Charlie McCreevy, the outgoing Irish finance minister who has been named European commissioner for the internal market, will be a hard act to follow, according to Dublin.
“He’s a big beast,” says one Dublin-based fund manager. “He had the reputation of being very independent, listening to advice but then making up his own mind and pushing through measures, often in the teeth of opposition.”
McCreevy, 54, came into politics from accountancy and spent years languishing on governing party Fianna Fáil’s backbenches. “McCreevy was an economic conservative on public spending back in the days when it was not fashionable,” recalls Pat Leahy of the Sunday Business Post newspaper.
In office he soon established a pro-business reputation and presided over Ireland’s ‘Celtic tiger’ boom in the 1990s, overseeing a period of foreign investment-led economic growth.
“He liberalised the market, halving capital gains tax to 20% despite being warned not to, which gave rise to classic tax buoyancy with the tax take rise by five times as a result,” says the manager. “He also slashed Ireland’s corporate tax rate to 12.5% from 40%.”
On the pensions front McCreevy pushed through the implementation of the National Pensions Reserve Fund despite taking flak from those opposed to putting money aside at a time when the government was borrowing. “The move was way ahead of its time, and it’s since done very well in terms of investment performance,” says the manager.
He also liberalised the pensions market, allowing high-net worth retirees to establish an approved retirement fund (ARF) over which they retain control rather than being required to buy an annuity from a life company. “The industry responded with tailored, bespoke ARF solutions.”
“There are a few black marks,” says Leahy. “He allowed a 20% annual increase in public spending in the run up to the 2002 general election and gave a massive supplement to the public sector pay benchmark against the private sector.”
His establishment of special savings incentive accounts (SSIAs) has also been seen as a failure. “The intention was good and he ignored advice not to press ahead,” says the manager. “But there was no saving going on in the Irish economy. People were spending their income.”
So, he is a controversial character and after Fianna Fáil’s disastrous showing in the European and local elections earlier this year there were clear signs that his days in cabinet were numbered.
Public opinion appeared to agree. Recent months saw 59% of respondents to an Irish Independent poll say he was not a competent finance minister in light of the SSIA failure, and 51% of participants in a Sunday Business Post/Red C opinion poll say they do not think McCreevy was the man for the finance job. However, he romped to victory in a Finance Magazine poll to find Ireland’s best-ever finance minister taken after his departure was announced.
“There was certainly a large body of opinion that viewed the decision to remove him as disastrous,” says Leahy. “The general perception is that while he might of got a lot of the small things wrong he got most of the big things right.”
And he has gone out on a high. The ministry’s Economic Review and Outlook 2004 gave an upbeat assessment of the Irish economy, foreseeing average inflation of 2.2% after 3.5% last year, raising its forecast for this year’s GDP growth to 4.7% from a previous estimate of 3.3%, cutting the forecast for the 2004 budget deficit to 0.4% of GDP from 1.1% and reducing the government's projected borrowing requirement to E1.8bn from the December budget forecast of E2.8bn.
A measure of McCreevy’s appeal is that Simon Coveney, an MEP for the opposition Fine Gael, welcomed his appointment. “It isn’t a question of cross-party support,” he says. “But I am a substitute member of the internal market and consumer protection committee and I share his belief in removing barriers to trade and the need for increased competition to improve services and reduce prices to the consumer. So even though he is from a different party I am looking forward to working with him. And we’ll see a very different Charlie McCreevy now because he doesn’t have to get Fianna Fáil into government at the next election and he doesn’t have to get himself elected and so can think much more strategically.”
But Coveney concedes that Brussels will be more of a challenge that Dublin. “He’ll certainly find it more difficult to have the sort of free rein that he’s had in Ireland,” he says. “During his seven years as finance minister he stamped his personality on the role. But in Brussels he’s going to have to take his fellow commissioners with him.”
And while the Irish government has claimed McCreevy has one of the top jobs in the Commission his portfolio was stripped of responsibility for tax issues in the horse-trading to accommodate the new member states. In addition, the single market is 90% a reality, according to veteran Brussels observer John Palmer of the European Policy Centre. “McCreevy inherits largely a de facto reality, it’s already acquis, and he will be ensuring that governments implement what they have agreed to do but haven’t actually done,” says Palmer.
But Chris Verhaegen, secretary-general of the European Federation for Retirement Provision (EFRP), which represents occupational/supplementary pension plans throughout the EU, sees this as a vital task. “Of course at first sight the Financial Services Action Plan is almost finished,” she says “But when it comes to implementation the devil is in the detail. Most of the measures will be implemented at member state level and so can be transformed into either light touch or burdensome legislation.”
The incoming commissioner's outlook will be crucial, Verhaegen insists. “We expect him to complete the new approach developed under Frits Bolkestein. This means actively encouraging member states to implement financial services law in concert. Bringing legal proceedings against states with non-compliant laws once the implementation deadline has passed should only be a matter of last resort. By itself, it”s too little too late.”
She adds that “particular forcefulness will be needed for those bits of the directive which might suggest member states have a free licence to keep quantitative restrictions and other restrictive practices. The commissioner must spot backsliding here, especially on investment aspects, and then convince any member state either to justify its retrograde position or abandon it.”
In Verhaegen’s opinion: “The future is still very much open and the opportunity for an incoming commissioner to shape it is significant.”
And Coveney is sure that McCreevy will make a mark. “I think that he has a huge amount of experience, a huge capacity for work and a lot of energy,” he says. “From my experience of him on a personal level he is the kind of politician who calls a spade a spade, he has his own ideas and has the potential to be a good commissioner.”