Bruegel: an unlikely start-up

In October 2002 I had lunch with Nicolas Véron. He and I had separately developed an interest in the role of economic think tanks. I had just ended my term as Executive President of the French Prime Minister’s Council of Economic Analysis and had joined the Treasury on a temporary basis to contribute to the preparation of the French G-7 presidency. I was planning to later join the IMF. Nicolas had started a financial consultancy after having worked in government and in an internet start-up.

We had both learned in government that good ideas are the scarcest of all policy ingredients, and we had both observed that in Europe, the dialogue between researchers, practitioners and policymakers lacked intensity and relevance. For these reasons we were both keen on finding ways to promote evidence-based policy thinking in Europe and together we came up with the idea of an economic policy research organisation that would emulate the best US think tanks. We concluded from our exchange that this was an idea worth turning into a real project. Most likely, it would not succeed. But we felt that it had to be tried.

I started discussing the idea with colleagues within the French Treasury. I spoke first to those in charge of European policies: Claire Waysand, Odile Renaud-Basso and Stéphane Pallez. I should have been discouraged, because from a bureaucratic standpoint the idea of creating a policy-devoted body outside the government machinery was a very odd one. But they did not discourage me, and instead expressed interest. I then spoke to Jean-Pierre Jouyet, the State Secretary (Directeur du Trésor), and he was equally supportive. Emboldened by these unexpected reactions I went to see Francis Mer, the Minister, whom I had known in his previous incarnation as a private-sector CEO while I directed and he chaired CEPII, the research institute. He was not a risk-adverse man and responded with encouragements.

On the German side the state secretary was Caio Koch-Weser, who had been recruited from the World Bank and had brought with him the Washington policy culture. He was nostalgic of the brown-bag seminars held at the Bank and the stimulating intellectual atmosphere of Washington-based international financial institutions. So when he heard about the project he was immediately keen on developing it. He wanted the new centre to be a lively forum for interaction and a birthplace for new ideas. With Jean-Pierre’s support he became an essential driving force for it.

After the official blessing was given in January 2003 by president Chirac and chancellor Schröder on the occasion of the 40th anniversary of the Élysée treaty, serious discussions began between France and Germany. I was put in charge of the project for the French side and soon went to Berlin to meet my counterpart Christian Kastrop. Christian was also an untraditional bureaucrat: instead of the standard attitude of defiance vis-à-vis something that had not been invented at the ministry, he quickly developed ownership in the project. Together with his colleagues Norbert Hoekstra and Rita Schutt he formed a strong, opinionated but ultimately fervent crew.

Christian and I decided to task a team composed of Lionel Fontagné, the director of CEPII, and Willi Leibfritz of the OECD with the preparation of the scientific project. We assigned the crucial responsibility of preparing the statute to Reiner König, a former Bundesbank director, and Nicolas. Reiner and Nicolas were as different from each other as conceivable, but they worked wonderfully together and skilfully solved many of the problems raised by the creation of what would become Bruegel. The upfront investment we made in its design and governance turned out to be an extraordinarily profitable one.

Chancellor Schröder and President Chirac had wisely agreed that the future think tank would be located in Brussels rather than in France or Germany. Time therefore had come to approach Belgium. I went to see Peter Praet, whom I had known as Chief Economist of a major bank. He had been Chief of Staff of Finance Minister Didier Reynders before becoming a director with the central bank. Peter, who would later join Bruegel as a board member, was immediately enthusiastic. He introduced me to the minister, who committed support. He also took the apparently more mundane decision to assign responsibility for the project to a young advisor, Stéphane Rottier. Stéphane proved extraordinarily effective in the next phase of the project, the discussions between states that actually led to the launch of Bruegel.

The discussions opened in October 2003 after ministers Hans Eichel and Francis Mer had expressed agreement on the outline prepared by our team. The Chirac-Schröder declaration had made clear that Bruegel could not remain Franco-German. So we invited all EU member states, the Commission and the ECB. It took a few months to move from a Franco-German outline to a shared project. A few individuals played a defining role in the process, especially Jan Donders of the Netherlands, Alicia Garciá Herrero of Spain, Eduard Hochreiter of Austria, Carlo Monticelli of Italy, Sigurd Naess-Schmidt of Denmark, and Paul Rankin of the UK.

By March 2004 agreement was reached. Twelve states committed to supporting what was still known as the European Centre for International Economics, conditional on our ability to attract private members. We were thrilled that Hungary, Poland and Slovenia decided to take part from the outset, despite the fact that they were not yet members of the EU. Securing UK membership was particularly rewarding – as Jon Cunliffe, then at the Treasury, quipped in one of the meetings: “We are not very good at joining.” The quid pro quo for UK membership was that states committed support to Bruegel for a 2-year period only and that they would continue financing it only if it were effective and able to attract private support. What initially looked like a limitation proved in fact to be a blessing: the only way to survive was to succeed – fast.

Three things were needed before we could launch Bruegel: first, private members; second, a proper structure; third, a chairman and a director.

Recruiting private members was essential to Bruegel’s identity. But it was also a challenge. We had decided to set the membership fee at a relatively high level because our preference was for a few committed partners rather than a large number of indifferent members. Nicolas and I began to chase CEOs and to try to convince them to join. It was difficult, because we were offering neither direct service nor a way to indirect lobbying. I remember long discussions with a major and wealthy investment bank that resulted in their suggestion that they could discharge of the membership fee in kind, through engagement of their first-rate economists in our debates – we welcomed this, but also insisted on the cash component. Caio Koch-Weser helped to reach out to German companies, but as far as other countries were concerned, we had to do it all on our own. Given these hurdles, the fact that we were able to sign up 17 corporate members from 8 different countries (including the US) by late 2004 is testimony to the strong appeal of Bruegel’s initial concept. Individuals such as Klaus Mangold at Daimler-Benz, Jim O’Neill at Goldman Sachs, and Louis Schweitzer at Renault were instrumental in this result.

To build the legal structure and make preparation for recruitment and operations, the state members appointed a Steering Group chaired by Sigurd Naess-Schmidt who had served as representative for the Danish finance ministry. Sigurd was very committed to the project and he helped considerably in the setting up of the initial structure.

Lastly, we needed a Chairperson. The dream chair existed in the person of Mario Monti, then European Commissioner for Competition. He would bring academic background, intellectual authority, undisputable independence, and European commitment. But his availability was uncertain. Having been approached through his head of staff Marc Van Hoof and through fellow commissioner Pascal Lamy, an early supporter of the project, he had indicated sympathy for the idea. But other things could happen.

Fortunately (for us at least), things clarified and Mario’s commitment materialised. His involvement quickly became very active. One detail preoccupied us: we did not have a proper name yet. We all wanted to avoid the four-letter acronyms so common in Brussels that they provide a guarantee of anonymity, but in spite of creative sessions with our communication guru Soizick Bévan and others, we had been unable to come up with a proper name. When told about the problem, Mario paused and asked: do you give me 24 hours? The next day, he came back with an idea – a pun on “BRUssels European and Global Economic Laboratory”. Bruegel had found its name.

In December 2004 the first Board was elected. It convened in January 2005. Mario was chosen as Chairman and I was appointed Director. On 18 January 2005 we held the first press briefing, which Mario opened by saying that, not having been an enthusiastic supporter of each and every French, German, or Franco-German initiative when he was Commissioner, he could confess that the one that eventually led to the creation of Bruegel had been an excellent one. What followed is told by Nicolas in another article: the early days, the early staff, the first conference, the first paper. The start of an extraordinary journey that I am proud to have been part of.