No one in Brussels or other EU capitals is surprised to learn that Jean-Claude Juncker’s Luxembourg was, and is, a tax haven. And no one doubts that the new president of the European commission, a crafty survivor whose political longevity is peerless in Europe, knew enough about the vast tax avoidance schemes practised there, even if he did not bother to master all the fine print.
The question is whether Juncker, a little more than a month into a five-year term as head of the EU executive, can weather the storm and credibly perform a poacher-turned-gamekeeper role of setting up an EU regime to clamp down on tax evasion and avoidance. There are few leaders in Europe who understand the workings of the EU as well as the former prime minister of Luxembourg. With the exception of Germany’s finance minister, Wolfgang Schäuble, Juncker is the only leader left who took part in the negotiation of the Maastricht treaty more than 20 years ago which dealt with the impact on the EU of German reunification and the process to create the euro. He has been attending EU summits uninterruptedly for 20 years. No one at the summit table can boast that record. He knows everyone. He has friends everywhere. A fixer, a mediator between France and Germany (needed right now as much as ever); the consummate EU insider, he also knows where the EU’s skeletons are buried. Asked about the impact of the Luxleaks on Juncker’s credibility and the authority of the new commission, the commission vice-president, Jyrki Katainen, squirmed and left the room. “I trust him,” he told the Guardian. “I’m not in a position to give any advice … We have to focus on what the president has done by himself and not done.” Last March, the EU’s centre-right leaders, including the paramount leader, Angela Merkel of Germany, met in Dublin and backed Juncker to become the next commission chief after he was unseated last year as Luxembourg’s prime minister. They will not make life difficult for him now. For them, mayhem at the top of the commission would seriously destabilise an EU desperately trying to come up with policies to drag Europe out of years of crisis, while anti-EU populists give the leaders a hard time across the continent. The consensus on not rocking the Juncker boat was evident in the European parliament last month. The far-right populists, led by Nigel Farage of Britain’s Ukip, Marine Le Pen of France’s Front National and the Five Star movement mavericks of Italy’s Beppe Grillo, tabled a vote of no confidence in Juncker. Everyone else held their noses. Even Juncker critics on the left refused to back the motion, while the mainstream Christian and social democrats, and liberals all solidly supported the president. Juncker took the entire 28-strong commission to the parliament, defended himself after the first round of Luxembourg leaks, and walked away unharmed. Besides, in the endless turf wars waged between rival EU institutions in Brussels, the parliament views Juncker as “its” commission chief – it played a key role in getting him the job in the first place – and will not challenge him too severely. If there is pressure on Juncker, it will come not from the EU political elite, but from the media in the form of further revelations. Officials and diplomats say his fate will hinge on how compelling the evidence against him is. But the competition department of the commission he heads is also investigating Luxembourg on the grounds that some of the “comfort letters”, tax rulings, and avoidance strategies agreed by his then administration amounted to state aid in breach of EU competition rules. The cases of Fiat and Amazon are being investigated, while Skype may have to be added to what seems certain to become a long, and lengthening list.
Juncker insists his position at the head of the commission will not impair the credibility and impartiality of its investigation. Rather than jeopardise his position, the political elites in Germany and France and elsewhere will exploit the Juncker scandal to push an agenda bringing more transparency to tax arrangements to counter “tax-dumping” between EU governments.
Juncker claims to be a champion of such moves, suggesting either a Damascene conversion to the cause or a calculation that his political future depends on being seen to be a born-again proponent of fair taxation. For the moment at least, Juncker looks tarnished by the disclosures, but not really in fear for his job. Although he is free to resign, he cannot be removed as an individual. The entire European commission would have to go, felled by a vote of no confidence in the European parliament. This is a remote prospect at the moment. And for this to happen, national leaders, chief among them Merkel, would have to signal that Juncker’s time is up and then press their allies in the parliament into organising the commission’s collapse. No one in Brussels at present is talking in such terms.
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