Europe sends Biden a reminder of why Transatlantic ties matter

(Bloomberg)—At the tail end of the Cold War, on the westernmost tip of the Soviet Union, Valdis Dombrovskis sat in his home in Riga and tried to tune in to Voice of America. 

The station jumped all over the radio dial as broadcasters played cat and mouse with the Soviet censors trying to jam their signal, but the kid who would grow up to become the European Union’s trade chief kept chasing it. He knew the propaganda. He wanted to hear what the U.S. had to say for itself. 

“Since kindergarten we were indoctrinated with all this Communist stuff, and the U.S. was kind of the arch evil hegemon of imperialists,” Dombrovskis said in an interview earlier this month. “Of course in everyday life, when you were growing up, this perception was changing.”

It’s a sign of just how fast the arc of history can bend that the Soviet teenager has become the EU’s go-to person for tackling its thorniest problems. Now as trade commissioner, he finds himself at the sharp end of European efforts to rebuild the western alliance that won the Cold War, dominated the world and was tipped into crisis by the presidency of Donald Trump. 

“It is important to maintain and develop this strategic partnership,” he said. “It’s important also internationally to get the U.S. back to multilateralism.”

In Brussels, Dombrovskis is known for his deadpan, almost robotic delivery. He sticks to the script and focuses on the detail, often from behind a thick folder of documents. 

A meme making the rounds in the EU capital supposedly shows Dombrovskis in 16 different emotional states — the same photo is used for all of them, his usual neutral expression behind rimless glasses.

Officials who have worked with him — and those who’ve sat opposite him in negotiations — say that lack of charisma is his secret weapon: Dombrovskis is never fazed, regardless of what is thrown at him.

It also makes him difficult to read and officials say people often underestimate him, despite the fact that he has overseen the regulatory framework that put the EU at the forefront of green finance and prepared the bloc’s financial rulebook for life without the City of London. 

Dombrovskis will certainly mark a change from his predecessor, the back-slapping Irishman Phil Hogan, who quit in August after breaching coronavirus rules. 

Hogan was just the latest in a string of EU trade officials who irritated their counterparts in Washington. On a visit at the beginning of the year, Hogan was given a dressing down by Trump’s economic adviser Larry Kudlow though with President-elect Joe Biden’s Irish roots, he might have proved an asset.

In any case, the arrival of Biden should lighten the mood. Antony Blinken, his nominee for secretary of state, said in September the U.S. needs to end the “artificial trade war” with the EU. 

“We ought to be able to do it,” Blinken said. “We’ve got the same basic goals.”

But the structural tensions will remain — the EU’s first major policy decision following Biden’s election victory was to impose retaliatory tariffs on $4 billion of U.S. goods as part of the long-running fight over state aid for Boeing Co. and Airbus SE. 

“I still believe,” he says. “There is much more which is binding us together than pulling us apart.”

His back story helps to explain why. 

Dombrovskis was born in 1971 in Latvia, one of three tiny Baltic countries unwillingly absorbed by the USSR at the end of World War II. It was a monochrome world where people turned to the black market to secure illicit goods from the West. 

“Everything which was from the West, like the music and clothes, was cool,” Dombrovskis says. “It was all semi-official and semi-legal in terms of how we were getting hold of all this.”

He was studying physics in Riga when the Soviet Union collapsed in 1991 and Latvia won independence. 

Dombrovskis spent most of the 1990s in academia, switching between science and economics, moving from Riga to Germany and eventually to the University of Maryland on the outskirts of Washington.

On the first day at a military lab where he was supposed to be researching laser technology, the guard refused him entry. Without a passport from a NATO country, he was rated a security risk and only allowed in after colleagues turned up to vouch for him. 

The value of a Latvian passport was about to increase dramatically. 

When Dombrovskis returned home after a year, he found a country in a hurry. 

New institutions and new political parties were springing up as Latvia rushed to cement its realignment with the West by joining NATO, the EU and eventually the euro.

Dombrovskis landed a job as an analyst at the central bank. Three years later, in 2002, he was finance minister.

That meant a front row seat in the construction of the European project, with all its compromises and contradictions.

“So I could observe early damage to the stability and growth pact,” he jokes. That’s a reference to a notorious meeting in 2003 when the ministers blocked sanctions on France and Germany for breaching EU fiscal rules. The precedent set has handicapped EU budget enforcers ever since. 

Six years later, in the grip of the financial crisis, Dombrovskis was given another lesson in European realpolitik: the rules bite harder for little countries. 

In February 2009 the Latvian government collapsed. With the economy in free fall and on the state on the verge of bankruptcy, President Valdis Zatlers turned to 37-year-old Dombrovskis when he could find no one else to lead the country through its bailout. 

Dombrovskis pushed through a brutal austerity program worth about 16 percent of gross domestic product as over a fifth of the country’s output was wiped out. Unemployment exceeded 20% while about 5% of the population left the nation. 

At the end of each review, the prime minister invited the country’s creditors to his office and checked off one by one the measures they’d demanded to release the next tranche of funds, each policy action highlighted in green, yellow or orange, depending on its status.

You don’t normally see that much attention to detail from finance ministers in bailout countries, never mind a prime minister, according to officials who were involved.

A bailout program is usually fatal for a government. But Dombrovskis went on to win two more elections, becoming Latvia’s longest standing premier since independence. 

He quit the premiership abruptly in November 2013 after 54 people were killed in an accident at a grocery store. But two months later, Latvia joined the single currency. 

The former prime minister too was quickly embraced by the EU, named European Commission Vice President for the euro and, later on, financial services. 

He’d managed to persuade the Latvians that austerity was worth it. In his new job, he had to help persuade the Greeks. 

Dombrovskis rates the day in August 2015 he signed the third Greek bailout deal to keep the country in the euro as one of the most important moments in his EU career.

If he can put trade relations with the U.S. back on track, he may well have another.