The accidental Eurocrat

Michael Chamier speaks English and French and can understand German and Spanish. He lives in Luxembourg and commutes to work between Luxembourg, Brussels and Strasbourg.

These might be the characteristics you would expect from a man who has been a senior European finance executive for major pharmaceutical companies. But, after 15 years as director of finance for the European parliament, Chamier has developed the sort of skills one might expect from a career diplomat.

Although his career on the Continent has made him a committed European, Chamier confesses: ?I never set out to become a Eurocrat.? He answered a magazine advertisement ?out of curiosity? some 15 years ago, ?and here I am today?, he says, in his part-time office in the new European parliament building in Brussels.

Chamier trained as an accountant in the City of London with Dangerfield Brewis and moved to the Paris office of Arthur Young in 1966. He defected to the business world with Reckitt & Coleman?s Paris-based household consumer products division in 1970. Subsequent moves took him to Brussels and London, with Squibb Europe and then Cabot Europe, based in Paris.

With such a background, languages and Continental accounting practices held no fear for Chamier, but it would be difficult to think of any job that could provide adequate training for his current role.

?There are two main differences from the business world,? he explains. ?Normally a board of directors sits around a table and talks in one language. We have to go before a multinational committee. Every person speaks his or her native tongue, with simultaneous translation.

?Second, they?re not business people in the sense you or I would understand, so you have to look at affairs from their political viewpoint.? Rather than focusing on profit and loss figures, Chamier sees his role primarily as defending the interest of European taxpayers and ensuring they get value for their money.

Aside from coping with linguistic and cultural differences, his role requires a considerable degree of negotiation and tact. The budget hearings, for example, are conducted in public. To avoid unseemly disagreements, he explains: ?You?ve got to take key members aside, brief them in depth and allow them to ask the questions they may not dare ask in public.? Chamier enjoys the multi-cultural milieu of the European political scene, but it does complicate his approach to financial management. There are times, he confes-ses, when a course of action appears self-evident – until he presents it to his political masters, who may have come up with other interpretations based on their own cultural characteristics.

?They?re not wrong, but you have to be able to accommodate the differences – as long as they do not transgress the law or principles of sound financial management. Though the Anglo-Saxon accounting model is excellent, it is not always applicable,? he says.

Through its budgetary sub-committees, Chamier is answerable to the 626 members of the European parliament and is also subject to the regulatory supervision of the European Court of Auditors, the European Commission and, ultimately, the Council of Ministers.

Observers suggest that the length of Chamier?s tenure as finance director in what can be very trying circumstances is a testimony to the patience and care he brings to the role.

The European parliament?s financial regime is like no other. For day-to-day budgeting and expenditure activities, Chamier reports directly to two parliamentary committees – budget and budget control. Each comprises up to 40 politicians from across the political spectrum, though key members will liaise more regularly with the finance function.

Aside from the need to satisfy so many different users of his accounts, the politically controlled financial structure in which Chamier operates can throw all manner of surprises in his path.

Few other finance directors, for example, would have had to wait until mid-December for final approval of their 1999 budget.

The Council of Ministers and the parliament have a gentleman?s agreement not to interfere with each other?s internal finances, but last month?s political machinations made life difficult for Chamier. Rather than working to 1999?s allowances, Chamier had to be ready to move to a provisional twelfth-month regime set out in the community?s finance regulations if parliament blocked the commission?s budget.

Devised in the days when General de Gaulle opposed Britain?s entry into the common market, the commu-nity?s cash-based accounting regime is a hybrid of French and German procedures and were detailed in an annexe to the Treaty of Rome.

?Had the British been in at the beginning, we would have had our word to say, and I?m sure the financial regulations would have looked substantially different today,? says Chamier.

There is a move towards semi-accruals accounting, but as long as the annualised budget process remains, it will prevent Chamier from applying techniques such as rolling three-month budgeting which have become fashionable in the business world.

?The financial regulations are a blanket that applies to all of Europe?s institutions,? says Chamier. ?But they?re less suited to smaller institutions like parliament that have less expenditure.? When ministers at the 1992 summit agreed to build new parliament complexes in Brussels and Strasbourg, they forced parliament to find new ways to accommodate the costs within the confines of the regulations, which did not permit him to borrow any money (see box).

The annual accounts are examined by the European parliament?s budget control committee. The European Court of Auditors examines them and the accounts are then consolidated with other institutions and published by the European Commission.

In normal circumstances, Chamier is not permitted to transfer surpluses from one budget heading to offset shortfalls in other areas. To do so, he must go back to the budget control committee for permission or seek authorisation from the president of parliament. In the past year, he has managed to get around 25 such transfers agreed.

The reporting structure is simplicity itself compared to the parliament?s budgeting process. The figures are negotiated and approved by a separate budgeting committee, which appoints a ?rapporteur? to liaise with the finance director for each budgetary year.

For 1998, Chamier worked with John Tomlinson, the Labour politician since ennobled as Lord Tomlinson.

The current budget was constructed in tandem with Vicenzo Viola, an Italian Christian Democrat. The rapporteur for the 2000 budget is Edith Muller, a representative of the German Green Party.

?Rapporteurs try very much to have an influence on the budget,? says Chamier. ?Being a Green, Ms Muller will probably put more emphasis on ecological audits and environmental issues. Our role is to try to accommodate their wishes within the predetermined financial ceilings and they then have to sell their ideas to the budget committee.? Ever the diplomat, Cha-mier says his team?s role ?is not to play at being politicians, but to give people professional opinions. But one has to take into account political objectives and we try as far as possible to accommodate those political objectives in the financial recommendations and decisions which we propose.? Once approved by the budget committee, the parliament?s budget – currently approaching 1bn euros – is voted on by all 626 members of the assembly. Although they approved parliament?s 1999 budget in October, it was not until December that parliament voted to discharge the European Commission?s total budget for the year.

Like other European institutions, the parliament?s finance department is remarkable for the relatively low count of qualified accountants. The 40-strong team includes just three – Cha-mier himself, accounting officer David Young, a Scot, and Belgian certified auditor Emile Ceuppens. Individual accounting officers control spending under different budget headings.

Chamier, for instance, is also the authorising officer for around 20% of parliament?s budget, including members? expenses and grants to political groupings.

Looking over Chamier?s shoulder is independent financial controller Eoghan O?Hannrachain. He checks each expense item and issues a ?visa? to authorise disbursements. Around 12 times in the past year, he issued refusals which can only be overruled by parliament?s Bureau. ?It?s a serious matter,? says Chamier, who most recently had to deal with a refusal arising from the contractor?s tendering procedure for furniture at the new Strasbourg parliament building.

Until 4 January, the European parliament?s trading currency was the ecu, which changed overnight into the euro. Chamier and his team probably had one of the easiest transitions to the single currency, but still needed to conduct trials in December to ensure that its bankers would be able to cope with the new payroll system.

Does he have any advice for the rest of Europe?s finance managers, who will have to cope with far more traumatic changes resulting from economic and monetary union? ?From a purely financial viewpoint, the introduction of the euro will make an enormous psychological difference, once it gets going,? he answers.

?It will make life much easier for multinational corporations by reducing currency exposures, lowering interest rates and bank charges and facilitating cross-border comparisons.? He stresses, however, that it will take the full three-year transitional period to realise these benefits.

On the political front, Chamier explains: ?People will have to realise that we?ll all have to live with the policy of the European Central Bank.? Although national governments will surrender a certain amount of power to the ECB, each member state will be represented by the chairman of its central bank.

Chamier says the success of the single currency will depend on whether the ECB can maintain its independence and integrity in the face of political interference.

The European parliament will play a key role in overseeing the ECB, as the bank?s chairman has to make quarterly reports in person to parliament. From his grandstand seat, Chamier predicts a great power struggle will be played out between the 15 central bankers and national governments.

Such insights into the formation of the new European order are one of the advantages of his job and he takes ?great satisfaction? from the role he has played.

?Although it is sometimes very frustrating,? he adds, ?when you look at what could have been done?.

ACCOUNTANTS AT THE HEART OF THE EURO

When he is not busy assessing Europe?s VAT revenues, Morley Pecker, the controller of resources at the European Commission?s XIXth directorate, acts as treasurer for the Belgian branch of the UK?s Consultative Committee of Accountancy Bodies.

?We?ve got 450 members from the various institutes,? says Pecker. ?They?re spread all over the place, some are in the commission but the majority are outside, doing the things accountants do all over the world. An enormous number of accountants have Rgone nativeS and formed local firms and joined the Belgian institute. All the big firms are here.? Pecker, who has been with the commission for 25 years, says ?It?s stuffed with lawyers. Other nations tend to believe the lawyer or economist is God?s gift. The British conception of an accountant doesn?t have the same value.? Pecker says, however, that the pan-European body FEE, headed by John Hegarty from his office in Brussels, ?has had an enormous influence in informing local opinion what accountants can be – we do have an influence.? The single most influential UK accountant in preparations for the single currency is Peter Blackie, the senior official responsible for information on the euro in the commission?s economic and financial directorate (DG II).

?He probably has more influence than the other 449 of us put together,? says Lowri Evans, a senior official in the employment, industrial relations and social affairs directorate (DG V). Blackie?s role is typical of the commission, she says, where ?one person within the system can have massive direct influence on a single subject?.

After working as an auditor for Deloittes, Evans joined the European Commission in 1983. She has since moved into social policy, where she is responsible for planning and co-ordination. In contrast to Blackie, she says: ?I have a superficial interest in everything.? Evans says that a UK accountancy qualification ?is wonderful to have? when working as a Eurocrat. ?It allows you to pass easily between the economic and political world and guarantees your numeracy and planning skills.? Jeremy Jennings, Arthur Andersen?s partner in charge of the office of public affairs in Brussels, is also president of the British Chamber of Commerce in Belgium. ?People who live and work in Brussels tend to see EMU in a different light, because they?re not bombarded with propaganda from certain UK tabloids,? he says. ?On a political level, EMU is done and dusted – but there are huge outstanding issues for business.

?It?s very annoying that British business is unprepared because the government hasn?t taken a stand to provide information. The sooner we join EMU, the better.

?But you have to think longer-term than the euro. European Union tax harmonisation may have been exaggerated by the tabloids, but with the single currency we will get a single stock exchange.? ?This doesn?t mean London will be dismantled,? adds Jennings, ?but there will be an umbrella of common rules and procedures, which could give rise to a European equivalent of the Securities and Exchange Commission. This is a good thing.

?Financial regulation and auditing are becoming global. It?s not appropriate for the US to dominate such important issues.? Jerome Adam is an executive partner in Moores Rowland Europe?s Brussels office. Adam is responsible for educating the firm?s international network of member firms and their clients about EMU. ?I?ve championed the cause within the network and lectured about the euro in the US, Norway and the UK,? he says. ?The sooner Britain joins, the better.? In spite of his enthusiasm, he warns: ?Even among clients in the RinS countries, over half the work will need to be done starting from 4 January. There will be problems and our profession needs to put in a lot of work, not just consulting to clients, but providing hands-on assistance with computer systems and training people.

On his travels, Adam has had the opportunity to assess levels of preparation in different countries. ?It depends who you talk to,? he says. ?Some mid-size German companies are not as advanced as some in the UK.? FINANCIAL FOUNDATIONS UNDERPIN NEW HEADQUARTERS

The European Union?s financial regulations prohibit any of its institutions from borrowing money.

This caused some consternation in parliament?s finance department when prime ministers agreed at the 1992 Edinburgh summit to build two new parliamentary complexes – a billion-euro complex in Brussels referred to by locals as ?La folie des dieux? (folly of the gods) and one in Strasbourg.

?At the beginning we had serious problems,? says Michael Chamier, ?as the regulations were not designed to handle such large projects.? Chamier made a plea to the Council of Ministers for a derogation to authorise borrowing on the open market, but the ministers were reluctant to set a precedent that could open the door to other exceptions that would undermine the no-borrowing rule, suggests Chamier.

The Brussels project was outsourced to a consortium of two Belgian banks. This outsourcing arrangement allowed the sponsoring agents, Generale de Banque and Bacob to raise approximately #1bn in finance, which parliament will repay over a ten-year period. Arthur Andersen?s London office helped put together the securitised funding package. ?We?re paying it back like a mortgage, but from a legal viewpoint, we?re not the borrower,? says Chamier.

Aside from fuelling new financial engineering approaches, the massive parliamentary building projects have left their mark on Europe?s accounting procedures. The regulations have been amended to incorporate the notion of depreciation for fixed assets, which were previously carried at cost. The result, says Chamier, is a much more understandable balance sheet.

The second change grew out of a conversation between Chamier and UK budget committee member John Tomlinson. They decided to collect any unspent amounts under the various budget headings and apply them to pay the building promoters to reduce the capital outstanding. Known by the French term ?ramassage?, the budgetary recycling technique had been written into the community?s financial doctrine. In 1998, ramassage generated 60m euros which helped parliament to pay in full for two of the three main buildings in the Brussels complex.

?It?s been a great success and has set the precedent for how major capital projects will be procured in the future,? says Chamier with evident pride. Ever the diplomat, he adds: ?It just came out in conversation between us, but Lord Tomlinson deserves the credit.

He was the one who pushed it and sold it.?