EU commissioner heralds private equity groups as economic saviours

Charlie McCreevy, EU internal market commissioner, yesterday delivered an astonishing paean of praise for private equity companies as dynamic saviours of clapped-out firms – and of the European economy as a whole.

The former Irish finance minister, responsible for policing financial services, lauded private equity groups – and hedge funds – for their “constructive destruction” and made plain he had no intention of following the US lead and burdening them with further regulation.

His comments, to an industry conference in Dublin, came on the back of an onslaught on the private equity industry which was condemned this week by Brendan Barber, TUC leader, as “too often amoral asset-strippers after a quick buck”.

Mr McCreevy, the most neo-liberal of the 27 commissioners, declared: “I believe that private equity houses and activist fund managers of all kinds, including hedge funds, play a much more valuable role than any government or regulator in propelling the liquidity of our capital markets, in reducing the cost of capital, in driving forward Europe’s growth and in equipping European industry to survive and compete in the more challenging global markets we now face.”

Acknowledging the case for regulators to monitor banks’ exposure to the funds, he added: “But it should be a case of close and effective supervision – not strangulation.”

Praising private equity for its role in forceful corporate restructuring in Europe, Mr McCreevy said the funds had helped keep public companies on their toes. “When they haven’t been on their toes, they have helped knock their management teams off their pedestals. That is as it should be – exactly as it should be.”

Accusing many boards of being “clubby and complacent,” he said they needed the spur provided by corporate raiders and hedge funds. “The alternative to creative and dynamic restructuring and adaptation – and, yes, to dynamic destruction too – is stagnation, decline and disappearance.” Mr McCreevy said the companies looked after the interests of private clients and pension funds and delivered impressive returns to their shareholders.