Analysis - Juncker's team likely to survive EU power struggle

By Paul Taylor

PARIS (Reuters) - Party politics seems set to trump concerns about the competence and suitability of several candidates for the European Commission when lawmakers pass judgement on Jean-Claude Juncker's most controversial nominees this week.

The European Parliament has flexed its muscles by recalling Britain's Jonathan Hill for a second hearing on Tuesday on his fitness to be in charge of banking and financial services.

The French, Hungarian and Czech aspirants are being forced to take written re-sits. Parliament's lawyers are scrutinising the financial statements of Spain's nominee for the energy and climate change portfolio, Miguel Arias Canete, who is also under fire over his family's oil industry ties.

And the former Slovenian prime minister, who nominated herself after losing an election, faces a bumpy ride on Monday.

Yet mutual dependence between the EU's two main political families -- Juncker's centre-right European People's Party (EPP) and the centre-left Socialists and Democrats (S&D) of European Parliament president Martin Schulz -- means any major rejections seem unlikely.

"The worst case scenario that we keep all the bad candidates because they cut a deal cannot be ruled out," said Sylvie Goulard, a member of the centrist ALDE group on the economic committee, which grilled Hill and France's Pierre Moscovici.

She said Juncker would do better to reshuffle his pack so that weaker nominees are moved to less sensitive jobs but added: "That is not the direction things are going in."

A senior EU official, reflecting the institutional fears of Commission veterans, said score settling by the political groups had taken over from the examination of competence.

"It is no longer about the right candidate. It is a political game between the parties in parliament -- taking hostages and exchanging them," he said.

Juncker's spokeswoman said he was satisfied with the performance of all the candidates in their hearings, especially Hill. A source close to the former Luxembourg prime minister said he spent the weekend working the telephones to parliament leaders and Schulz "to cool things down".

THREE POWER STRUGGLES

There are at least three power struggles in play: between Juncker and the parliament; among the main political groups in the legislature; and between lawmakers and the member states.

Parliament forced the replacement of nominees in 2004 and 2009 and some lawmakers want to wield that power again to assert the Commission's accountability to the elected assembly.

Schulz was Juncker's unsuccessful centre-left opponent in the May European elections and may have a personal motive for flexing the legislature's prerogatives.

However Juncker can claim democratic legitimacy of his own since unlike his predecessor, Jose Manuel Barroso, he was the EPP's declared lead candidate in the election campaign.

Aides to the incoming president say he recognises that parliament needs to get something out of the confirmation process, but he hopes it will be satisfied with fuller answers to the follow-up questionnaires and won't insist on scalps.

The two main political groups are dependent on each other for a majority due to the influx of Eurosceptic far-left and far-right members after the pan-European elections, so a sort of "mutual assured destruction" may impose an armistice.

Some deputies are keen to inflict defeats on the British and Hungarian nominees because of Britain's Eurosceptic outlook and Hungary's record on media freedom and the rule of law.

But rejecting Hill could open a crisis with London, perhaps making it more likely that Britons vote to leave the EU if Prime Minister David Cameron's Conservatives win next year's general election and hold a promised in/out referendum in 2017. And Hungary's Tibor Navracsics distanced himself somewhat from Prime Minister Viktor Orban.

THEATRE

In last week's parliamentary theatre, Conservatives angered by the rough questioning of Arias Canete by the left and Greens wreaked their revenge on Moscovici.

The Socialist, who was French finance minister until six months ago, was given a torrid time by lawmakers who questioned his ability to enforce the EU's budget rules when Paris had repeatedly failed to meet its deficit-cutting targets and was again seeking more time.

The supplementary questions he must answer in writing by Tuesday were even more clearly designed to corner him, restrict any wiggle room and make him punish France. One asked:

"What action should apply to Member States whose budget deficit is constantly above 3 percent of GDP and which have already been granted an extension of the deadline to bringing down the deficit to Maastricht levels? Under which circumstances would you argue for granting more time or applying sanctions? What action will you apply to a Member State whose public debt is constantly above 60 percent of GDP and increasing? Under what circumstances would you not recommend to apply sanctions?"

Yet German Chancellor Angela Merkel's Christian Democrats, who dominate the EPP, pulled their punches in criticising Moscovici's performance, leaving the door open to accepting him grudgingly for the sake of Franco-German relations.

In theory, parliament only has the right to approve or reject the whole Commission in a single up/down vote due on Oct. 22. In practice, committees can withhold confidence from individual nominees who display a poor grasp of their portfolio or raise ethical or policy issues.

In 2004, lawmakers forced Italy to withdraw its nominee for justice and home affairs, Rocco Buttiglione, after he described homosexuality as a sin. To spare then Prime Minister Silvio Berlusconi embarrassment, the EPP insisted a Socialist nominee was also dropped and another made to switch portfolio.

No candidate has made that kind of gaffe this time, although some have floundered when asked detailed policy questions.

Deploying charm and wit, Hill initially seemed to disarm doubters who contended that a Briton was ill-fitted to regulate the excesses of finance or build a European banking union, since his country was dependent on an outsized financial sector and had turned its back on the euro and the banking union.

But he was floored when asked for his views on euro bonds -- jointly issued euro zone government debt -- and high frequency trading, and for his ideas for creating a capital markets union.

"I have no particularly informed view on the subject," he said of euro bonds, a hot-button issue in Germany which unlike the other two matters is not in his area of responsibility.

Perhaps the most successful nominee was Denmark's Margrethe Vestager who won unanimous approval after a self-confident three-hour audition for the powerful role of European competition commissioner. She even turned the tables on photographers by taking their picture on her mobile phone.

The format of the committee hearings, with no follow-up questions allowed, favours evasions and generalities. Whether the detailed written interrogation elicits more precise answers remains to be seen.

But unless the lawyers and accountants find a skeleton in Arias Canete's closet, the chances are that the wily Juncker will be able to exploit the balance of terror between EPP and S&D to push his team through, despite lawmakers' reservations.

He has another argument up his sleeve: neither major party wants what he calls "Europe's last chance" to restore public confidence to get off to a chequered start, with Barroso's lame duck Commission possibly forced to linger in office while parliament wrangles over new Commissioners' qualifications.

Since parliament has asked Juncker to move fast to present a 300 billion euro investment programme in November to revive the European economy, it would be held responsible for any delay.

(Editing by Mark Potter)