The EU competition commissioner is fighting a slide into protectionism, writes JAMIE SMYTH

COMPETITION COMMISSIONER Neelie Kroes is no pushover. Nicknamed “Nickel Neelie” by the media which compares her rise in politics to that of former British prime minister “iron lady” Margaret Thatcher, she has taken on some of the biggest beasts in business and politics and won the day.

Ryanair boss Michael O’Leary has suffered the indignity of seeing the 67-year-old Dutch competition commissioner block his proposed takeover of Aer Lingus.

French president Nicolas Sarkozy earned a trademark Kroes rebuke this year when he cheekily suggested Renault should repatriate jobs back home to France rather than manufacture in the Czech Republic.

And even the super-persuasive Microsoft chief executive Steve Ballmer couldn’t stop her slapping a massive €1.7 billion fine on the software company.

“I think it was important that in the case of Microsoft we had a positive outcome from the court. That our way of thinking was accepted,” says Kroes, referring to the ruling of the European Court of First Instance to back the EU executive’s decision that Microsoft abused its dominant position.

The Microsoft decision handed Kroes instant star status even though the case was first pursued by her predecessor Mario Monti.

It also established the commission as the world’s top anti-trust regulator and gave it the confidence to continue its aggressive pursuit of illegal activity by launching a string of anti-trust inquiries and major cartel-busting operations.

Last week she announced a new inquiry into the pharmaceutical industry, which she suspects of illegally preventing generic drugs reaching patients on time.

She also hit the headlines in May when she levied a €1 billion fine on US technology firm Intel, which she accuses of illegally preventing rival companies from entering lucrative sectors of the computer chip market.

“If we are talking about cartels and anti-trust cases that are damaging consumers and damaging a lot of enterprises then it’s important to note most companies are behaving by the rules. There are just a few rotten apples who aren’t,” says Kroes, who is in Ireland for a two-day visit when she will meet Government Ministers and pro-EU campaign groups to talk about Europe.

Most of her attention in recent months has been focused on averting a dangerous slide into protectionism prompted by the global financial and economic crisis. EU governments have so far pumped a staggering €3.7 trillion in state aid into banks to keep them afloat, and there are growing concerns in Brussels that this could undermine competition rules.

“Nothing is more spoiling than getting used to a helping hand, and the helping hand in this case is taxpayers’ money,” says Kroes, who is pushing governments to ensure banks in receipt of state aid implement restructuring plans and any found not to be viable in the medium term are wound up.

“Banks have to adapt to offset the distortion of competition caused by the state aid they receive. A rival bank doesn’t want to be faced with one that is getting a helping hand and doesn’t have a level playing field.”

Kroes will publish new guidelines next week for governments to follow to ensure they are allowed by the commission to provide state aid to their banks. These will focus on ensuring that governments restructure banks that require bail funds through sell-offs of non-core branches or units. Banks will also be expected to contribute a significant proportion of the costs of restructuring, and will be forced to adapt their activities to compensate for the distortion of competition caused when they accepted public money.

She says the Government will have to follow the guidelines in relation to the three biggest Irish banks, Bank of Ireland, AIB and Anglo Irish Bank, which are all in receipt of substantial State support. But the new guidelines will apply to the 70 other EU financial institutions relying on state bailouts, and will set a 2013 deadline for the end of all state subsidies to the sector.

“If state aid is needed in the future then we are making a big mistake,” says Kroes, who has called on British banks Lloyds and Royal Bank of Scotland, which owns Ulster Bank, to slim down by disposing of non-core assets.

“It’s not size, it is your viability and your business model that should be competitive in the international market,” says Kroes, who accuses banks of helping to cause the crisis by having “eyes bigger than their bellies”.

She admits her tough stance on slimming down and restructuring Europe’s banking sector has put her up against some “pushy” governments. But she says she is not someone “that can be influenced by governments and businesses”.

Competition lawyers in Brussels say she has had a good recession by keeping the competition rules at the front of the debate and showing good political leadership in the face of a storm. However, some question her grasp of the detail of competition law and her inability to grasp the subtleties in complex cases.

“She is a poor shadow of some of her predecessors such as Mario Monti, Leon Brittan or Peter Sutherland because she doesn’t know the detail,” says one senior lawyer.

“But it is true that she has been an effective crusader, and certainly has had a politician’s instinct in the job.”

She certainly got off on the wrong foot with Minister for Finance Brian Lenihan, when last October, without any prior notice, he announced a blanket State guarantee for Irish-owned banks.

“For me this wasn’t acceptable; it would have been absolutely a problem under the single market rules but when we got in touch with the Government they were very co-operative and constructive in finding a way out,” says Kroes, who remembers a late-night meeting in Luxembourg with Lenihan to iron out the problems with the plan.

However, she says she now enjoys a good working relationship with Lenihan, who she met yesterday in Dublin for talks about the creation of the National Asset Management Agency (Nama) and his approach to the crisis.

“It’s a good start but we have to find out how it is working,” says Kroes, who has implored other EU states to develop plans to deal with bad assets.

And what about her relationship with another brusque Irishman, Ryanair’s Michael O’Leary, following her decision to block his proposed takeover of Aer Lingus?

“It was an unacceptable deal that he placed on the table; there is no doubt about that. But I was also aware that I was facing a guy who had broken up a protected air policy in Europe. So on the one hand I had great respect for what he had done for Europe and for consumers,” says Kroes, who adds that it is possible that changing circumstances would enable a merger between the two Irish airlines to go ahead some time in the future.

Coming from the Netherlands, Kroes knows a thing or two about rejecting EU treaties. In 2005 the Dutch threw out the precursor to Lisbon, the EU constitution, in a referendum prompting a crisis in the Union just as she was settling into her new job in Brussels. “There was a lot of misunderstanding about the issue because in Dutch the word constitution was putting people on the wrong track,” says Kroes, who keeps a brick with the word “No” inscribed on it sitting on her table to give her inspiration during meetings.

“It wasn’t a constitution and it isn’t a constitution. For me it is matter of giving people the facts and figures…I respect the Irish people; you are wise people.”

As well as being an enthusiastic European, she is also enthusiastic about getting more women into top positions in politics and business. “My clear line is that if Lehman Brothers had of been ‘Lehman Sisters’ would the crisis have happened like it did? No,” says Kroes.

“Generally women have a better ear to listen, and they are less likely to pretend to know everything themselves. They are team players with less ego. This gives me the feeling it is worthwhile to have more diversity,” says Kroes, who today will meet members of a new lobby group Women for Europe, which will campaign for a Yes in the Lisbon referendum.

But the biggest challenge for Kroes will be holding on to her job for a second five-year term when her mandate ends on October 31st.

“It’s too early to say. My government hasn’t addressed me,” says Kroes, who makes no secret of her desire to stay on in the commission’s powerful competition portfolio.

“There is still a lot to do,” she says, noting that many governments plead for others to adopt a non-protectionist attitude while in their own daily activities adopt a protectionist approach.

“When you talk about a single market, protectionism is an outdated term and the single market are the crown jewels.”