Charlemagne. Europe’s dash for growth

The European Commission puts the economy first

JOS MANUEL BARROSO, president of the European Commission, appears to be taking Bill Clinton as a role model. Like Mr Clinton, he began his term with a pointless and damaging row about homosexuality: although in his case, it was about alleged gay-bashing by a prospective European commissioner, not about gays in the military. Now Mr Barroso is trying to boil his programme down to something like the famous Clintonian slogan: “it's the economy, stupid.” Such candour is not allowed in official documents, however, so the programme that Mr Barroso presented on February 2nd was soporifically entitled “A partnership for growth and jobs”. But its central message was clear. The European Union's biggest problem is slow growth, and the Barroso commission wants to do something about it.

For a political leader to make creating prosperity his top priority would usually be utterly banal. But this is the EU, where Mr Barroso's statements have been greeted with deep suspicion. The left fear that he is intent on dismantling EU social and environmental legislation. Poul Nyrup Rasmussen, head of the party of European Socialists and a former Danish prime minister, even used the ultimate Brussels boo-word, accusing Mr Barroso of promoting a “neo-conservative” economic agenda. But economic liberals are also wary. They fear that a commission-sponsored “dash for growth” could degenerate into doomed and wasteful efforts to promote European industrial champions.

Both sets of fears focus on Gunter Verheugen, a German who is a vice-president of the commission with special responsibility for competitiveness. He played a central role in drafting this week's document. Before Mr Barroso was even appointed, the German government made clear that it wanted a key economic portfolio in the commission. Inevitably, therefore, Mr Verheugen is seen as Berlin's man. His every statement is scrutinised for evidence that he is taking orders from the German government or from German industry. When Mr Verheugen suggested that merger rules might be applied less fiercely, liberals cried foul. When he spoke of the need to lessen the regulatory burden on industry, greens and trade unions bristled.

Mr Verheugen has also clashed fairly openly with some of his colleagues. On his desk this week stood a gorgeous bunch of red tulips: a peace offering from Neelie Kroes, the Dutch commissioner for competition, with whom Mr Verheugen has been squabbling. Mrs Kroes and her team are worried that the German commissioner may try to annex their powers over mergers and state aid. But to judge from Mr Verheugen's conversation, it is promoters of social and environmental legislation who should be more worried. He says that he wants his “personal trademark” to be a more aggressive approach to deregulation. Acknowledging that cutting red tape has long been a mantra for the commission, as for governments everywhere, he says, “I want to be the guy that really did it.”

Asked for an example of red tape that needs cutting, Mr Verheugen responds instantly: “REACH”. This is the acronym for an EU directive on chemicals, promoted energetically in the previous commission by Margot Wallstrom, a Swede who was then environment commissioner. Mrs Wallstrom sought to demonstrate the need for stricter restrictions on chemicals by taking a blood test to show how many noxious substances had infiltrated her system. (Apparently, she is stuffed full of flame retardants, although she looks very well on it.) But Mr Verheugen is more interested in the impact of the directive on the health of European business. He complains that studies of the cost to industry of complying with REACH come up with figures ranging from €2 billion ($2.5 billion) to €40 billion. Whatever the right figure, Mr Verheugen considers it too high. He says that it is too late (and anyway undesirable) to withdraw the legislation entirely, but he hopes to see it amended to make it friendlier to industry. And from now on, he plans to ensure that all draft regulations coming out of the European Commission are subjected to a rigorous impact assessment, so that their costs are spelled out.

The delusion of champions

If slashing regulation was all that Mr Barroso and Mr Verheugen were about, economic liberals could relax, and even cheer. But there are less appealing ideas in the European air. The hoopla over the launch of Airbus's super-jumbo last month has given fresh heart to those who believe that governments can pick economic winners. Jacques Chirac, the French president, has talked of using Airbus as a model for a host of other industries, from telecoms to energy. Le Monde, the bible of the French establishment, has proclaimed “the return of industrial policy”, and has even fingered Mr Verheugen as its chief promoter within the European Commission.

The man himself seems eager to dispel any such impression. Airbus, he suggests, is a “misleading example”, because it operates in a unique industrial sector. He adds that “anyone arguing for a return to 1970s-style industrial policy would be very isolated within Europe.” Mr Verheugen is not opposed to the emergence of European champions. But he says they must be produced by the market. “I have told European industrialists they can come and see me any time, but there are two things they cannot ask for: money, and protection from competition.”

If all this can be taken at face value, it sounds good. But while there is no doubting the determination of the Barroso team to breathe new life into the European economy, most of what needs to be done is sadly not in their power. Structural reforms to Europe's welfare states and deregulation of labour markets remain largely the province of national governments. Still, if the commission shows more restraint when exercising its formidable powers over social, environmental and industrial legislation, it would at least be following the sage advice given to new doctors: “first, do no harm.”

How will the new European Commission turn out in its economic policy? Will it be liberal, deregulatory and supporters of a free market, or will it promote an interventionist industrial policy with significant social and environmental legislation.

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