EUROPEAN DIARY:Michel Barnier, whose appointment to one of the most powerful jobs in Europe struck fear in the financial markets, sees himself as the very voice of sanity
MICHEL BARNIER took over the helm of the European Commission’s internal markets division last month from Charlie McCreevy.
Though Fleet Street would have you believe that the Frenchman breathes fire in his zeal to tighten oversight of the financial markets, Barnier strikes a less threatening tone. Indeed, he casts himself as the very voice of sanity. But Barnier is a big beast too. His appointment to the internal markets portfolio was seen as the price set by French president Nicolas Sarkozy for his assent to Cathy Ashton’s selection as EU foreign policy chief.
At a time when the long-derided French economic model has proven its resilience, Barnier’s assignment to one of the most powerful economic jobs in the commission sent a signal. Those who fear the weighty hand of the state were displeased.
Neither is Barnier a man to hide his background. Au contraire. English may now be the EU’s lingua franca, but he prefers his native language.
Inevitably perhaps, his appointment was portrayed in Britain as something akin to a dastardly French plot to destroy the City of London. The man himself is quick to stress his independence, saying he will not take instructions from Paris, Berlin or Washington.
Still, he is quite different in outlook to his Irish predecessor. McCreevy is a free-market man to the marrow, Barnier is a keen regulator.
Hand-picked to carry out a task that McCreevy did not appear to relish, Barnier argues that the economic crisis leaves no option but to expand the reach of those who police markets. “What has changed here is not just the commissioner, it’s the general economic situation,” he said at a briefing yesterday.
Barnier sets out the process of regulatory reform in sweeping terms, saying that no person, market, product or territory should be able to avoid the net. Any repeat of the financial crisis could have “devastating” consequences if the European authorities were shown not to have acted to restrain and control markets and the institutions.
In that case, he argues, nothing other than a retreat to nationalism and protectionism would be in store. This would have obvious consequences for Europe’s internal open market.
As European and domestic authorities continue to grapple with the consequences of crisis, Barnier is not alone in highlighting concern about public opinion. European Central Bank chief Jean-Claude Trichet has said: “We cannot afford to have a financial system which is as fragile in the future as it was in the past. Our democracies in particular would not accept that.” Even as Angela Merkel set terms last week for a rescue for Greece, she was said to have to expressed concern about the threat of a nasty response to any German-funded bailout from far-right forces.
It is one thing, of course, to recognise that public patience with the financial system is not infinite. But adopting such concerns in the real world is politically tricky and fraught with potential for conflict. Sure enough, Barnier has already run into trouble with Downing Street.
A fortnight ago, British prime minister Gordon Brown persuaded Spain’s rotating EU presidency to withdraw a proposal to impose tougher regulations on private equity and hedge funds. Brown argued that the new proposals would drive funds based in London offshore. The effect of this manoeuvre was to forestall a finance ministers’ debate on the plan until after the British general election in May.
From an Irish perspective, this opened up a fresh opportunity for the Government to try to prise concessions on aspects of the proposal that might dim Ireland’s lustre as a hub for fund operators. Time is tight, however. Barnier says he will tackle the issue anew in June or July.
While he expresses confidence that a deal can be done and says that is his preference, he notes that finance ministers can move forward with such a plan on the basis of a qualified majority vote.
Asked whether he is equally confident of doing a deal with the Tories should they prevail in Westminster, Barnier indicates that he is and says his own personal contacts within the Conservative Party are strong. He is quick to name Ken Clarke as someone he knows well and says he recently held a briefing for seven or eight Tory MPs.
Whatever the outcome, this battle of wills over hedge funds and private equity may well be just the first of many. Among numerous other projects, Barnier wants to complete work on bank supervision, enhance transparency in securities markets, strengthen investor protection and develop mechanisms for crisis prevention. It is a mammoth task and further conflict seems certain.
