For Europe's Elite the Party Lives On After Brexitby
Banking industry hiring of former officials continues unheeded
Cameron, Hollande face criticism of pampering for aides
Europe’s political elite may have missed the Brexit memo.
Six weeks since U.K. voters rebuked the ruling class by choosing to leave the European Union, the region’s establishment has reacted by carrying on as before.
The revolving door of former policy makers joining the finance industry has spun again, with European Commission President Jose Manuel Barroso signing up with Goldman Sachs Group Inc. and former Bank of England Governor Mervyn King joining Citigroup Inc. Meanwhile departed Prime Minister David Cameron is facing criticism for nominating numerous aides for honors, including his wife’s stylist.
The perception of elite coziness risks further disenfranchising those backing Brexit, and peers across the continent who share the feeling of being left behind by the powerful and wealthy in the era of globalization and financial crises. A potential upshot is more support for populist parties that tap into alienation such as the U.K. Independence Party or France’s National Front.
“Anything that doesn’t show government or public institutions in a good light merely confirms some of the attitudes that probably contributed to the Brexit vote,” said Chris Roebuck, a visiting professor at London’s Cass Business School and a former adviser to UBS Group AG. For some voters, “there is a group of people out there who aren’t normal people like you or me, who have benefited since the financial crisis -- because they’re an elite.”
The latest round of former policy makers joining the financial industry they once regulated is raising eyebrows.
King, who once railed against “incompetent and greedy” bankers, has become a senior adviser to Citigroup, the Financial Times reported last week. Barroso’s role as an adviser to Goldman Sachs drew a rebuke from France’s President Francois Hollande, who called it “morally unacceptable.”
The French leader knows only too well about criticism of the elite. Less than a week before his Goldman comments, satirical magazine Canard Enchaine published revelations of the 9,895-euro ($10,958) a month salary paid by the French state for his hairdresser, more than the wage of a European Parliament member.
Across the Channel, Cameron has taken advantage of a practice largely bypassed by his two predecessors to ask Queen Elizabeth II to bestow dozens of honors on allies following his exit from 10 Downing Street. Among those nominated, according to media reports alleging cronyism, are Isabel Spearman, a former aide to his wife, as well as media advisers and two former drivers.
“An untrained observer would basically think, ‘it’s your friends, that’s the problem,’” said Roebuck. “No doubt some of the people on the list have made a contribution, but the way it has been presented, it is not clear what that contribution has been.”
King and Barroso are only part of an apparent hiring spree of former officials by Europe’s finance industry. Other appointments announced in July include Joerg Asmussen, a former state secretary in Germany’s Ministry of Labor and onetime European Central Bank Executive Board member, who is joining Lazard Ltd. next month. International Monetary Fund executive Jose Vinals, an ex deputy governor of the Bank of Spain, is becoming chairman of Standard Chartered Plc.
Defenders of the personnel interchange between policy making and finance argue former officials are selling their skills rather than their connections and that following the global crisis, bank behavior might improve with such in-house influences. Most comply with “cooling off” periods before taking the new roles.
The recent wave of hires is also nothing new, given former Prime Minister Tony Blair counsels JPMorgan Chase & Co. and his predecessor John Major assists Credit Suisse Group AG. Blair’s successor -- Gordon Brown -- now works for Pacific Investment Management Co.
The exchange of talent between Washington and Wall Street is also well established. Current Treasury Secretary Jacob Lew worked for Citigroup before returning to government, while Robert Rubin went the other direction in 1999. Former Federal Reserve Chair Ben S. Bernanke now advises Pimco.
European officials should be still wary of the impressions that their career decisions can give, said Emily O’Reilly, the EU Ombudsman.
“When former EU commissioners or senior EU officials take up jobs in the private sector that involve them lobbying their former colleagues, it is highly damaging to public perception of the EU,” she wrote in an e-mail to Bloomberg. “With the EU already suffering from a crisis of trust among its citizens, it is essential that such impressions do not take root.”
Populist parties are already seeking to turn distrust of leaders to their advantage electorally.
“The post-politics careers of former ministers invariably involve consultancy roles and corporate directorships,” Douglas Carswell, a member of Parliament representing UKIP, said in a blog posting this week. “Is that a reflection of their expertise? Or is it -- implicitly at least -- in return for services rendered while in office?”
The disaffection may get worse before it gets any better, said Daniel Freund, head of advocacy for EU integrity at Transparency International, an anti-corruption watchdog.
He noted a “very steep” rise in the number of revolving door cases within Europe and pointed to the U.S. as an example of what may lie ahead. Data show the number of retiring senators moving into lobbying increased from 3 percent in 1974 to nearly half in 2012.
“What is important is that these politicians understand that this kind of behavior definitely contributes to this feeling, and this contempt for, the political class,” Freund said.