Jean-Claude Juncker Needs to Go

There is only one star in this picture.

Photographer: Axel Schmidt/Getty Images

Jean-Claude Juncker, the new president of the European Commission, was always a bad choice for the job, foisted on the bloc's 28 national governments by a European Parliament eager to expand its powers. It's becoming clear now just how poor a decision that appointment was.

Juncker was the prime minister of Luxembourg, a tiny nation with a population 1/17th the size of London's, for almost two decades. In that time, he oversaw the growth of a financial industry that became a tax center for at least 340 major global companies, not to mention investment funds with almost 3 trillion euros ($3.7 trillion) in net assets -- second only to the U.S.

Partly as a result of the Swiss-style bank secrecy rules and government-blessed tax avoidance schemes that helped draw so much capital, the people of Luxembourg have become the world's richest after Qatar. The tax arrangements, described in leaked documents provided by the International Consortium of Investigative Journalists, allegedly enabled multinationals, from Apple to Deutsche Bank, to reduce their tax liabilities on profits earned in other countries: The effective Luxembourg tax rates that resulted were as little as 0.25 percent. The countries where the money was made received nothing.

It's telling that these arrangements have long been shrouded in secrecy. (Only last month did Luxembourg's government drop its opposition to new EU rules on banking transparency.) Juncker, you could say, made his country rich by picking the pockets of other countries, including those of the European Union he is now mandated to serve.

The commission was already conducting an investigation of Luxembourg's tax arrangements. Juncker says he won't interfere -- but he won't recuse himself, either. Indeed, his spokesman says he is "serene" in the face of the revelations. He shouldn't be. At this point, he could best serve the European project by resigning.

Juncker's position as the head of the body investigating the tax practices he oversaw as prime minister is a clear conflict of interest. It's possible the commission will find nothing improper about Luxembourg's tax-avoidance paradise: The EU allows member governments wide latitude in taxing companies, so long as they don't favor some over others. But with Juncker in charge of the commission, any such exoneration will fail to command public confidence.

Just now, the importance of restoring trust in the EU would be hard to overstate. The union is struggling to emerge from the financial crisis and is increasingly seen as elitist, meddling and incapable of producing either fairness or growth. It cannot help this effort to have it overseen by a man who spent his career as a quintessential backroom dealer while building and running an international tax haven at other European countries' expense.

Granted, most of this was known -- or should have been -- before the appointment was made, and the European Parliament is much at fault for insisting on Juncker's appointment in the first place. But the tax revelations have put the issues before the public in a way that tests the EU's credibility afresh. Juncker has done nothing illegal and is in no immediate danger of being removed. Even so, the EU would be best served if he stepped down. 

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.