There is nothing quite like suspicion of Goldman Sachs to unite Europe’s populists, conspiracists and the political establishment. Known in France as l’affaire Barroso, the US investment bank recently touched a raw nerve when it hired a top former EU official. The pitchforks are out.
For Goldman it must have seemed a good idea. What better response to Europe’s troubles than to enlist José Manuel Barroso, a former Portuguese premier and two-term European Commission president. As well as offering advice, opening doors and chairing Goldman Sachs International, he would embody the bank’s commitment to the EU post-Brexit.
The backlash was something else. “Morally unacceptable,” cried François Hollande, president of France. “Hardly surprising for people who know the EU does not serve people but high finance,” said Marine Le Pen, France’s far-right firebrand. Almost 150,000 have signed a petition calling for the commission to strip Mr Barroso of his pension.
Much has been written about revolving doors, ethics rules and whether Mr Barroso’s political instincts deserted him in retirement. But l’affaire Barroso is fascinating for other reasons too. It is a window on the febrile, kickback mood in Europe: anti-establishment, anti-banker, anti-Brussels, anti-American. And it amply demonstrates Europe’s enduring reluctance to acknowledge the homegrown causes of its banking malaise.
For all its faults Goldman is probably a sideshow. Populists hate to admit it, but Europe’s banking crunch — in Italy, Spain, Greece, Slovenia, Ireland and Portugal to name a few — was as much about low finance as high finance.
“The crisis in Europe has not been one of capital markets or fancy investment banks but a crisis of normal banks. Basically the more standard the bank, the more plain its business, the more problems there have been,” said Nicolas Véron of the Bruegel think-tank.
“There is still a lot of denial. We should be long past the stage of acknowledging that this was a homegrown crisis. The detonator was American but the explosive charge was European.”
To understand the Barroso outcry consider Jean-Claude Juncker’s revealing comments on the episode. “Personally I do not have a problem with him working for a private bank, but maybe not this bank,” said the current commission president as he explained why he removed Mr Barroso’s red carpet privileges.
In other words, had Mr Barroso chosen another bank, even another Wall Street bank, there probably would have been nothing like this furore. There is something special about Goldman that gave an indignant reaction its edge.
Many reasons have been cited. For some, the original sin is Goldman’s involvement (along with others) in the mortgage market practices that sparked the 2007 crisis. Others cite Goldman’s role in helping Greece cover up a ballooning deficit with expensive derivatives deals.
But a moral appraisal of Goldman distracts from the real point. If Mr Juncker had spoken out against politicians serving on bank boards, he would have been calling out an entire political class, especially in Germany where sitting on a board seat of public banks is routine for politicians. “It is so institutionalised in Germany they don’t even see it as a worrying revolving door,” said Carl Dolan of Transparency International. “It is the system.”
Indeed in the topsy-turvy world of Brussels, there are rules restricting what former commissioners can do, but little to stop serving MEPs from taking jobs with companies that they also legislate on. Several of the European Parliament top lawmakers on financial services serve on advisory boards for small banks.
Finally take the case of Monte dei Paschi di Siena, an ailing Italian bank. It is a thoroughly European mess. This venerable institution has been in bed with politicians for centuries, notably bankrolling Italy’s centre-left. Soft-touch regulators allowed it to sell dangerous bonds to unsuspecting savers and forever delay dealing with problems. While Goldman helped Greece fix its books, it was Deutsche Bank that allowed MPS to obscure losses with complex derivatives.
And today it is Italian politicians shielding the bank from Europe’s new bail-in and resolution rules. And the opposition? Well Italy’s populists are banging the drum for a taxpayer bailout to save the bankers. Little wonder Europe prefers to talk about l’affaire Barroso.