On Juncker's big day, Barroso row casts shadow on EU

By Alastair Macdonald

STRASBOURG (Reuters) - Jean-Claude Juncker, the European Union's chief executive, had his annual moment in the spotlight on Wednesday, but his predecessor has cast an unwelcome if unmentioned shadow on his State of the Union address.

Just as Juncker was telling Europeans the British vote to quit the bloc must not mean the end of an EU seen by critics as out of touch with citizens and in thrall to global capital, he is rowing with Jose Manuel Barroso for being hired by U.S. investment bank Goldman Sachs.

The quarrel, in which Barroso has accused Juncker of taking "discriminatory" measures against him and the bank by opening an ethics probe in response to a public outcry, underlines developments in politics, not just in Europe, that create dilemmas for many in high office.

First is rising mistrust of politicians: Quicker to believe they are in it for profit, voters are turning to populist alternatives. If the EU is, as Juncker said on Wednesday in "existential crisis", the personal conduct of its leading figures will help shape its fate.

Mention of Barroso in the European Parliament's State of the Union debate came from Nigel Farage, the UK Independence Party leader who wants the rest of the EU to be wound up after Brexit. Farage -- a former City trader himself -- offered sarcastic congratulations to Barroso on his "highly paid job" at Goldman and told Juncker: "The big boys, I'm sure, will look after you."

Second, leaders are getting younger but living longer, hence a trend in big names seeking new roles to earn a good living.

And third, a response by institutions to tighten up rules on what former office-holders do is leading them into tricky value judgments about public perceptions of conflicts of interest. Those in turn are tough to capture in hard and fast legal regulations.

PUBLIC REACTION

Barroso, in a letter to Juncker excerpted in the Financial Times on Tuesday, pointed out that many previous European commissioners have taken private sector jobs. He and Goldman insist they have acted legally and with high ethical standards.

The former Portuguese prime minister, who stepped down after a decade as Commission president two years ago, was appointed non-executive chairman of Goldman Sachs' international arm in London two weeks after the Brexit referendum stunned Brussels.

Juncker himself had made clear in July that he disapproved of Barroso's move. "I would not have done it," he said. But his initial reaction was that Barroso had not broken a code of conduct which obliges former commissioners to seek permission for new jobs only in the first 18 months after leaving office.

However, pressed by the EU's ethics watchdog, European Ombudsman Emily O'Reilly, who cited the damage the affair was doing to public trust in the EU, Juncker last week ordered an ethics panel to determine whether Barroso had broken a broader obligation, with no time limit, to act with "integrity".

"The most important challenge for the EU today is one of trust and legitimacy," O'Reilly told Reuters.

"It may have perfect legal legitimacy but not yet the popular legitimacy among many people in Europe," she said, in reference to widespread public perceptions that EU institutions are not as democratically accountable as national governments.

Daniel Freund at the Brussels office of anti-corruption watchdog Transparency International said Barroso's case was part of a trend to which there were no simple answers -- namely what does a fairly young ex-leader do with the rest of their lives?

Barroso was only 58 when he stepped down from the Commission and at 60 is a year younger than Juncker. The prime minister who led Britain into the Brexit vote, David Cameron, quit parliament this week at just 49 and said he is seeking a new career.

"High-level politicians ... are becoming younger," Freund said, noting as an example U.S. President Barack Obama, who will still be only 55 when he steps down in January. "These are still relatively young men at the peak of their careers so they're not just going to go golfing and throw dinner parties."

Like Ombudsman O'Reilly, Freund said EU institutions and the Commission in particular generally had stronger rules to avoid conflicts of interest through officials moving from public to private sector than many European national governments.

Germany was unusual in last year introducing a cooling off period for senior officials after uproar over high-profile cases of government figures moving into private lobbying. A decade earlier, Chancellor Gerhard Schroeder caused an outcry when he joined a Russian-owned gas pipeline firm shortly after taking decisions while still in office that favored the company.

Another who faced public criticism was Tony Blair, who became an adviser to another Wall Street investment bank, J.P. Morgan, after stepping down as British prime minister aged 54.

SUBJECTIVE JUDGMENTS

Karel De Gucht, a former Belgian foreign minister who was EU Trade Commissioner under Barroso and left office aged 60 at the same time in 2014, said it was uncomfortable for officials well short of retirement age to find themselves out of work, even with a Commission allowance of half-pay for up to three years.

He is now on the board of steel giant Arcelor Mittal, where he said his experience as trade commissioner fighting Chinese dumping allowed him to continue to promote European interests.

But the Commission did stop him taking another role. He did not identify it but said it was similar to his jobs at a private equity fund and telecoms firm yet failed a test of image.

"They said it could give a wrong perception in the public," he told Reuters by telephone. "It's better not to do it because it could give a wrong impression. But there you enter in a very subjective domain."

That matter of perception is at the heart of the Barroso case. The president of the European Parliament, Martin Schulz, urged the Commission to clarify its code of conduct but an EU official said rules struggled to address the issue.

The key problem for Barroso, the official said, was the poor image of Goldman Sachs among sections of European voters. "I don't see how you fix that," he said. "Should we have a black list of 'toxic' companies that no commissioner should work for?"

That is partly why O'Reilly is pressing Juncker to start reviewing appointments on a systematic and case-by-case basis.

Noting OECD guidelines on the subject, she said: "Perceived conflicts of interest can be just as harmful to the trust in public decision making, and so needs to be taken into account."

(Editing by Mark John)

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