Olivier continues, “they used to send us borderline figures and we would oppose them with our own calculations. Now they’re sending us figures that are completely out of line.” In this sense, political work has had a negative impact on the credibility of the Pact. Will the Commission still be taken seriously in the future? Several countries, starting with the Netherlands and its allies in the New Hanseatic League, have been doubting this for some time. In the wake of the crisis brought on by the COVID-19 pandemic, during which the Pact’s rules were lifted and public deficits exploded, Paolo Gentiloni, the Italian social democrat who replaced Pierre Moscovici, may have to cope with even greater North–South mistrust. Still, on the Pact, the Moscos point out that, while they did not apply sanctions, at least they took the excessive deficit procedure seriously. This is not the case with the macroeconomic imbalance procedure, the “Keynesian” pillar of the Pact, for which they had more sympathy but could never implement. This procedure aims to avoid a balance-of-payments surplus in one country, a sign that consumption is

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



221

too low in comparison to its neighbors, whose exports suffer in consequence. It is not easy to implement, since, unlike with the budget, governments have limited control over business investment and consumer spending. Moreover, a qualified majority is needed to trigger the macroeconomic imbalance procedure, while the excessive deficit procedure must be blocked by a qualified majority. In this regard, Germany, the eurozone’s main offender, was never targeted. Its huge current account surplus (between 8 and 10 percent, against a limit of 6 percent of GDP) harms Italian and French exports and thus growth in the eurozone. Beyond institutional constraints, conservative forces dominating the Commission and the Council have systematically refused to question Berlin and the countries of the New Hanseatic League. “We would have had more moral and economic legitimacy if we had been as rigorous with Germany, the country with an excessive external surplus,” admits Marco Buti, head of DG ECFIN. “It would have been more legitimate compared to Italy, Spain, and Portugal, which have an excessive deficit.” This debate, which the Moscos wanted to have, did not take place, suggesting that the application of the rules can be just as arbitrary among conservatives as it is among socialists. In any case, cool relations between the Commission on the one hand and Germany and the New Hanseatic League on the other explains to a large extent the failure of eurozone reform. No one in the cabinet disputes this. Based on the promotion of popular ideas that could transform the governance of the Economic and Monetary Union, the Moscos’ political work came up against a coalition of governments that were not ready to change institutions. Even if certain elements of reform had been accepted by all member states during the 2012–14 period, the dissipating fear of Greek contagion and the prospect of a healthy economic recovery denuded the commissioner’s ability to convince the opposition, or at least to achieve some progress—for example, with the creation of an embryonic EU treasury. “The only moment of hope was the reflection paper, when we talked about convergence in 2017,” Olivier says. But soon thereafter, criticism of the “Juncker– Moscovici doctrine” and the politicization of the Pact provided ammunition for those who wanted to restrict the Commission’s budgetary surveillance powers, or even transfer them to a rule-bound, intergovernmental European Stability Mechanism. Some in the Berlaymont may also have wanted to go too fast, antagonizing ordoliberals by rushing the timetable even though, in fact, the Commission was making a lot of concessions. Quoting Winston Churchill, Fabien concludes, “in the end, we had defeat and dishonor.” Institutional and diplomatic inertia prevailed until the COVID-19 crisis changed Germany’s stance, and empirical advances became possible. Conversely, the most effective political work was done on taxation. By surfing on the scandals widely reported by the media, by building their own political majority in Parliament, the commissioner and his staff succeeded in forcing the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

222

  

hand of the governments and getting directives adopted that otherwise might not have been adopted. In the first two years, the Commission can be credited with real achievements in the field of transparency, despite the unanimity rule and the temptation felt by some countries to veto. Several initiatives were already in preparation, but they needed to be repackaged and actively promoted. When the commissioner moved on to more ambitious proposals, however, the context became less favorable. The existence of parallel discussions at the OECD, where the United States is strong, became a pretext for a handful of governments to stall European progress. On the cabinet’s track record, members’ opinions differ. In the Forêt de Soignes, I witness an instructive exchange between David, who welcomes the fact that the OECD is taking up the EU’s ideas (“we’re playing PingPong, and let’s say we’re in the pong”), and Elena, who fears that the Commission is simply no longer in the loop. As I often hear it said in the Berlaymont toward the end of the mandate, the “table is set for the next Commission.”

Political work: practices and strategies The sociology of international political work reveals practices that widen the space of freedom in which the actors can operate. In their daily lives, they face strong constraints from institutions, law, expertise, economics, and diplomacy. Through political work, they redefine the apparently implacable logic of these constraints as a choice among possible, if conflicting, options.³ It makes it possible to say that “yes, an alternative is possible.” In doing so, political work presupposes the possibility of freeing oneself, through strategic practices, from the structure of relations between states, the constraints of international law, or technocratic expertise. Among the strategic practices that I observed, some involved the mobilization of interpersonal connections with institutional powerholders. From this point of view, the Moscos benefited from the close relations that the commissioner enjoyed with President Juncker and President Hollande, who vouched for him with other commissioners and with Germany. Other practices consisted of mobilizing national or partisan identities. Since the cabinet was perceived, like the commissioner, to be both “socialist and French,” the Moscos had a proportionate weight and legitimacy in the European landscape: in decline, but still going strong. Over time, as we have seen, these two resources were somewhat demonetized. However, the commissioner’s political will, or rather his will to do politics, remained vibrant. A good part of his cabinet espoused this will with greater or lesser enthusiasm: the Parisians more so than the Brussels people, but everyone seemed to enjoy doing politics. Finally, political work consisted in developing a vocabulary and a communication strategy aimed at enlisting parliamentarians and, beyond that, a

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



223

segment of public opinion. On this last factor, the commissioner and Olivier each left their mark on the cabinet. All these strategic practices were shaped by the trajectory of the commissioner and his cabinet members in the European political field.⁴ Most of the time, they were not unconscious. Without calling it that, the Moscos thought about political work in a fairly reflexive and intentional way—capitalizing on public indignation to enlist journalists, building coalitions with political parties and leaders, playing on the rivalry between the conservative and social-democratic families.⁵ This is different from political entrepreneurship, however. The Moscos’ strategies were the product of long discussions, of which I have shown several examples, but also of trial and error, of tinkering, and sometimes of retrospective mental reconstruction.⁶ While political entrepreneurship mobilizes resources to support a given objective, political work seizes opportunities in a more inductive manner, often by accident rather than by design, to exert agency. In political work, there is a strong element of emotional labor.⁷ In some cases, the Moscos tried to turn a constraint into a resource, one they could wield against other constraints. Experts could become allies. For example, the eurozone reform project harnessed a widespread theory among solidarist and Keynesian economists—fiscal federalism—against governments that did not want to change existing institutions.⁸ With regard to Greece, the commissioner leveraged a member-state’s diplomacy, France’s, in the Eurogroup. Without their alliance against Berlin and markets, Greece would perhaps have left the eurozone. In terms of budgetary surveillance, markets made the commissioner’s job easier, first by increasing the objective pressure on the debt of countries such as Italy, and second by generating an economic upturn that made it possible to reduce deficits in a more or less mechanical way. All of this took place without ever applying sanctions; in this way the Juncker–Moscovici doctrine won over center-right commissioners and the New Hanseatic League. Indeed, the support of the Commission president was decisive. “On the rules, it was hard at the beginning,” recalls Olivier. “At first, we didn’t know that President Juncker actually agreed with us. The thirteenth floor orchestrated our support, it organized the division of the EPP. It gradually isolated the minority.” What were the Moscos’ broad intentions in deploying these strategies? All of them left-leaning, like the commissioner, the staffers were not revolutionaries. They shared a reformist, pro-European, social-democratic sensibility. But within this common milieu, their intentions were nonetheless colored by their personal trajectory: having attended the College of Europe, succeeded in the European concours, or worked in the private sector for the Brussels people; having graduated from a French grande école, worked in the finance ministry, or been a Socialist Party activist for the Parisians. While the former wanted to shape the European agenda—indeed, this will likely remain their primary horizon throughout their

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

224

  

careers—the latter hoped to save the French Left, to which their experience, their sensibilities, and their professional ambitions were linked. Beyond political objectives, cabinet life was an experience of cross-socialization: Parisians discovered, first with amazement and then with curiosity, the constraints of a European game with twenty-eight member states; the Brussels people got a taste of politics with a commissioner who knew what he wanted and was deeply concerned about his image as a politician. The European immersion that took place on the tenth floor of the Berlaymont produced tangible effects. From the outset, cabinet life was structured by the decision to appoint a French commissioner who would have to apply German-designed rules. The Franco-German couple was embodied in the duo of a French head of cabinet and his German deputy, but I also often observed it in the friendly but vigorous conversations between Reinhard, the German economist, and Fabien, the French economist. For Olivier, the cabinet functioned as a permanent Franco-German deliberation, which shaped the commissioner’s positions within the Commission.

The limits of the Moscovici case “The pessimism of reason, but the optimism of the will”: like Étienne, the commissioner enjoys quoting Antonio Gramsci, a communist thinker and activist. The sentence applies well to the political work I have observed in his cabinet. Some were federalists at heart, others committed to the leftist cause, but no one was under the illusion that they could affect a deep transformation of Europe. At most, they believe they succeeded, as they put it, in “pushing the envelope.” During my embedded observation, right up to our collective reading of the manuscript, I was struck by the cabinet members’ acute awareness of the limits of political work. This is not just a question of reformist sensitivity on their part. In all the areas studied in this book, the Commission is only one actor among many. Whether it is about the Greek program or budgetary surveillance, either the Council or the Eurogroup has the final say. The Commission proposes but does not have the right to vote. On taxation, unanimity is required. And when it comes to proposing new ideas to strengthen economic government, a change of a quasiconstitutional nature, the impetus can only come from the European Council. The constraints are strong, which makes the political work portrayed here all the more interesting.

“Was it an experiment or a method?” “Anyway, it was exciting. But could we do it again?” Olivier wonders during our last meeting before I leave Brussels. Facing an impasse in the autumn of 2019, with

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



225

the impossibility of forming a new Commission and the Brexit imbroglio, national leaders take back control from Brussels-based actors. The European Council meets late into the night, President Macron calls the German chancellor, a new consensus must emerge at the highest level to enable the EU to find a way out of the crisis. Powerless in the face of this high-level diplomatic act, the Commission once again becomes a passive player. This brings us back to the original topic of this book, that of a political Europe. For a long time, wanting a political Europe meant wanting more Europe. Since 1950, the architects of the EU have tried to give it the attributes of a state: a federal ambition since the Treaty of Paris on the European Coal and Steel Community, a parliament (1962), direct elections (1979), a flag (1986), citizenship (1992), and— almost, in 2005—a constitution. One could question the functioning of institutions, but it was clear that a more political Europe would probably be more federal, headed by a government: the Commission. With the polycrisis of the 2010s, the view is reversed. When politics comes to Brussels, it now seems to threaten the EU. Politics no longer has the face of Simone Veil or Daniel Cohn-Bendit investing European institutions with a positive symbolic charge; now it is Nigel Farage or Matteo Salvini seeking to destroy them. The political Commission confronted these “enemies”: through Pierre Moscovici in the Italian dossier, but also with Jean-Claude Juncker clashing with British Leavers, Frans Timmermans admonishing the Polish government, and Margrethe Vestager refusing to give in to German and French economic interests. Is it a good thing for Europe to play politics? That is to say, not to avoid but to embrace conflict? Many commentators answer in the negative. Among them, Giandomenico Majone argues that the EU should focus on public goods that do not lend themselves to conflict, such as market regulation or the fight against climate change. Politics is seen here as a distraction that prevents the achievement of an optimal solution.⁹ Andrew Moravcsik, for his part, believes that the EU cannot do much more than generate and guarantee compromises between its member states. Democratic politics works very well in national parliaments and governments; there is no need to replicate it at supranational level.¹⁰ Without going that far, Stefano Bartolini warns us that the principle of consensus that has presided over the construction of Europe is too precious to be sacrificed on the altar of majority democracy. Perhaps the model to be followed is that of Switzerland, where federal policy consists of seeking compromises between groups.¹¹ In this sense, Kalypso Nicolaïdis and Jan-Werner Müller speak of a European demoi-cracy that must, rather like the Swiss Confederation, cultivate national democracies rather than seeking to supplant them. The “constitutional patriotism” dear to philosopher Jürgen Habermas is also not built on political conflict, but on the common good.¹² Of course, Europe cannot avoid politics. But, in these perspectives, which are not hostile to the EU, the Commission is not the institution best equipped to

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

226

  

interfere in political processes. Luuk van Middelaar argues that, while it is good that the EU has entered the era of politics, heads of state and government meeting in the European Council must be in charge. They have real legitimacy, which is democratic because it is national, and they alone can decide on behalf of the people. In other words, they shoulder political responsibility in a way that the Commission never will.¹³ Especially in times of crisis, one might add. Like van Middelaar but in a more critical vein, Jonathan White, Christopher Bickerton, Dermot Hodson, and Uwe Puetter observe a shift in European power toward intergovernmental bodies (the Council) deemed more suited to rapid, “discretionary” decision-making.¹⁴ For most of these commentators, the Commission is the “guardian of the treaties”: it should not get too involved in politics. Its role is to execute the rules laid down by the member states, to advise them and, if necessary, to sanction those who do not keep their commitments. It is hard not to with agree with Luuk van Middelaar that the Council should have ultimate political responsibility for shaping institutions and providing collective leadership on fundamental issues. Because of the constraints I mentioned, the Commission is not formatted to respond to what Jonathan White calls “emergency politics.”¹⁵ Where my analysis differs, however, is in paying attention to the political work that supposedly technocratic organizations such as the Commission will inevitably carry out. In his book, van Middelaar contrasts the “politics of events,” based on the taking of responsibility, with the “politics of rules,” which is based on authority. For my part, I do not believe that the Commission should confine itself to the scrupulous application of the rules. As we have seen, there is a space in which political choices will, in any case, be made within the rules. The Commission cannot draw up the “European order”; but, given its powers, the pressure from Parliament, and the initiative of its leaders, it is unthinkable that it should not be led to interpret or even change this order. As Renaud Dehousse argues, the Commission cannot, therefore, as an institution, escape politics.¹⁶ There are many issues that call its competences into question or that, conversely, may allow it to expand its reach. Conflict with Russia lends a strategic dimension to the Commission’s neighborhood policy. Tensions surrounding migration are inseparable from the Schengen area, which is also an EU competence. The single market, the core of the EU, becomes a strategic issue when it comes to transforming the defense industry or preparing for the digital economy. The Commission cannot do without an economic policy for the eurozone forever; the euro, like the fight against climate change, has distributive effects based on political choices. As the EU boosts its economic resources and engages in real transfers to fund the post-COVID-19 recovery, the Commission’s political role will again move to the fore. *

*

*

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



227

In 2014, Jean-Claude Juncker was able to form a political Commission because he believed in it, but also because the context was favorable. Member states were led by governments of the moderate Right or the moderate Left. European elections had produced results that made it possible to envisage a stable “grand coalition” in Brussels. Pierre Moscovici and his cabinet found their place in this coalition, of which they embodied the “left flank.” Until 2017, the support of François Hollande and the close collaboration between the president of the Commission, Jean-Claude Juncker, and the president of Parliament, Martin Schulz, gave the Moscos significant leeway, a space of freedom that they both exploited and sought to enlarge: sometimes against German chancellor Angela Merkel and the European institutions, often in spite of them. From 2017 onwards, the replacement of Social Democrat Martin Schulz by the conservative Gianni Pittella in Parliament, the coming to power of Emmanuel Macron in Paris, and the travails of the governing coalition in Berlin reduced this leeway. Allies fell or left, one after the other. As a result, it became more difficult to implement a social-democratic policy. “There was a time,” recalls Rémi, “when we were lost. We wondered: Where are we?” The Moscos’ political work was therefore situated in space, in time, and in the institution. To be sure, I would have observed different practices in the cabinet of Günther Oettinger, a German responsible for the budget, or Marianne Thyssen, a Belgian responsible for social affairs, or under the Barroso Commission—with different consequences. Ursula von der Leyen’s “geopolitical Commission,” which also borrows from the vocabulary of the political Commission, is likely to take quite different forms than the ones I have explored, all the more so after the COVID-19 cataclysm, which will shape global geopolitics and the European economy for years to come. Nevertheless, structural conditions for the possibility of Commission-led political work remain in my view fairly stable. Why is that? Because the politicization of Europe is not a figment of the imagination. All public opinion surveys show the increasing salience of European issues at the national level. After Brexit, 93 percent of the European population lives in the Schengen area and 85 percent in the eurozone. As discussions over an ambitious EU recovery plan shows, the departure of the United Kingdom weakens the position of those who see the EU as merely a trade agreement. Yet through its policies, the EU creates winners and losers.¹⁷ It is only natural that citizens should take an interest, supporting a candidate who promises to ensure their country’s influence in Europe or rejecting a policy they consider contrary to their political preferences. Moreover, coming from a 2019 election with a turnout comparable to that of the US electorate, the European Parliament is not prepared to give up its power to veto the Commission’s appointment or its legislative proposals.¹⁸ I agree with scholars who see the democratization of the Commission, the Eurogroup, or the

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

228

  

European Central Bank as the best way to strengthen the EU.¹⁹ However, this democratization must not be achieved at the cost of a form of political impotence. A sham democracy, making weakened institutions transparent, proceeding to the direct election of a Commission president who would then be subservient to national governments, would be doomed to failure. So would the politicization of issues on which the EU can do nothing. Political agency, in order to make a difference, must be built against the strong constraints that weigh on democracy. That is the whole point of the political work that I have tried to analyze. Even if we can see the dangers—and this book raises a number of them—the project of a political Commission still makes sense. Neither international organization nor federal state, the European Union will remain a unique political system because it allows for the exercise of democracy between democracies.²⁰ Forging policy ideologies and programs that suit the economic and social realities of twenty-seven member states; bringing together coalitions from political families that are themselves kaleidoscopic; humanizing the application of treaties produced by past diplomatic compromises; communicating in twenty-four languages—this will never be easy. The ambition required to do so can be dismissed as futile and harmful to national democracy. It can also be embraced as one of the key challenges of human coexistence in the twenty-first century.

Notes 1. Jean-Pierre Stroobants and Virginie Malingre, “Commission européenne: Thierry Breton adoubé par les eurodéputés,” Le Monde, November 15, 2019, https://www. lemonde.fr/international/article/2019/11/15/commission-europeenne-thierry-bretonpasse-le-cap-des-auditions_6019223_3210.html 2. Speech by the Minister of Foreign Affairs, Stef Blok, at a Meeting of EU Ambassadors in the Netherlands,” February 20, 2019, https://www.government.nl/documents/speeches/ 2019/02/20/speech-minister-blok-meeting-eu-ambassadors 3. Pierre Bourdieu, “La représentation politique,” Actes de la recherche en sciences sociales, no. 36–7 (1981): 3–24; Jacques Lagroye, ed., La politisation (Paris: Belin, 2003). 4. Didier Georgakakis and Antoine Vauchez, “Le concept de champ à l’épreuve de l’Europe,” in Guide de l’enquête globale en sciences sociales, ed. Johanna Siméant (Paris: CNRS Éditions, 2015). 5. Vincent Pouliot, “Practice Tracing,” in Process Tracing: From Metaphor to Analytic Tool, ed. Andrew Bennett and Jeffrey T. Checkel (Cambridge: Cambridge University Press, 2014), 237–59; Frédéric Mérand and Amélie Forget, “Strategizing about Strategy,” in Pierre Bourdieu and International Relations, ed. Rebecca Adler-Nissen (London: Routledge, 2012). 6. John Campbell, Institutional Change and Globalization (Princeton, NJ: Princeton University Press, 2004). 7. Arlie Russell Hochschild, The Managed Heart: Commercialization of Human Feeling (Berkeley: University of California Press, 1983).

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



229

8. Nicolas Jabko, “The Elusive Economic Government and the Forgotten Fiscal Union,” in The future of the Euro, ed. Mark Blyth and Matthias Matthijs (Oxford: Oxford University Press, 2015). 9. Giandomenico Majone, Dilemmas of European Integration: The Ambiguities and Pitfalls of Integration by Stealth (Oxford: Oxford University Press, 2005). 10. Andrew Moravcsik, “In Defence of the Democratic Deficit: Reassessing Legitimacy in the European Union,” Journal of Common Market Studies 40, no. 4 (2002): 603–24. 11. Simon Hix and Stefano Bartolini, “Politics: The Right or the Wrong Sort of Medicine for the EU?,” Notre Europe Policy Paper No. 19 (2006). 12. Kalypso Nicolaïdis, “Notre démocratie européenne. La constellation transnationale à l’horizon du patriotisme constitutionnel,” Politique européenne, no. 19 (2006): 45–71; Jan-Werner Muller, “The Promise of Demoi-cracy: Diversity and Domination in the European Public Order” in The Political Theory of the European Union, ed. Jurgen Neyer and Antje Wiener (Oxford: Oxford University Press, 2010); Jürgen Habermas, The Crisis of the European Union: A Response (Cambridge: Polity, 2012). 13. Luuk Van Middelaar, Alarums and Excursions (New York: Columbia University Press, 2019). 14. Christoph Bickerton, Dermot Hodson, and Uwe Putter, The New Intergovernmentalism (Oxford: Oxford University Press, 2015). 15. Jonathan White, Politics of Last Resort: Governing by Emergency in the European Union (Oxford: Oxford University Press, 2020). 16. Renaud Dehousse, “The Euro Crisis and Beyond: The Transformation of the European Political System,” Robert Schuman Working Paper No. 67 (Florence: European University Institute, 2018). 17. Neil Fligstein, Euroclash: The EU, European Identity, and the Future of Europe (Oxford: Oxford University Press, 2008); Hanspeter Kriesi, “The Politicization of European Integration,” Journal of Common Market Studies 54, no. 51 (2016): 32–47; Jason Beckfield, Unequal Europe: Regional Integration and the Rise of European Inqueality (Oxford: Oxford University Press, 2019). 18. Laurie Beaudonnet and Frédéric Mérand, “Qu’est-ce que l’Europe politique? Un agenda de recherche sur la politisation,” Politique européenne, no. 64 (2020): 6–31. 19. Stéphanie Hennette et al., How to Democratize Europe (Cambridge, MA: Harvard University Press, 2019). 20. Paul Magnette, Le régime politique de l’Union européenne (Paris: Presses de Sciences Po, 2003).

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

Epilogue The entry into office of the von der Leyen Commission on December 1, 2019 allows the commissioner and cabinet members to envisage a transition before the end of the year. Career officials return to the administration. For them, the cabinet’s political experience is over. Olivier is being considered for a deputy director-general position in a noneconomic sector of the Commission, Reinhard for a director position at DG ECFIN. David and Ioana return to their respective DGs, TAXUD and ECFIN, Maud to Michel Barnier’s task force on relations with the UK. Some staffers remain in the cabinet circuit—that is, in the Berlaymont. Having passed the internal competition reserved for former cabinet members, Fabien joins the cabinet of the employment commissioner from Luxembourg, while Simon becomes a member of the Gentiloni cabinet, where he is joined by Elena and Marco Buti, the director-general of ECFIN. Cecilia becomes the Swedish commissioner’s assistant, Yannick moves to central services. Among assistants, Rémi decides to apply to the Ecole nationale d’administration. Étienne and Alice explore their options in public relations, possibly in Paris. In Brussels, their networks did not survive the European elections, as the French Socialist Party elected only six MEPs. While Audrey has become a scriptwriter for Belgian television, most of the Parisians are back in France: Chloé works for a private firm in Paris and the two Isabelles work as executive assistants in the public sector. As far as the commissioner himself is concerned, a period of uncertainty follows. Not a member of Emmanuel Macron’s party and, unlike his colleagues Frans Timmermans and Margrethe Vestager, not having led the European election campaign, he leaves Brussels for good. It is, however, “the job where I have been happiest and most successful. Not in Bercy, where I was not happy and I did not do as well as I would have liked. Well, there were circumstances . . . ” His appointment as president of the French Court of Auditors, referred to in chapter 4, remains only a distant prospect at this point. Pierre Moscovici says that he wants to devote himself to writing and teaching, and even to the practice of law, but I feel that the political animal has a hard time coming to terms with this prospect. “What happens when the light goes out? Will this serenity last? On December 1, I’ll be alone, by myself [he actually uses a much more colorful French expression that I won’t repeat here] . . . with an office at the Court of Auditors as a

The Political Commissioner: A European Ethnography. Frédéric Mérand, Oxford University Press (2021). © Frédéric Mérand. DOI: 10.1093/oso/9780192893970.003.0012

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi



231

Figure E.1 At Forêt de Soignes First row: Cecilia, Elena, Leila, the commissioner, Paola, Alice, Reinhard, Delphine, Olivier, Stéphane Second row: Chloé, Ioana, Franck, David, Isabelle III, Yannick, Maud, Étienne, Rémi, Simon, Fabien, me, Olga

rank-and-file civil servant. An experienced rank-and-file civil servant,” he says with a smile, before adding, “and at the disposal of events.”

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

Index For the benefit of digital users, indexed terms that span two pages (e.g., 52–53) may, on occasion, appear on only one of those pages. Alliance of Liberals and Democrats for Europe (ALDE) 91–2, 100, 102, 129, 202, 216–17 anti-tax avoidance directive (ATAD) 184, 186–8, 206 backstop (Eurozone) 150–2, 162, 164–6, 168–9, 171–3 backstop (Irish) 194–5 base erosion and profit shifting (BEPS) 183–5 Brexit 6, 18, 29–30, 98, 156, 158, 186, 189, 191–5, 216, 218, 224–5, 227 Common Consolidated Corporate Tax Base (CCCTB) 198–212 College of Commissioners 1, 6, 14, 16–17, 22, 34, 81, 91–2, 106, 111, 113, 115–20, 122, 132–5, 137, 140, 154–5, 159, 161–2, 166, 179, 184, 191, 197, 199, 215–18 Conte, Giuseppe 133, 136, 144–7 Costa, Antonio 11, 113, 116–18 Court of Justice of the European Union 7, 165, 168 COVID-19 148, 161, 218–21, 226–7 Dijsselbloem, Jeroen 25–6, 53, 56–61, 73–4, 99, 139, 149–50, 157, 164, 167–8, 170, 186, 199, 201 Di Maio, Luigi 133–40 Dombrovskis, Valdis 14, 16–17, 34, 51–2, 68, 79, 91–2, 105–6, 110–12, 116–25, 130–2, 139–41, 149, 153–4, 156, 159–61 draft budgetary plans (DBP) 108, 112, 114, 116, 121, 129–30, 133–4, 137, 142, 215–16, 220 European Central Bank (ECB) 2–3, 8, 41–2, 44–54, 56–7, 64, 67, 78, 81, 132, 144, 149–50, 225–8 ECFIN (Directorate General for Economic and Financial Affairs) 17, 21, 23, 27–31, 49, 67, 71, 92–3, 108, 110–12, 114, 117, 134, 136–7, 140, 149–75, 210–11, 221, 230 ECOFIN Council (see also Eurogroup) 7–8, 11, 16, 24–5, 29–30, 67, 106, 108–9, 113–14, 119–25, 127, 132–41, 147, 156–7, 162, 166, 170, 177–8, 181–91, 197, 201–2, 204–7, 209–12, 216, 221, 224

European Council 42–3, 103, 115, 155–6, 166, 216–19, 224–6 European Court of Auditors 45, 49, 124 European elections 1–4, 25–6, 100, 102–3, 128, 133, 135, 138, 141, 143–4, 146, 173, 176, 191, 216–17, 225, 227–8, 230 European Parliament 1–5, 7–9, 22–3, 25, 36–7, 67–9, 73, 89–90, 98–9, 101–2, 105, 115–16, 119, 128, 139–40, 146, 150, 155, 163, 165–70, 173, 176–80, 184–91, 197, 199–203, 207, 212, 215–19, 221–3, 225 European People’s Party (EPP) 1, 4, 25, 89, 92, 100–1, 105–6, 114–19, 129, 185–6, 216–19, 223 Eurogroup 9–10, 23, 29–30, 40, 64, 89–90, 98–102, 114, 119, 127, 130, 132, 136–41, 149–50, 154, 157, 164–70, 199, 223–4, 227–8 European Semester 28–9, 92, 108, 130, 133, 141–2, 150, 153, 167, 176–7, 183, 215–16 European Stability Mechanism (ESM) 42–5, 52, 65–6, 69, 107, 150, 153, 161–74, 221 excessive deficit procedure 91, 93–4, 107–8, 113, 118–21, 123–5, 137–46, 154–6, 220–1 G20 22, 30, 136, 144, 153, 178, 183, 197, 203–4, 207–10, 215 Gentiloni, Paolo 130–41, 215–16, 220, 230 grand coalition 4, 25, 105–6, 127, 218, 227 hebdo meeting 16–18, 91, 113, 199 Hollande, François 11, 23, 25, 56, 73, 89–92, 94–8, 101, 154–6, 222–3, 227 International Monetary Fund (IMF) 19, 22, 30, 40, 64, 122, 153, 162–3, 208–9, 220 jour fixe 17, 67–8, 179, 204, 206 Juncker, Jean-Claude 1–11, 16–17, 23–6, 34–5, 37, 51–8, 70–1, 84–7, 89–96, 98–102, 105–6, 111–25, 127–32, 135–9, 144–6, 149–50, 153, 155, 161–4, 172, 176–82, 203, 215–19, 222–3, 225, 227

OUP CORRECTED AUTOPAGE PROOFS – FINAL, 7/5/2021, SPi

234



Lagarde, Christine 56, 72–3, 75–6 Le Maire, Bruno 93, 197, 203–4, 206, 210–12 macroeconomic imbalance procedure 220–1 Macron, Emmanuel 5, 11, 76, 89–90, 93–103, 135, 145, 150, 161–7, 169–74, 197, 203–8, 215–18, 224–5, 227, 230 Merkel, Angela 45, 55–6, 78, 105, 107, 128, 150, 161–4, 166, 171–4, 193, 210, 217–19, 227 New Hanseatic League 9, 106, 150, 170–4, 218, 220–3 Organization for Economic Cooperation and Development (OECD) 67, 176, 197, 222 Padoan, Pier Carlo 99, 129–32, 134, 138, 157–8 Progressive Alliance of Socialists and Democrats (S&D) 25, 69, 90, 98–102, 106, 111, 115, 119, 154, 164, 185–6, 191, 202, 213, 216–19 Rajoy, Mariano 113–18 Renzi, Matteo 128–41, 154–6 Salvini, Matteo 101–2, 133–48, 225 Sapin, Michel 91–2, 157–8 Schäuble, Wolfgang 42, 44, 50–1, 53–4, 57–8, 61, 73–4, 76–9, 92, 121–2, 150, 155, 157–8, 164, 210–11

Scholz, Olaf 76–9, 164, 171, 210, 212 Schulz, Martin 25, 98–9, 116, 149–50, 155–6, 161–4, 216, 227 Selmayr, Martin 17, 34, 36–7, 91, 105, 115, 133, 137, 141, 170, 193 Socialist Party (Parti socialiste) 5, 23–6, 31–2, 89–103, 223–4, 230 Spécial chef meeting 16, 18–19 Spitzenkandidat 1, 25–6, 98–102, 217 Spokesperson’s Service (SPP) 17–18, 27–31 TAXUD (Directorate General for Taxation and Customs Union) 17, 20–1, 23, 29, 176, 197 Timmermans, Frans 25, 34, 100, 102, 166, 225, 230 Tria, Giovanni 133–46 Tsipras, Alexis 9–10, 40–88, 215, 220 Varoufakis, Yanis 64–5, 70, 82, 86, 219–20 Vestager, Margrethe 14, 18, 34, 82–3, 94, 100, 102, 177–9, 225, 230 veto 7–8, 47–8, 58, 77, 86, 177, 191, 197, 202–3, 205–6, 212, 221–2, 227–8 von der Leyen, Ursula 1, 146–7, 215–19, 227, 230 Weber, Manfred 4, 101, 216–17