Do you trust this man?

AFP PHOTO / JOHN THYS

Do you trust this man?


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On 25 May next, the European voters will for the first time have their say in the appointment of the Commission president. However, the likelihood that this would improve the ‘corporate governance’ of the EU Commission is nil. The European citizens will remain as powerless as today against the appointment of the members of the future Commission to the various portfolios. As today, they will continue to suffer the consequences of inadequate policy decisions taken by below average politically appointed Commissioners.

A recent illustration of such inadequate decision is the green light given end last year by the Commission’s Vice-President in charge of competition policy, Joaquín Almunia, to a merger between both Greek airline companies at the time, Olympic and Aegean, creating a monopoly on domestic routes in Greece.

The U-turn of Joaquin Almunia

Three years ago, end January 2011, Joaquín Almunia blocked an attempted merger between Olympic Air and Aegean, after nearly a year of discussions. The Commission said that the merger would create a “quasi-monopoly” in Greece and that the merger would have led “to higher fares for four of the six million Greek and European passengers flying to and from Athens each year”. But surprise surprise, two years later Joaquín Almunia made a U-turn, on the basis of an astonishing reasoning.

After years of mismanagement under successive socialist governments, Olympic was privatized in 2009. At that time, it was costing the Greek taxpayer about €1,500 a day. The new owner could however never turn the tide and transform Olympic into a profitable company. This was already clear in 2011. But this time the owner of Olympic could convince Joaquín Almunia that if the latter did not approve the merger, the former would pull the plug out, creating further social unrest in Greece and raising animosity against the EU.

However, Joaquín Almunia needed to find a legal justification for its U-turn, what he did not fail to do with the help of the brilliant in house lawyers employed in the well staffed Commission legal service. The legal argument sounds: Olympic will go out of business and once Olympic will be out of business; Aegean would become the only significant domestic service provider and thus acquire a monopoly. Conclusion: since Olympic would anyway disappear as a competitor on the Greek market, the merger caused no harm to competition that would not have occurred anyway. Joaquín Almunia, explained: “It is clear that, due to the on-going Greek crisis and given Olympic’s own very difficult financial situation, Olympic would be forced to leave the market soon in any event. Therefore we approved the merger because it has no additional negative effect on competition.” It was like a criminal court acquitting a murderer of a cancer patient on the grounds that since the victim was anyway going to die, the murderer had caused “no additional negative effect”.

This being said, Joaquín Almunia did not come back on its finding of 2011 that six million Greek and European passengers flying to and from Athens each year will have to pay higher fares. He said that not the merger but the difficult financial situation of Olympic would be the cause. In addition, Joaquín Almunia stressed that due to its financial difficulties Olympic had already closed a number of routes. In 2011, Aegean and Olympic provided competing services on 17 routes. When the Commission approved the merger between Aegean and Olympic, they had overlaps on seven routes only, of which the following five domestic routes are served only by them: Athens–Chania; Athens–Mytilene; Athens–Santorini; Athens–Corfu; Athens–Kos. Why would the Commission risk causing new social turmoil in Greece for a few Greek routes. After all, Greeks and tourists can also take the ferry if they find the plane too expensive.

The dressing up

Clearing a merger on grounds of the “failing firm defense” – as the reasoning is known by lawyers –is very unusual.  David Anderson from the law firm Berwin Leighton Paisner says that Olympic-Aegean merger is only the second merger approved by the EU Commission on the “failing firm” reasoning.  Moreover, the Olympic-Aegean merger is the first merger ever cleared on a second attempt.

Aegean’s team of lawyers who obtained the Commission’s approval for the Greek carrier acquisition of its rival Olympic Air, lead by Mark Powell and Dr Assimakis Komninos, both from the International law firm White & Case, therefore proudly issued a press release stating that “While the decision should be viewed in light of the current economic context in Greece, it nonetheless represents a first for EU merger control”.

This being said, the only information currently available on the reasoning of the EU Commission is that in the press releases from the Commission and the lawyers of Aegean, since the Commission has not yet made public the wording of its decision of 9 October of last year.

Not the first file

The Olympic-Aegean merger is not the first file for which Joaquín Almunia will be remembered in Greece when he retires at the end of this year.

Greeks do not forget that soon after Joaquín Almunia’s appointment on 26 April 2004 as European Commissioner for Economic and Financial Affairs, the news came out that Greece had been reporting souped-up deficit figures every year since 1998 in order to flout the Stability and Growth Pact. The Greek budget deficit for 2003 was revised upwards from 1.7% to 4.6% of GDP. The following year, the country’s deficit reached 6.6% of GDP. But what did Joaquín Almunia do beyond correcting statistics? Beyond observing, as he did in a speech in Athens on 5 October 2005, “the determination and commitment of the Greek government to restore fiscal discipline and speed up the reforms in order to be better equipped in the face of the new needs of our modern and open societies”? Today and for many years, the Greek population pays and will continue to pay for the inertia of the Spanish EU Commissioner when in charge of Economic and Financial Affairs. But President Barroso rewarded him in 2009 for his handling of the Greek file – had Joaquín Almunia not successfully ensured that no one blamed the Commission for what happened? – with a promotion as Commissioner in charge of competition, one of the most powerful and sought after positions in the Commission.

Happy pensioner

Joaquín Almunia will be 66 at the end of the year and will likely retire when leaving the Commission. Contrary to so many pensioners in the EU who have seen their pensions cut under the EU promoted austerity, he will as former Commissioner receive an EU pension of more than 10.000 Euro per month, with the low EU tax. He will accumulate this pension, with no reductions, with his national pension as a MP (during 25 years) and minister. If he ever visits Greece and flies from Athens to Corfou, he will likely hardly suffer from the souped up tariffs from the monopoly that he brought about.

 

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