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Departing Barroso sees EU stronger after euro debt crisis

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[October 27, 2014] By Paul Taylor

BRUSSELS (Reuters) - Outside the European Commission's hulking headquarters, a poster on a street lamp proclaims "Titanic: final weeks".

It is advertising an exhibition in Brussels on the cruise liner sunk by an iceberg off Newfoundland a century ago.

But as Jose Manuel Barroso spends his last few days at the helm of the European Union's often maligned executive arm, with his designated successor Jean-Claude Juncker speaking ominously of "Europe's last chance", it's hard not to see the irony.

Barroso, a former Portuguese prime minister, is proud of having helped keep an enlarged 28-nation Europe afloat for 10 years through the most severe economic and financial storm in half a century.

"I was always confident that we would prevail, but I had to push the ship in the right direction, sometimes against very strong headwinds," Barroso said in an interview after a bruising final EU summit, his 75th as Commission president.

His legacy is to have helped the euro currency zone survive a searing 2009-13 debt crisis by establishing a financial rescue fund, enacting stricter budget rules, tightening financial regulation and starting to build a European banking union.

But he leaves amid a howling Eurosceptic gale in Britain and chill winds of anti-EU populism in many other member states, whipped up by mass unemployment and economic stagnation.

His happiest moments were receiving the Nobel Peace Prize on behalf of the Union in 2012 "at a time when there were lots of doubts about the EU even in European countries", and signing the Lisbon Treaty that revamped the bloc's complex institutions after French and Dutch voters rejected a European constitution.

He also helped make Europe a world leader in the fight against climate change and the drive for cleaner energy.

But after years of crisis with sleepless nights spent trying hold the euro zone together, other memories are more somber.

Barroso recalled hosting a private brainstorming session with the chief economists of the main European and U.S. banks in July 2012 at the peak of the crisis.

"I asked them two questions. 'How many of you think Greece will still be in the euro zone at the end of the year?' All except one said 'no'. The central scenario was the Greek exit.

"Then I asked: 'How many of you believe we'll be able to sustain the euro in its present form?' It was 50/50."

With financial markets in turmoil, he spent most of that month persuading Greek Prime Minister Antonis Samaras to embrace radical reforms and German Chancellor Angela Merkel, the most powerful EU leader, to keep Athens in the currency area.

"There were many important personalities even in the German government saying the best thing is to put Greece and some others out so that we can save the rest," he recalled.

If Greece had been cut loose, Portugal, Spain and Italy would have come under immediate market pressure. The survival of the euro, launched in 1999 as Europe's central economic project underpinning its single market, would have been in jeopardy.

Barroso said he had appealed to Merkel's cautious instincts.

"For me the point was not so much to convince her of the interest of having Greece in the euro, but to convince her of the danger of not having Greece.

"I said 'do you want to jump in the dark?'. This is a powerful argument with someone like Angela Merkel whose decision-making system is basically conservative in the good sense of the word. She tries to minimise risk, not to maximise benefit."

On another occasion, at a fraught Group of 20 economic summit in the French resort of Cannes in November 2011, Barroso enlisted the support of U.S. President Barack Obama to thwart German pressure to force Italy to accept an International Monetary Fund standby loan program.

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"This was perhaps my most difficult moment," he said.

He told doubting world leaders such as Obama and Russian President Vladimir Putin the euro would survive, not with one neat, clean solution, but by "muddling through".

Barroso's decade in office began under a cloud. He was not the preferred candidate of the two main EU powers, Germany and France, and was picked only after Britain vetoed then Belgian Prime Minister Guy Verhofstadt, a keen European federalist.

Deep inside the centre-right pragmatist, who began political life as a Maoist student radical in Portugal's 1974 revolution, lurks a feeling that the EU establishment looked down on him.

He is bitter about criticism from fervent enthusiasts for European integration who maintain he weakened the Commission's leading role and kowtowed to the big member states.

"How can all these experts on European politics say and write that EU institutions have been downgraded and what we have now is (the rule of) inter-governmentalism and Germany? They have understood nothing," Barroso said.

powers of my great predecessor Jacques Delors, someone I greatly admire," he said, citing notably the Commission's enhanced role in surveillance of national budgets.

Those new powers are one reason why Barroso's term is ending amid a political furore.

Seeking to enforce fiscal rules strengthened during the crisis, the Commission is in a stand-off with France and Italy over their budget deficits. Barroso clashed with Italian Prime Minister Matteo Renzi over Rome's publication of a confidential letter from the Commission that demanded an explanation.
 

There was also an outcry by Britain over a statistical revision of national accounts that means London is required to pay a 2.1 billion euro top-up into the EU budget by Dec. 1.

No one in Brussels seems to have realised how explosive the annual accounting exercise could be, Barroso acknowledged.

With the anti-EU UK Independence Party snapping at his heels, British Prime Minister David Cameron refused to pay and unleashed verbal fury at Brussels, saying this sort of incident made it harder to persuade Britons to vote to stay in the EU. He was backed by Renzi who denounced "bureaucrats without a heart".

Visible shaken by the firestorm, Barroso said the matter had been handled "at a technical level" without his knowledge.

As the longest-serving EU leader, Merkel presented Barroso and European Council President Herman Van Rompuy, who chairs EU summits, with a gift of fine porcelain plates at a farewell lunch -- a delicate gift to end a tempestuous assignment.

(Writing by Paul Taylor; Editing by Ruth Pitchford)

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