The rot at the top of the EU

Complaints about the pay and power of the EU’s top bureaucrats are getting louder. Are they justified? Matthew Partridge investigates.

Who's complaining?

There is growing controversy about the pay and power of the European Commission, the main administrative body of the European Union (EU). David Cameron has argued that, as part of a drive to keep EU spending under control, European civil servants in Brussels should "share the burden" by having their pay and benefits cuts.

As David Davis notes in the Daily Mail, EU commissioners earn a basic annual salary of £194,000 "almost £80,000 a year more than US Secretary of State Hillary Clinton gets paid". In a rare sign of unity, eight countries, including Britain, France and Germany, demanded in October that plans to raise civil service spending by 25% over the next seven years be rethought. Even insiders admit that Brussels lacks accountability.

Daniel Guguen, a lecturer at the College of Europe, the top training school for European bureaucrats, has attacked the Commission for being undemocratic'. In an interview with Public Service Europe, Guguen claimed that, "on some issues, the eurosceptics are right. The system we have now is the worst you can possibly imagine. It is a culmination of all faults."

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How much power does the Commission have?

The Commission proposes legislation, implements decisions and treaties, and takes care of the day-to-day running of the EU, including its spending programmes. It is headed by 27 commissioners, one for each member state. These are appointed by their home governments for fixed terms.

In theory, it is answerable to both the Council of Ministers, who make major decisions, and the European Parliament, who actually pass the legislation. But Guguen argues that over time both institutions have surrendered more and more power, leaving the Commission firmly in control.

For example, the European Parliament has granted the Commission power unilaterally to extend or even make laws, without consultation. He also says the complexity of most legislation leaves commissioners reliant on the advice of the unelected civil servants.

Has the crisis given it more power?

No, argues Gideon Rachman in the FT. In fact, as the eurozone crisis has developed, Germany's key role as the largest creditor nation means it is quietly supplanting Brussels as the political capital of Europe. "The [International Monetary Fund's] most important conversations take place with the German government and the European Central Bank" not the Commission. But many German commentators disagree.

Der Spiegel's Christoph Schult argues that "with almost every step toward reform that the EU has taken since the crisis began, the jurisdiction of the... Commission has grown". While Merkel may want a bigger role for Germany, she "has had to realise that she needs [Commission President Jos Manuel Barroso] to assert German interests and create a true fiscal union".

Does this matter?

One argument is that it doesn't matter if Brussels is unaccountable, as long as the decisions it makes are in Britain's interest. One way to ensure this is to have British civil servants in key roles. As Stanley Pignal notes in the FT, although "EU civil servants are instructed to forego their home countries' national interest... the bloc's 27 governments understand full well that a fellow countryman is often a natural ally".

But even if you accept this argument, the trouble is that just 3% of civil servants in the key economics directorate are British. While this is partly to do with Britain's decision to stay out of the euro, even Romania and Sweden are better represented. This is unlikely to change; an even lower proportion of recent graduate-level hires came from Britain.

How could it be reformed?

One way to reduce the power of European civil servants would be to expand the role of elected representatives. For instance, the European Parliament could be given more control over law-making and Commission appointments. So far, it has only been able to stop the nomination of one candidate, Italy's Rocco Buttiglione, in 2005.

Alternatively, Wolfgang Schuble, Germany's finance minister, who favours further integration of European countries, has suggested that the Commission "ought to be elected directly, either by the parliament or through the direct election of a Commission president". The drawback is that this would reduce the power of national governments to influence European policy.

Such a move might also make it easier for Brussels to expand its power overall, since it would be harder for critics to claim that it was "unaccountable". Schuble, of course, sees this as a good thing, stating that "the Commission has to develop into a real government", but it's the last thing eurosceptics would want to see particularly given the difficulty the Commission has in managing its budgets at a time of austerity everywhere else.

Does Brussels have a corruption problem?

An ongoing problem is the apparent inability of Brussels properly to oversee the EU projects that it funds. The EU's Court of Auditors refused to sign off on its accounts for the 18th year in a row, saying that controls over 86% of the EU budget in 2011 were only partially effective'.

Marta Andreasen, a former chief accountant at the Commission, claims on The Commentator website that "money is given to countries to spend pretty much as they wish and there are no proper checks in place to ensure it's being used properly, or even whether the promised projects are actually being built".

She estimates that up to 20% of the Commission's spending may "disappear into the back pocket of a corrupt official".

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri