View for a new Europe

Fri, Feb 3, 2012, 00:00

FRIDAY INTERVIEW:Nicolas Berggruen, billionaire investor and founder of Berggruen Holdings Inc, by DEREK SCALLY 

IT IS EASY to overlook Nicolas Berggruen in the Davos congress centre. In a blue velvet blazer, with tousled brown hair, he sits to one side of the throng, warming his hands at the annual bonfire of the vanities.

Business invitees to the World Economic Forum (WEF) fall into two main groups. The on-the-make majority talk long and loudly about themselves, their companies, their successes. Houses, cars, yachts – and a harried harem of assistants and trophy wives in their wake – are, in their minds, the rightful trappings of status and success.

In their midst is a quieter Davos minority, people who come – often alone – to listen, to talk and to get ideas. They have already made their fortune and, seeing the privilege and burden this brings, make a conscious decision to reinvest in the society that enriched them. Berggruen, happily alone, is part of the minority.

He looks a decade younger than his 50 years, made his fortune on the stock market before he was 30 and today heads a holding company worth more than $2 billion with interests in real estate, private equity, renewable energy and agriculture. A jewel in his corporate crown is the German retailing giant Karstadt, owner of Berlin’s retail temple KaDeWe, to which he soon hopes to add the department store rival, Kaufhof.

With business success stories a dime a dozen at Davos, however, what makes Berggruen stand apart is his status as a billionaire itinerant.

A decade ago he sold his homes around the world and has no fixed abode, dividing his time between hotels in places as far-flung as Los Angeles, New York, Paris, Berlin and Mumbai. A BlackBerry is his only constant companion and, apart from a private jet to zip him around the world, his worldly possessions would, he remarked recently, fit comfortably into a paper bag.

In recent years, Berggruen has moved beyond business to identify challenges around the world where his time, money and intervention might be of assistance.

His Nicolas Berggruen Institute, a non-profit body exploring good governance, lobbied California’s cash-strapped state government to establish a “rainy day fund” law, setting aside money in good times to avoid future budget crises. Although not a new idea, the intervention of Berggruen’s “Think Long” committee – members include two former US secretaries of state – helped swing the debate and pass a law. This year, further proposals will be put before Californian voters thanks, in part, to the efforts of Berggruen’s committee.

Today, Berggruen’s chief worry is Europe – in particular, how politicians and their voters can be convinced to reform Europe’s governance and economic structures to prevent the old continent sliding into an abyss of global insignificance.

Berggruen has established a council of European grandees, including former European commissioner Jacques Delors and ex-chancellor Gerhard Schröder, to discuss ideas and formulate proposals that are at once ambitious but within political reach.

Similar to many European think tanks, Berggruen’s councils calls for root canal work on the EU governance structure. Only then can the European democratic deficit be addressed and, in turn, win public support for deeper Europe-wide reform and integration.

Berggruen’s Future of Europe council sees the future of the EU in a European federation, similar to the Swiss model, where states retain control over everything except a limited number of areas, such as fiscal policy.

To improve democratic legitimacy, the council recommends upgrading the European Parliament to a body worth the name, with MPs and a head of parliament chosen by pan-European elections. The existing European Council, where EU leaders meet, would continue as an upper house.

“The issue in Europe is not a financial issue, it’s a political issue with a political structure that no longer functions,” he says. “What’s obvious is that you can’t have a common currency without the centralisation of certain monetary functions. A group of countries bound together by a currency cannot go without the next step.”

Clinging to familiar structures of national governance, while comforting and understandable, is a path to global insignificance, he argues. Today’s politicians in Europe are elected nationally to address primarily national issues. Dashing distractedly to extinguish one European fire after the next, however, they have proven unwilling and unable to act in concert to address long-term common structural and economic challenges.

“Leaders will have to be courageous and frank, to tell citizens what’s good about Europe and what’s bad, what happens if we make this work and what happens if we don’t, benefits and sacrifices,” he says. “We are in a globalised world, we’re not an island. It’s not an easy thing to do, but in the end, they’ll have to do it.”

In a paper, his Future of Europe council hopes to activate voters’ “enlightened self-interest” to increase support for governance reforms. Liberated from short-term crisis management, they hope this will allow politicians to embrace policies which, although painful short-term, will preserve the best of the European social model in the long term.

At the heart of this challenge is the role of Germany, he says.

After having the foresight – and luck – to complete painful structural reforms when the cost of money was 2 per cent, asking Italy, Spain and others to do so with refinancing rates running at 8 per cent or more is a tall order requiring “breathing room” and a “money bridge”.

“Germans feel that if they could reform, others can too. Other countries have to acknowledge that,” Berggruen adds, “but Germany needs to be pushed to the point where they say ‘we didn’t need money when we reformed, but you do’. If Germans want this thing to work, they will have to acquiesce on that.”

Berggruen holds US and German citizenship, the second passport giving him an informed, if critical view of Europe’s economic powerhouse. He worries that Germany’s current generation of leaders lack their predecessors’ unique mix of pragmatism and courage. Rather than take a leap of faith with their neighbours, he is concerned that some Berlin leaders view the euro zone crisis as a kind of controlled laboratory experiment.

“It’s not that controllable,” he says, “and if you tell someone who’s sick to take hard medicine and then to run a marathon, it won’t work. You have to give them time to rest.”

It is a view that applies to Ireland, he says, where people have “ploughed through” its reform programme.

“Ireland had a very good time but then you had the banks and were almost a victim, in essence.”

The son of a German Jewish émigré, Berggruen has a European and American take on life, but his business sense is very much American (see panel). His casual dress and Anglo-American love of wheeling and dealing has attracted attention – and no small amount of suspicion – in Germany’s buttoned-down, gold-rimmed-glasses business world.

He made headlines in 2010 by snapping up the struggling Karstadt department store chain, the largest in Germany, and is now pursuing its main rival, Kaufhof.

The purchases have a symbolic value: the son of a Jewish refugee returning to Germany to take over companies which the Nazis purged of Jewish employees, managers and, in the case of Kaufhof, even its Jewish owners.

Historical symbolism, though, is no basis for good business and, in an era of aggressive online retailing and fast-fashion high-street rivals, Berggruen faces a challenge to erase the 1980s feel of department stores and win back younger customers. To reach his goal – a Karstadt-Kaufhof empire with a combined turnover of more than €7 billion – Berggruen has to beat off rival bidders and woo employees and unions who worry a merger means mass redundancies and store closures.

“I think it would be better if each brand remained strong and quite different,” he says. “There are certain synergies to source better, but they will have to remain competitors. The idea is not to kill one for the other but to make them both strong.”

Sealing the deal might help dispel lingering suspicions in the German business world that Berggruen is a playboy billionaire. However, the jury is still out on whether European voters, who disregarded well-meaning calls for “more Europe” in the good times, will be more open to Berggruen’s plea for a European federation in these straitened times.

Still, there is something novel about calls for economic reform and fiscal responsibility from a billionaire who has forgone many of the trappings of wealth – if not the wealth itself – to pursue a cause in which he believes.

Finally, the burning question: does he regret offloading his homes and other billionaire baubles a decade ago?

“The drive to accumulate is in some ways quite healthy and I don’t think you can blame anyone for wanting things.

“Personally I am more interested in other things, and I would prefer to dedicate my resources and time to things I personally think are more interesting.

“On balance, if you spend a lot of money on things or yourself, and you can afford it, go beyond that.

“Spend on others, help others.”

On the record

NICOLAS BERGGRUEN was born in 1961 in Paris. His father, Heinz Berggruen, was a journalist, art dealer and collector who fled Nazi persecution of Jews in his native Berlin. In his final years, Heinz Berggruen returned to Berlin to leave his home town a parting gift: his extensive art collection, including dozens of Picassos bought directly from the artist.

Berggruen jnor was educated in France, Switzerland and New York. Reports suggest he was expelled for insubordination from his Swiss boarding school. Berggruen prefers to say he left after “differences of opinion”, believing he had more to learn from cinema and travel.

He studied business and finance at New York University and began an investment company in the 1980s by taking a loan from his former boss. Berggruen invested his profits in properties in Manhattan and Brooklyn before branching out around the world.

In 2004 he sold the fund of hedge funds he co-founded in 1988, while his father’s death in 2007 gave him a significant inheritance. Today Forbes ranks him 171 in its top 400 of the world’s wealthiest people, with a fortune estimated at $2.2 billion.

Today his Berggruen Holdings company has interests ranging from Spain’s Prisa media to German retail group Karstadt, bought in 2010 for €1 in exchange for a cash injection of €70 million to save the company.

Unmarried with no children, he jets around the world and is a regular on the US social scene. Each year he hosts an Oscars party in Chateau Marmont in Los Angeles.