One sunny evening, in the spring of 1995, I was sitting in the splendid headquarters of the Cr?dit Lyonnais bank in Paris, talking to Pascal Lamy, chief of staff to Jacques Delors when he was president of the European commission. As our conversation turned from the problems of the near bankrupt Cr?dit Lyonnais to less stressful matters in Brussels, the burly, crew-cut Frenchman declared suddenly that it was time for the European parliament to sack the European commission.
Coming from the man who had spent nearly a decade building the commission into an institutional battering ram for European integration, it was an extraordinary comment. My first thought was that he was simply expressing frustration with the new commission headed by Jacques Santer, former prime minister of Luxembourg-and everybody's second choice for the job. But as we talked further it became clear that he had a loftier goal in mind: he wanted to trigger a crisis at the heart of the EU in order to rebuild the legitimacy and accountability of its institutions.
Lamy's argument was that Europe could no longer be fashioned by stealth by an elitist cadre of bureaucrats. Delors's achievements-the single market, the Maastricht treaty, the blueprint for Emu-marked a huge advance for integration; but the public and the EU's own institutions had been left behind. Now it was vital for the public and the institutions to "catch up." The first step was for the parliament to follow the tradition of elected assemblies and oust the executive, in this case, the European commission. How far-sighted Lamy looks, four years later. True, the Santer commission jumped before it was pushed. But the events in Brussels in mid-March 1999 mark a watershed in the EU's 42-year history.
The Santer commission collapsed as a result of six cases of mismanagement and petty corruption, highlighted by the surreal tale of Edith Cresson, the French commissioner who famously appointed her septuagenarian dentist to a position where he was responsible for EU funds. The findings were set out in a report written in unusually plain English by a committee of investigators from the Swedish, Spanish, French, Dutch and Belgian public services, which Santer had convened in response to pressure from the European parliament. The Wise Men's report argued that the commission's doctrine of collective responsibility had become an alibi for refusing to take responsibility for mistakes: "It is becoming difficult to find anybody... who has even the slightest sense of responsibility."
Santer's mistakes were to pledge to respect the Wise Men's findings whatever they might be, and to fail to recognise the threat from a team which included two former heads of the Court of Auditors, which had been involved in several long-running battles with the commission. He also argued that, however serious the misuse of public funds inside the commission, the situation was worse in most member states, and that he had made a decent start in clearing things up. Both points were true. But as one Brussels diplomat put it: "Santer's team should have been aiming for a machine which was beyond suspicion. Instead they seemed to be prepared to settle for second best."
Yet these were merely tactical and presentational errors. In the end, the commission was undermined by more powerful forces; forces which will shape the EU as it prepares to adapt to Emu and enlargement to the former communist countries of central and eastern Europe. The first is the north-south culture clash. In the past, such tensions have usually involved money, with the poorer southern countries going cap-in-hand to Germany. The March crisis opened up a new split over standards of public administration, between northern "Calvinists" demanding value-for-money and financial probity, and "Club-Med" countries more tolerant of graft.
The second phenomenon is the slow emergence of a European polity. This still bears scant resemblance to national democratic polities, and "EU-rope" remains the specialist subject of a sub-section of most countries' political and business elites. But Europe now permeates almost every aspect of domestic politics in a way which would have been unimaginable 15 years ago. The commission crisis is itself evidence of this trend. Consider the European press and television coverage of the d?b?cle. This was a pan-European story. It was covered in the light of national preoccupations, but with a similar "boot out the rascals" tone in most countries. French journalists were particularly scathing about Cresson, who had served as prime minister under Fran?ois Mitterrand.
The third phenomenon is the rise of the European parliament in relation both to the commission and to the council of ministers (the main inter-governmental decision-making forum for the 15 member states). For a long time, the parliament has had a reputation as a travelling circus of expenses-fiddling eccentrics (and voter turn-out in Euro-elections has been correspondingly low). But, thanks to the 1992 Maastricht treaty and amendments in the 1997 Amsterdam treaty, the 626-member assembly is acquiring greater powers of co-decision with the council in areas such as free movement of citizens, transport and regional subsidies. It is also evolving as an interlocuter for the European Central Bank (ECB), and as a forum for policing and interrogating commissioners in a style similar to the US Senate. Forcing the commission to resign en masse has tilted the balance of power inside the EU-so far, the big loser is the European commission.
for more than 40 years, the commission has been the keeper of the European flame. Jean Monnet and the founding fathers saw the commission playing a multiple role in the journey towards "ever closer union." It was the guardian of the economic and political treaties; the motor of integration through its right of legislative initiative; the protector of smaller countries against the big powers; and the broker in disputes between member states.
Part executive, part international civil service, the institution enjoys supra-national powers in areas like competition policy, but is generally kept on a tight leash by the member states. Indeed, the commission is where the Europe of cooperating nation states meets the Europe of supra-national federalism. An ethos of Euro-Messianism has been kept alive in corners of the commission by some of the EU's career civil servants, but the national interest is never far away. The directorate-generals who run the EU's 23 directorates are in theory subordinate to the commissioners, and both are supposed to place the interests of the EU above those of their own countries. But the nationally-appointed commissioners are often guided by national-political priorities. Even the civil servants above a certain level are appointed by horse-trading between member states and, like the commissioners, are of varying ability. It has thus been hard to establish a meritocratic, efficient, commission ethos.
Moreover, national commissioners often carve out their own fiefdoms. Thus the Spaniards have come to dominate the development aid budget. The French control the farming directorate. The Germans control competition policy. Policy coordination hardly exists. These problems have been exacerbated by the cabinet system which the commission imported from France, allowing individual commissioners to have at least six staff who jump into every policy debate.
The commission coped well enough with the first phase of the European Community. But, after Delors became president in 1985, the pace quickened, and the commission's failings became more apparent. Delors's tactic was to bypass the old bureaucracy. "He created a parallel government," says a retired official, "but in doing so, he made the commission more complicated than ever." Faction-fighting between the civil service, the commissioners and Delors's people, was rife. Delors inserted his own representatives in the higher ranks of each of the directorates. Each reported to Lamy, who ruled the commission with an iron fist, bullying both commissioners and civil servants. Roy Denman, former EU ambassador in Washington, called it "Tammany Hall with a French accent."
Delors's reluctance to confront poor standards of management and lack of accountability would not have mattered so much if his commission had not taken on so many new responsibilities. The launch of the single market created a huge new body of EU legislation (270 new directives), while the end of the cold war allowed the commission to make a grab for the aid programmes for building the new market democracies of central and eastern Europe. Delors accepted the challenge because he wanted to enhance the commission's prestige. The US encouraged the development, while member states thought it would lighten their own load. But Delors paid little attention to the fact that the commission had neither the staff nor expertise to handle the job. The result was a frenetic burst of sub-contracting to highly-paid consultants, as polyglot twenty-somethings tried to meet deadlines for the disbursement of money to projects such as the decommissioning of unsafe nuclear reactors.
The funds dispensed in the present decade speak for themselves. Almost 9 billion euros ($9.7 billion) for the Phare programme for central and eastern Europe. About 3.3 billion euros ($3.6 billion) for the Tacis programme for the former Soviet Union. And 4.2 billion euros ($4.5 billion) for the Echo humanitarian programme which is the largest in the world, funnelling money to causes such as Rwandan refugees or earthquake victims in Armenia. However deserving the causes, the Court of Auditors has consistently uncovered significant cases of fraud and mismanagement in such programmes.
By the time Delors gave way to Santer in early 1995, the tension between a commission devoted to the vision of an ever closer union and a commission as a manager of money and programmes had become unsustainable. As Lamy says: "There was a feeling that if you ran a normal administration in Brussels, the sense of mission, the goal, would be lost. It had to change." And with Santer it did change, in many ways for the better. When I first met Santer in his modest prime ministerial office in Luxembourg, in late 1994, his Leitmotif was consolidation. He ticked off the tasks of the next commission: monetary union by 1999; a constitutional conference starting in 1996 (Amsterdam) to review the Maastricht treaty; and an agreement among the member states (Agenda 2000) on the financial and policy reforms required to make enlargement work. All this has been achieved on time, although Agenda 2000 falls far short of what is required and will have to be revisited.
Santer, the decent but grey European, deliberately drew a contrast with Delors's "big picture" presidency. "There is no need for big ideas. The big ideas are already on the table," he said. He wanted tougher controls on spending and fraud detection. He said that public trust in the EU would not be restored until people were confident that the annual budget of 69 billion euros ($75 billion) was being spent prudently. One of his first moves was to appoint two penny-pinching commissioners from the newly admitted Scandinavian states-Anita Gradin of Sweden and Erkki Liikanen of Finland-to handle fraud, budget and financial discipline. Liikanen described the commission in terms of a company which had gone through a period of rapid growth and now needed to bed-down the changes. Backed by Santer, he introduced a series of reforms strengthening the status of financial managers. Santer also established a new anti-fraud task force which was given wide powers to investigate the misuse of EU money.
But, as history often relates, it is the first-wave reformers who are swept away by the forces they unleash. One of the immediate consequences of Santer's reforms was to increase the level of detected fraud, and increase awareness of the EU's managerial problem in member states. Santer also had the bad luck to come up against a more aggressive European parliament, seeking a role in "cleaning up" the EU, plus the rise of a more inquisitive European polity.
It is one of the oldest jokes in Brussels that if the EU applied to join itself it would be refused entry for being insufficiently democratic. This is not just a matter of the large number of nationally appointed, rather than elected, officials; it is a matter of the secrecy of the council of ministers and the style of the Brussels administration. During Santer's term of office, that old culture began to break down. It started with a little-noticed change in the rules of engagement between the press corps and the commission, which introduced English as an alternative to the obligatory French. This was a victory for non-French-speaking journalists, whose efforts to penetrate the Brussels bureaucracy had hitherto been blunted. The reform signalled an erosion of France's linguistic and, more importantly, its cultural domination in Brussels.
There was also a weakening of discipline inside the bureaucracy. Ritt Bjerregaard, a Danish commissioner, shocked her colleagues by publishing a tell-tale diary of her first six months in Brussels (dinner party conversations and all). Then another new arrival from Scandanavia-a Swede, Magnus Lemmel-rubbished the way the bureaucracy was run in a newspaper interview. He was told to keep his mouth shut, but became a hero in his own country.
Another case concerned Bernard Connolly, the renegade British Eurocrat who wrote a book called The Rotten Heart of Europe, which denounced monetary union. The book was a polemic which occasionally strayed into the hysterical; but it was well-researched, and drew on Connolly's time as an economist in the commission. The official response to the book was to brand Connolly a lunatic. He was put on extended leave and, later, fired-another martyr to the cause of more openness and transparency in Europe.
Another blow to the commission's credibility came last year, when it emerged that its entrance exam for new employees-the concours-had been compromised. Newspapers recounted tales of young men and women exchanging answers over mobile phones, and popping off to the lavatory to pull out crib-sheets, right across Europe. After much huffing and puffing, the commission was forced to organise a new exam.
Perhaps a different president could have placed himself at the front of reform. But Santer had been chosen, in part, for his reluctance to challenge the most powerful member states. He never put any serious pressure on Cresson to quit. Instead, he telephoned Paris to sound out their willingness to dump her. The answer was a resounding "Non." So the commission went tamely to the guillotine. Now what is to be done?
there is a political dilemma at the heart of the EU. Governments have ceded wide-ranging powers to EU institutions without trusting them to use those powers. But weak institutions beget weak management. Good management consists of giving organisations clear and limited tasks, giving them the full authority to carry them out and making them bear the consequence of getting things wrong. Europe has done the opposite, but at last political leaders now recognise that this is a problem.
Until now, both member state governments and the Brussels true believers have had a vested interest in avoiding the clarity which good management implies. The traditional European method was to promote economic integration in order to attain political objectives which remained deliberately obscure. Emu was the last hurrah for this method, but it will no longer suffice. A sceptical public wants some sense of what the end-goal will look like. The commission crisis offers an opportunity to define the EU's goals and establish clearer boundaries between the supranational institutions (commission, parliament, European court and ECB) and member states.
Anti-integrationists, such as Charles Powell, former adviser to Margaret Thatcher, argue that it is time to roll back the commission's powers, notably its sole right of legislative initiative, and return power to national parliaments. But the truth is that Europe needs more autonomy (and resources) in some fields and less in others. Even Britain's most Eurosceptical politicians want stronger federal institutions for some purposes: for example, to stop unfair state subsidies in France or Germany destroying jobs in Britain. And most people concede that the commission could play a more effective role in policy coordination, if allowed. This coordination is effective in global trade negotiations, one of the few areas where the EU can match the US. But in other areas, notably foreign aid, countries guard their bilateral links and ignore commission efforts to unify policy.
The EU's political dilemma is even starker in the arguments over democracy and legitimacy. Should we capitalise on the recent success of the parliament and close the "democratic deficit" by introducing direct elections for the president and commissioners? Supporters of this view point to the emergent European polity and claim that it has no voice. The parliament is not yet a real parliament with a majority and a minority, but a mixture of amorphous political groups in which nationality plays as important a role as party label (indeed, it was the German euro-parliamentarians hunting as a pack to reduce German contributions who helped trigger the crisis). Nor is the commission a real government: it is a super-secretariat with some supranational powers run by unelected officials. Electing commissioners would make Brussels less faceless, and give the commission a popular mandate and real authority.
Therein lies the problem. Such a Europe would set up an unbearable tension with the nation state. It would mean moving beyond the EU's uneasy compromise between cooperating nation states and quasi-federalism, for which there is no significant constituency. The matrix inherited from the 1957 Treaty of Rome-parliament, commission and council of ministers-remains valid. This crisis is about management and accountability not constitutional principle. The EU is not a nascent nation state on to which the forms of a national democracy can be grafted. The democratic deficit has been adequately filled by the parliament's exercise of its long-standing right to kick out the commission.
Yet it is not quite so simple. While not wanting to tamper with the EU constitutional settlement, the reformers do want radically to improve the performance and accountability of EU institutions. "But the more Blair and others call for a more legitimate parliament and accountable commission, the more they encourage the members of those institutions to grab more power," says an EU diplomat, "yet countries like Britain and Denmark are reluctant to transfer more power to those institutions."
There is, however, some room for manoeuvre. Bringing the EU closer to the ordinary citizen must be possible without interfering with its underlying character. Indeed, such reform has been happening for years-it was only in 1979, for example, that the European parliament began to be elected rather than appointed. Part of the answer to the dilemma is to connect EU institutions more directly with the primary source of national democratic legitimacy: to strengthen the involvement of national parliaments in EU decision-making. One model is the Folketing, the Danish legislature, in which a committee of national and euro-parliamentarians vets EU laws and is considered more powerful than the relevant Danish minister dispatched to the council of ministers. Another idea, floated in Britain, is to create a body to sit alongside the European parliament, with members drawn from national legislatures.
There is also a long list of micro-reforms which may now be politically feasible. There is a need to rethink the size of the commission-both the number of commissioners (now 20) and the size of their cabinets, even though this would force smaller countries to cede their right to a commissioner. A better definition of the respective roles of the commissioners and the civil service in deciding and evaluating policy is required, as is better co-ordination of policy across directorates. The commission needs to phase out national slots at the top of the bureaucracy, and people must be sacked and promoted on merit rather than national patronage. Commissioners must be sackable individually by parliament and the president. Some of these measures are easy to implement, others-including rigorous financial controls-will be tougher, and many will attract the hostility of the EU's over-mighty trade unions.
many of these tasks fall to the new president: Romano Prodi, the 59-year-old Italian academic. He came to politics late, starting as a reform-minded Christian Democrat plucked by Italy's centre left to head the coalition after their victory in the 1996 election. He made his reputation as the prime minister who brought Italy into Emu, although his predecessors had done most of the groundwork. Inside Italy, his reputation is mixed. Some see him as a man of great charm but without the ruthlessness required for the reform slog now required in Brussels. They suspect that Massimo D'Alema, the Italian prime minister, pushed for Prodi to get the top job because he wanted a rival out of Italian politics.
In an interview with the Financial Times just after his appointment, Prodi made clear that he had no intention of accepting second-rate nominees as commissioners, and would exert his right of veto under the Amsterdam treaty. He also indicated a readiness to scrap peripheral commission aid programmes or research and development projects, and recognised the limits of the EU role in job creation. "The commission must concentrate on strategic aims."
Prodi comes to Brussels at a time when significant reform is possible. How successful he will be also depends on what happens to the balance of forces between the leading member states. That balance is more fluid than it has been for a long time, which is both an advantage and a disadvantage. The faltering of the Franco-German "motor" in recent months was one of the reasons why Santer went-there was no one to catch him when he fell. The French are uneasy about enlargement, and worried about the new generation running Bonn's SPD-Green government. The Germans are frustrated by an imperious President Jacques Chirac who always pushes French interests regardless of Germany's domestic constraints. Last year, it was the French candidate for the ECB. This year, he fought to the bitter end to preserve farm subsidies. At the recent Berlin summit on enlargement, the main manoeuvres took place between Bonn, London and Rome rather than between Paris and Bonn. None of this implies a break-up of the Franco-German alliance; but it does suggest that Chancellor Gerhard Schr?der has grasped that the alliance should be less exclusive.
Prodi will be tempted by many big ideas. One idea, forced by events in the Balkans, is to try again to create a coherent foreign and security policy. After the fighting, the EU is the best-placed organisation to organise a Balkan Marshall plan, with the distant prospect of EU membership for the warring statelets. Another idea, which again may be driven by events in the Balkans, is to build on the Anglo-French pledge on defence cooperation. This is not something in which all member states will participate. But Tony Blair's desire to break into Europe's inner core with Britain's military expertise could help to establish a European defence force within Nato.
But successful reform of the EU's institutions is, hopefully, what Prodi will be remembered for. Reform has big implications, not least for Emu. Making Emu work, and giving it legitimacy in the eyes of the EU's citizens, includes creating an appropriate political counterweight to the ECB and making decisions as transparent as possible. The EU is suffering a crisis of governance, not of regime. In the longer run-post-enlargement-Europe may require a new constitutional settlement, creating a looser EU. But for now, Prodi must put the EU house in order within the terms of the current settlement. The prize is a more open, legitimate Europe with better functioning institutions. The risk is that lack of political will leads to gridlock. In that case, Europe will continue its genteel decline, and the EU will slowly break up.
