Olli Rehn, austere guardian of budgetary discipline

Popular in his home country of Finland and much feared elsewhere in Europe, the European Commissioner for Economic and Monetary Affairs maintains a low profile. However, with the introduction of new supervisory rules for budgets, his emerging role as a key player in Europe’s economic governance will make it difficult for him to avoid the limelight.

Published on 9 November 2012 at 16:35

French politicians who like to blame “Brussels” for unpopular decisions should consider broadening their vocabulary by citing the name of “Olli Rehn.” The largely unknown Finnish Commission Vice-President has become a key player in European governance — a fact most recently highlighted by his 7 November exposé of growth forecasts for Europe. Modest to the point of self-effacement, Olli Rehn does not make much of his prerogatives.

“I do not have superpowers,” he points out to Les Echos. “I am politically responsible before the European Parliament and my legitimacy is solely based on a European treaty. The decision to reinforce economic governance was taken by member states and parliament, my task is simply to ensure that the member states practice what they preach.”

Largely unnoticed by the public, the last few months have been marked by a paradigm shift. With the approval of last year’s reform of the Stability and Growth Pact — the measures referred to as the six-pack in Brussels jargon — the European Commission now plays an essential role in economic management. When a country fails to toe the line of budgetary orthodoxy (3% deficit and 60% public debt) or adopt corrective measures that are deemed to be adequate, Brussels can now take advantage of a streamlined procedure for imposing fines.

And once they have been singled out, member states will have virtually no hope of escaping punishment: to mount a successful appeal, the member state in question would have to gain the support of a qualified majority on the European Council, which is virtually impossible.

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A low profile that is almost excessive

It will not be easy for bad pupils to beg for support from other member states. What’s more, the new texts have given Olli Rehn’s staff a brief to identify emerging “macroeconomic imbalances” in member states, like the loss of competitiveness in France or warning signs of a property bubble in the Netherlands. Once an imbalance has been identified, Brussels can issue one of its much-talked about “recommendations” and demand that the member state in question produce an action plan to correct it.

And all of this is just the beginning! In 2013, Brussels’ supervisory role will be further reinforced by the entry into force of the fiscal compact, which imposes the “golden rule” of budgetary management. Finally, another legislative text that is still being discussed by parliament, the so-called two-pack, will give Brussels greater oversight of national budgets and allow it to view economic plans before they are adopted by national parliaments.

However, Olli Rehn is keen to downplay its ultimate impact: “Bear in mind, there will not be a veto, just the right to give an opinion.” In the context of his increasingly predominant role, Olli Rehn’s insistence on keeping a low profile is at times almost excessive.

In Tim Geithner’s recently published telephone schedules, it is interesting to see who the US Secretary of the Treasury calls to discuss the euro crisis. In the first semester of 2012, he spoke around 20 times with Christine Lagarde of the IMF, and had a similar number of talks with the ECB’s Mario Draghi. His contact with Olli Rehn was much less extensive, in fact he only phoned him four times.

Future contender for the Finnish presidency

To those that know him from his time as Commissioner for Enlargement (2004-2010), his discretion does not come as a surprise. Olli Rehn was born in Finland, and national character counts for something in his manner. When they are in Brussels, the Finns themselves delight in telling a joke about the difference between the Finnish introvert and the Finnish extrovert: the introvert looks at his shoes, while the extrovert looks at your shoes...

As a political leader, Rehn remains very attached to his home country. That is where he earned his spurs, notably as the prime minister’s head of cabinet in the 1990s. Today, the Greeks, the Portuguese and the Irish, like to grumble about the “men in black” or highly placed officials from the IMF and the Commission who have posted on site to ensure the correct administration of the bitter potion of austerity. But back then, the “men in black” were threatening to come to Helsinki.

“Finland was in a very serious recession. I know what it is like to have the IMF on your doorstep. In 1992, to make sure that the books were square and to avoid international aid, we had to redo the budget for the following year four times over a period of a few weeks,” says Olli Rehn. Well respected in his home country and regularly tipped as a future contender for the Finnish presidency, Rehn never misses an opportunity to speak of his love for Finnish traditions like the sauna.

In early October, to combat the rise of the populist political party, the True Finns, and to address his compatriots’ reluctance to help out the “club Med” countries, Rehn published the Eye of the Storm, a book which recounts the euro crisis and offers an ardent defence of Europe. “That is my contribution to the debate for Europe and for Finland,” he explains.

A case by case approach

In an unusual initiative, profits from the sale of the book will be distributed to junior league soccer clubs — a testament to Rehn’s passion for football. A Manchester United fan, he tells us, “I first became familiar with Europe through sport,” before enumerating a list of clubs from across the continent.

The Finnish commissioner has deep-rooted economic convictions, which are more in line with the standard position in Northern Europe than they are with calls for the rapid introduction of debt sharing through the launch of eurobonds. On the frontline of the euro crisis over the last three years, Rehn has remained a proponent of austerity. As a “Mister 3%”, he is not very receptive to arguments voiced by politicians and economists who favour a more flexible austerity, nor is he convinced by the latest IMF studies which have highlighted the manner in which austerity can contribute to a recession.

An opponent of alternative economic medicine, the commissioner prefers high-dosage therapies that cause the patient to suffer, but offer the prospect of a faster cure. In the Brussels control tower, the recovery of Latvia, which is well on its way to being a candidate for the euro, is often contrasted with the prolonged agony of Greece, which has needed increasingly harsh medicine.

At the same time, Olli Rehn insists that the fiscal compact is far from stupid and that it does include a margin of appreciation for countries in the grip of recession. Moreover, since the start of the summer Rehn and his team have granted additional delays to Portugal and also to Spain. In short, the commissioner is in favour of a case by case approach and opposed to a generalised postponement of efforts that must be made. And so armed, he is well-prepared to deal with a full range of political pressures.

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