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Sweeping Away Europe's Cronyism (Int'l Edition)


International -- Editorials

Sweeping Away Europe's Cronyism (int'l edition)

When Edith Cresson gave a lucrative job supervising AIDS research to her dentist, she saw nothing wrong with it. "It's normal to work with your friends," she said. European parliamentarians didn't find it normal, however. They called for an independent investigation. When the investigation panel revealed widespread mismanagement of funds in the European Union's $100 billion annual budget, all 20 member of the EU's executive leadership, including Cresson, were forced to resign.

New demands for transparency and accountability are eroding Europe's old tolerance for corrupt backroom deals and cronyism. Voters and investors alike are calling for an end to the status quo and demanding clear-cut results. It is a movement that goes beyond government to business and even sport. After revelations of kickbacks and other abuses, the International Olympic Committee, based in Lausanne, Switzerland, along with its Spanish president, Juan Antonio Samaranch--"Your Excellency" to his friends--were forced this week to expel errant members. In addition, they agreed to publish audited accounts and allow oversight from an independent ethics board.

Investors won't tolerate the status quo, either. Executives can no longer hide from the market, and the resulting drive for efficiency doesn't allow widespread use of wasteful sinecures. Italian executives at the former state telephone monopoly and French bankers who thought they would never face hostile takeovers are now under attack. The entrenched forces of the status quo won't go quietly, however. In the wake of the surprise hostile takeover bid that Banque Nationale de Paris made for rivals Paribas and Societe Generale, the French government issued a warning that it would veto the deal if there were any substantial layoffs of employees. But, of course, the whole point of a consolidation is to create a leaner, more globally competitive financial institution.

The pressure for change is rooted in many of the EU's own policies. Brussels has pushed for deregulation and privatization of old state monopolies. It promoted the single currency, the euro. Voters, who have to compete to make a living on this newly freed playing field, no longer will tolerate old-style backscratching and favoritism.

But Europe must be careful to see the current reform initiative through to the end. Even though they have resigned, Cresson and her fellow European commissioners refuse to admit they have done anything wrong. They even want to stay on for months as caretakers through the end of their terms.

Similarly, executives at Telecom Italia and Paribas have tried to save their jobs by striking backroom deals. The takeovers must be allowed to continue, and a new European Commission president must be appointed quickly. Only if the cleanup is pushed to its logical conclusion will Europe become less corrupt--and a fairer, more open place to live and do business.


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