Greek crisis fuels Juncker power grab

Commission President Jean-Claude Juncker with German Chancellor Angela Merkel | Ralph Orlowski/Getty

Greek crisis fuels Juncker power grab

The European Commission has been a key, but increasingly unwelcome, player during the months of talks on rescuing Greece.


6/3/15, 5:15 PM CET

Updated 6/4/15, 7:14 AM CET

For European Commission President Jean-Claude Juncker, the roller-coaster negotiations with Athens haven’t just been about keeping Greece in the euro.

Behind the scenes, he has used the crisis to try to establish the European Commission as the union’s indispensable powerbroker, putting him at loggerheads with national governments.

At stake is the balance of power in the European Union. There has always been a natural tension between the Commission, as the EU’s executive arm, and the European Council, the forum of member states. Now, Juncker is trying to tip the scales in the Commission’s favor, arguing that as the Commission’s first popularly elected president, he has a mandate to do so.

Juncker’s strategy was on full display this week. On Monday, he traveled to Berlin, where he pushed Angela Merkel and Christine Lagarde to take a softer line on Greece. “Grexit is not an option,” he told a German newspaper ahead of the meeting, contradicting recent statements by some of the creditors. Juncker hosted Greek Prime Minister Alexis Tsipras Wednesday evening in Brussels for consultations on Athens’ latest reform proposals.

“Our role now is to mediate,” Commission spokesman Margaritis Schinas said. “We have to set the conditions … to come to a final discussion.”

However, Wolfgang Schäuble, Germany’s finance minister, quickly undercut the idea of a Tspiras-Juncker breakthrough. “Optimism on the Greek negotiations is not justified,” he remarked, adding that after seeing the Greek proposals, “my first impression is that the talks would not be over soon.”

Amid the wall-to-wall media coverage of the Greek talks across Europe, Juncker has often appeared to be at the center of the negotiations.

Berlin and Paris, in particular, want him to play only a supporting role. Critics in Europe’s capitals say the Commission president is overstepping his bounds. But so far, his tactics seem to be working.

“It has gotten to the stage where they [creditors] can’t ignore him,” says Raoul Ruparel, Co-director of Open Europe, a think tank. “They know that Juncker and Tsipras are going to meet and have these bilateral meetings so they don’t have any choice now but to involve him and make sure he’s on the same page.”

Unlike the eurozone governments, which have funded Greece’s bailouts together with the IMF, the Commission is not one of Athens’ creditors, a group that also includes the European Central Bank.

Nonetheless, Juncker has used the Commission’s membership in the troika of Greece’s bailout monitors to inject himself deep into the negotiations. European governments established the troika, now referred to as “the institutions,” back in 2010 in the scramble to grant Greece emergency aid. At the time, the ECB was reluctant to play the part of overseer of the Greek bailout, a political role that some argue conflicts with its mandate to remain independent. So the Commission was included in the group, alongside the ECB and the IMF.

Now, some eurozone capitals regret the decision.

“They just spend other people’s money,” a frustrated German official said of the Commission this week.

To be fair, the Commission doesn’t have money to spend on bailouts. The Commission does have a role to play in keeping the eurozone from fracturing, an argument Juncker has used to justify the Commission’s meddling.

What’s more, as the long-time head of the eurozone finance ministers gathering known as the Eurogroup, Juncker is uniquely qualified to deal with Greece. As Eurogroup chief from Greece’s first bailout until 2013, Juncker was in the thick of every major negotiation with Athens, is steeped in the issues and knows all the key players.  While it’s up to the troika to monitor the bailouts, the Eurogroup holds the purse strings.

What irks some Eurogroup countries is that Juncker’s position is often at odds with the creditors.

As the clock has wound down on Greece to seal a deal this week, Juncker argued for a softer line from the IMF and creditor countries in the talks. Juncker believes Europe and the IMF should relax the austerity demands on Athens by allowing it to run a smaller primary surplus, or government spending minus the interest paid on debt. That would give Athens more money to spend on social welfare and relieve the economic pressure many Greeks face. The IMF frets that Greece won’t be able to continue to service its debts. It wants Athens to stick to its previous commitments to record substantial primary surpluses in the coming years.

Juncker argued with success at Monday’s meeting that the creditors should give Greece more flexibility.

Ahead of Monday’s late night get together, Juncker dispatched his chief of staff, Martin Selmayr, to make the case for a less stringent approach towards Athens.

Europe’s demands on Greece have turned out to be “unrealistic and socially imbalanced,” Selmayr, a German and member of Merkel’s CDU, told an audience in Berlin.  Germany’s mass circulation Bild (published by POLITICO Europe shareholder Axel Springer) retorted that Selmayr had begun “to sound like Greek Premier Tsipras.”

Juncker’s strategy, some officials in Berlin speculate, is to cast Greece as a humanitarian crisis. That would justify more direct intervention by the Commission and shift negotiations away from a confrontational debtor-creditor dynamic.

The commission president would also like to take the IMF out of the equation, something Athens is also pushing for. The IMF’s involvement in the bailout has been controversial from the beginning. Critics see it as too rigid. Europe should be able to manage the crisis on its own, they argue.

Merkel, however, has insisted that the IMF have a role. Letting the IMF go would open the door the to the kind of “fudging” on targets that got Greece into its mess in the first place, German officials say.

Juncker isn’t the only Commission official pushing for more say in the Greek talks.

Pierre Moscovici, the economic affairs commissioner, has regularly interjected himself into the talks as well.

On Tuesday morning, he told French radio the talks with Greece had begun “to bear fruit,” an optimism not shared by many in the Eurogroup. In the same interview he made explicit the Commission view that striking a deal with Greece is a crucial part of saving the common currency and, by extension, the broader European project.

“I don’t want to minimize the financial risks, but for me the main necessity is political,” Moscovici said. “The euro is a political project and the future of Europe lies in greater integration among the countries which have chosen the common currency.”

Eurogroup chairman Jeroen Dijsselbloem warned a few hours later that the progress was “not enough.”

Back in February, when Greece was trying to win more time to negotiate with its creditors, Moscovici appeared to try to bypass the Eurogroup by meeting separately with Greek officials and presenting them with his own proposal. The talks were thrown into disarray after Greek Finance Minister Yanis Varoufakis said he was prepared to accept Moscovici’s proposal, which placed fewer demands on Athens. The Eurogroup thundered that the Moscovici had no mandate to negotiate.

The Commission insisted it was just a misunderstanding.

Florian Eder, Zeke Turner and Tara Palmeri contributed to this article.

Matthew Karnitschnig