The Other Vaclav

How the Czech president became Europe's public enemy number one.

After two years of debate, referendums, furious revision, and campaigning, the fate of the Lisbon Treaty to reform the European Union has come down to the signature of one man. Unfortunately for advocates of European integration, that man is Czech President Vaclav Klaus.

In his latest bid to scuttle the treaty's adoption, Klaus is insisting that a new, basically meaningless footnote be added, a demand that the the Czech government, which previously endorsed the treaty, is grudgingly supporting, despite the fact the treaty had been approved by the Czech Parliament. If he can delay matters long enough until an anti-Lisbon Conservative government comes to power in Britain, Klaus now has a small but not insignificant chance to sink the treaty altogether, a fitting swan song for the lifelong Euroskeptic.

Although mostly known outside his country for his skeptical views on global warming (environmentalism, in his opinion, is "the most prominent antiliberal, populist ideology of the contemporary world, comparable to communism and Nazism.) Klaus is one of the most important figures in post-communist Czech history, and the Lisbon battle is just the latest in a long series of controversial stances in his career. But lately, this lifelong iconoclast appears more and more as a tragic political figure. He is now totally isolated in Europe, shunned by most EU politicians, who view his obstructions as proof of his, and his country's, lack of democratic credentials.

When Klaus first appeared on the Czech political scene shortly after the fall of communism in November 1989, the public viewed him as a godsend. Compared with both the former communist power elite and the anti-communist dissident leaders who came to power at the end of 1989, he appeared, well, very Western.

He differed from the former dissidents not only in ideology but in appearance. Impeccably dressed and groomed, the well-spoken Klaus had nothing but scorn for those hairy men in old sweaters, many of whom still adhered to slightly utopian ideas of post-totalitarian politics.

Former Czech President Vaclav Havel, the unofficial leader of the dissident movement in the 1980s, has recalled that Klaus was first introduced to pro-democracy leaders of the Civic Forum movement during their negotiations with the communist regime in the late 1980s. The dissidents were desperately searching for an economist familiar with Western free market theories. Klaus, who had studied at the University of Chicago as a disciple of Milton Friedman, fit the bill. He was hardly a dissident, having worked for years as a clerk for the Czechoslovak Central Bank -- but he certainly appeared to be competent.

Klaus became the first non-communist minister of finance in the government of "national reconciliation" that was created as a result of round-table talks with the communists in December 1989. He was later reappointed to the same position when the Civic Forum overwhelmingly won the first free elections in June 1990.

By then, however, his disputes with political theories voiced by some dissidents were growing increasingly vocal. Although some former dissident leaders believed that a broadly based civil movement, such as the Civic Forum, could continue governing and represent an alternative to political parties, Klaus wanted to follow political formulas used in the West. As a result, he began to use his increasing popularity to push the Civic Forum to transform into a regular political party.

In 1991, he and his followers broke from the Civic Forum to create a new conservative political party called the Civic Democratic Party. Klaus, who had already begun to be known both at home and abroad as an economic reformer, thus became also the most prominent political reformer in Czechoslovakia, taking this label away from Havel, the other Vaclav.

But 1991 was also the year when it started to be apparent that there were significant differences between Klaus' rhetoric and his policies. Klaus presented himself as a classic neoliberal, but in reality he tried to keep the state in control of many areas of the economy and had little taste for the controversial "shock therapy" privatization tactics used in neighboring Poland.

He defended a policy of what could be called "economic nationalism," keeping the most important Czech companies in Czech hands, and he resisted the privatization of banks. The privatization schemes that were carried out under Klaus' watch were plagued by corruption and lack of transparency.

Klaus also played a key role in the breakup of Czechoslovakia. In 1992, his Civic Democrats won elections in what is now the Czech Republic. In Slovakia, by contrast, leftist and nationalist parties dominated. Sensing the writing on the wall, Klaus began advocating the dissolution of the country.

Although this effort was strongly resisted by President Havel and other former dissidents, Klaus' actions were, in retrospect, quite rational. The Czechoslovakian government was already paralyzed by growing Slovak demands for autonomy, but after Slovak nationalist parties were swept into power in 1992, it became obvious that the state could no longer function.

The fact that Klaus was able to force the volatile Slovak nationalist leader Vladimir Meciar to sit down with him and organize a civilized, nonviolent division of Czechoslovakia into two independent states is today viewed as a major achievement.

It was shortly after this that Klaus' distrust of the European project came to the forefront. Although, as prime minister of the independent Czech Republic, Klaus had submitted the Czech Republic's application for membership in the European Union in 1995, he was always less then enthusiastic about the EU, which he saw as an over regulated socialist enterprise. By the time a successor left-wing Czech government completed the process of accession in 2002, Klaus had already positioned himself as a Euroskeptic.

After losing power in 1997, Klaus had decided to give his Civic Democrats a different image. Reformist policies were to a large extent replaced by an emphasis on nationalism, Euroskepticism, and populism. Klaus' change in tone did boost his popularity to some extent, but was not successful enough to bring him back as the prime minister.

But Klaus accomplished a major political coup in 2003 when he was elected to succeed Havel as the country's president. Ironically, the Czech Republic's most prominent right-winger could never have pulled it off without securing the support of the unreformed Communist Party.

The Czech presidency is traditionally a mostly ceremonial position, and the limits of the office have often proved frustrating for the proactive Klaus. During his first term, he repeatedly tested the limits of his constitutional powers by refusing, for example, to name judges recommended to him by the Ministry of Justice or by refusing to sign international treaties that had been recommended to him for ratification by the parliament. He also vetoed many bills approved by the Parliament, often simply because he disagreed with them ideologically.

This was a departure from Havel's relatively light touch and was certainly not appreciated by the leftist government. Klaus also found himself on a collision course with the pro-EU forces in Parliament when he criticized various reforms the Czech Republic had adopted to meet EU membership criteria.

To maintain high visibility as Czech president, despite his lack of executive powers, Klaus has repeatedly chosen highly controversial topics to call attention to himself. He criticized, for example, the influence of civil society as a new ideology, which he calls "NGO-ism." He also protested what he deems a new, potentially totalitarian ideology, which he calls "human-rightism." And he has fought repeated wars with the judiciary, describing its influence in modern democratic societies as a "tyranny of judges."

Klaus also became one of the chief opponents of the conventional wisdom on global warming, claiming, for example, that "icebergs melt only in the films of Al Gore," whom he describes as "the arch-priest" of the new totalitarian ideology of environmentalism. In the past few years, he spent more of his intellectual energy and travel time fighting the proponents of global-warming theories than speaking on relevant issues in Czech politics.

Klaus' dislike of the European Union is the one issue that has remained dominant throughout his years in power, and it has only grown more extreme over time. Although he once felt that realistically, the Czechs have no alternative to EU membership, he now claims that the EU is more dangerous to Czech security than is Russia.

He is also a staunch opponent of the common European currency and he does not mind using offensive language and exaggerations to support his views.  In 1999 he declared that "efforts to introduce the euro are to a large extent driven by EU bureaucrats who eat breakfast in Venice, lunch in Paris, and dine in Copenhagen, and do not like changing money three times a day."

His opposition to further European integration stems not only from his nationalism, which is rooted in romantic 19th-century ideas of national identity, but also from his libertarian and conservative beliefs. In Klaus's world, the EU is an increasingly over-regulated, socialist organization that artificially suffocates the national identities of its members.

The Lisbon fight is Klaus' highest profile anti-European battle yet. and the president has made numerous efforts to sabotage the approval of the treaty in the Czech Republic. Last year he made an emotional appeal to the Constitutional Court to reject the treaty because it is supposedly incompatible with the Czech Constitution.

The Constitutional Court in the end ruled the opposite, and subsequently both houses of the Czech Parliament recommended the treaty to Klaus for ratification. Now that Ireland has finally approved the treaty in its second referendum, and Klaus' closest ally in the European Union, Polish President Lech Kaczynski, ratified the treaty in Poland, the completion of the ratification process in the entire EU depends on Klaus' signature.

To at least delay the ratification, he now wants the EU -- after the ratification process has been finished in 26 other EU countries and despite the approval of the treaty by the Czech Parliament -- to guarantee to the Czech Republic that the European Charter of Rights, which is part of the Lisbon Treaty, will not apply to the Czech Republic and cannot, therefore, be used by Sudeten Germans, 3 million of whom were expelled from Czechoslovakia after World War II, to reclaim their property confiscated by the Czechoslovak state.

This is a transparent ploy. All legal studies show that there is no such danger, because the charter cannot be applied retroactively. The EU may try to accommodate Klaus's demand, but more likely he is on a collision course not only with the EU, but also with the Czech government and major political parties, who increasingly view his behavior as violating his constitutional duties.

A man who was once viewed by many Czechs as a guarantee that Western democratic procedures would prevail in the Czech Republic is now seen as defying these very procedures for the sake of his own increasingly extremist beliefs. It's a sad end for a remarkable political career.



Sarkozy's Better Half

If the French president has a hope of getting things done at the G-20, it's because of his philosophic finance minister, Christine Lagarde.

Of all the leaders arriving at the G-20 summit in Pittsburgh today -- the third such meeting of finance and other government ministers to discuss the crisis and recovery since the crash of Lehman Brothers a year ago -- French President Nicolas Sarkozy has been among the most headline-stealing. He has called for strict compensation limits for the banking executives who precipitated the crisis and has said he will ask for sanctions on countries that do not comply. The famously energetic French leader has even threatened to walk out of the summit if his demands aren't met.

Early word out of Pittsburgh indicates that his brash style isn't necessarily going to get him what he wants -- but luckily, he's got a secret weapon. One of his cabinet officials has been making the press rounds with him, playing good cop to his bad cop in copious interviews in print and on television. That is Christine Lagarde, France's enigmatic finance minister and the former chair of the international law firm Baker & McKenzie. She has emerged in the past year as a major political player regarding the recession, and as a foil for Sarkozy. When he shouts, she coos. When he rages, she deploys wit. And when he bellows, she demurs.

That coolly philosophic attitude -- underpinned by a deep knowledge of labor law, corporations, and international management -- has made Lagarde one of Europe's most valuable economic negotiators. If Sarkozy doesn't get what he wants in the final communiqué, Lagarde, his more sensible half, just might.

Christine Lagarde was born to academic parents in Paris on New Year's Day in 1956. Her father, who died when she was a teenager, was a professor of English, literature, and ancient Greek, and her mother was a grammar-school teacher. To this day, Lagarde frequently quotes philosophy, and she nearly entered legal academia herself. She excelled in her youth at school and athletics, growing to 6 feet tall and winning a bronze medal in the French national synchronized swimming competition at age 15.

After finishing high school, she spent a formative year on an American Field Service exchange program at the swank Holton-Arms girls' school in Bethesda, Md., just outside Washington. It was 1974, at the height of the Watergate crisis. Lagarde interned on Capitol Hill as an office assistant for William Cohen, a Republican congressman from Maine who later served as defense secretary in Bill Clinton's cabinet. She grew close with her American host family, and enamored of the country, which she says is more "positive" than France. She also garnered a skill which would prove useful later in life: perfect command of English.

But she returned home to study political science at Institut d'Etudes Politiques, d'Aix. Initially, she considered becoming part of the civil service, but was rejected (one of the few failures Lagarde admits) from the highly selective program and decided to become a lawyer instead, focusing on employment law.

Despite her high marks at graduation, she was roundly rejected at French law firms, so sexist was the legal culture in Paris. Then, she interviewed at Baker & McKenzie, a large Chicago-based firm with a clientele of major international corporations like Coca-Cola. The Paris office had a female partner, Monique Nion, who became Lagarde's mentor. "There was a feeling of 'I went through hell, my dear, and by God, so will you,'" she told Investor's Business Daily. (Her office did not respond to a request for an interview.)

From the Paris office, Lagarde quickly ascended through the firm's ranks by managing major antitrust and labor cases, including ones with mass redundancies. She made partner in 1987 and then became the head of the firm in Western Europe, shuttling between Brussels, Milan, Madrid, London, and other cities. The firm still had an old-boy culture, which Lagarde undercut by outworking her colleagues and maintaining a cutting wit, one colleague recalls. "She was a very smart, very talented even-hand."

In 1999, she became the company's first ever female chairman (she dislikes the terms "chairwoman" and "chairperson"), moving to Chicago with the mission of streamlining and centralizing the diffuse practice. Derided as "McFirm" by its competitors, Baker & McKenzie had become massive and inefficient, earning far less per partner than firms like Skadden, Arps, Slate, Meagher & Flom. In her five years at the helm, she increased revenue by half, to more than $1 billion annually, and integrated the company's 68 offices. She also radically transformed partner compensation, despite serious opposition (pay cuts were "like taking your lunch," the colleague says), making the system more results-based and fairer.

Early one morning in 2004, Lagarde received a call from Paris. Then-Prime Minister Dominique de Villepin was on the phone, asking her to come back to France and join the government. She left her $1 million job to become a junior trade minister in President Jacques Chirac's cabinet and has spent the past five years ascending the ranks into France's political elite. In the trade bureau and as agriculture minister, a post she held briefly in 2007, she earned a reputation as a good soldier for Chirac, who advocated for economic dirigisme, or state controls. She won particular plaudits for her advocacy of certain trade protections for farmers -- antithetical to her current positions though that may have been.

When Sarkozy became president in May 2007, Lagarde became finance minister, a position Sarkozy himself had once held. Despite their wildly different rhetorical styles, they shared an economic vision for France: free markets, less regulation, and globalization. The country had languished in lean times even before the financial crisis hit. It had high unemployment and ran a deficit, largely due to its strict labor laws. Lagarde and Sarkozy developed a $15 billion series of tax cuts and employment-law alterations. They ended the 35-hour work week, making overtime tax-free. They capped the maximum income tax at 50, rather than 60, percent. They eased restrictions on entrepreneurs. Lagarde also slashed the ranks of her own massive department in the process of cutting 50,000 jobs from the famously bloated French civil service. To make up for easing taxes on the wealthy, she increased the non-progressive value-added tax. The motto for Sarkozy's economic plan was, "Work more, earn more."

To sell the unpopular changes, Lagarde turned to philosophy. In an address to the National Assembly, she said, "There is hardly an ideology that we haven't turned into a theory. We have in our libraries enough to talk about for centuries to come. This is why I would like to tell you: Enough thinking, already. Roll up your sleeves." She also took aim at France's intellectuals and socialists, like Bernard-Henri Lévy and Ségolène Royal. "They want to bring people down to solidarity," she has said. "They regard work as alienation in the old Marxist understanding."

Such pronouncements, coming as part of what critics see as her affection for the "Anglo-Saxon" model of capitalism, have earned her an unflattering nickname: "The American." Her asceticism -- apparently something the French associate with those across the pond -- probably also contributed. Lagarde is a non-drinking, non-smoking, yoga-performing, lap-swimming, health-obsessed vegetarian. (She has given up synchronized swimming, saying, "Legs up in the pool is not the expected behavior of the minister of economy.") Most famously, she has said that she keeps her "work-life balance" -- a term she readily mocks -- of caring for her two sons (who have always lived in Paris and are now in their early 20s) and juggling a punishing schedule by sleeping just five hours a night.

Since the crisis, however, Lagarde has done almost everything in opposition to the Americans. She has become a strong voice for international financial reforms: beefing up the powers of the G-20 Financial Stability Board, levying penalties on tax havens, regulating investment vehicles like hedge funds, raising capital requirements, and, most contentiously, imposing restrictions on bankers' pay (a measure U.S. President Barack Obama and British Prime Minister Gordon Brown oppose) -- something she has plenty of experience with from her time at Baker & McKenzie.

She has done all of this in her characteristically calm-spoken, sensible way, though she has toughened up her rhetoric in the face of U.S. and banker intransigence. She said it would be "absolutely outrageous and extraordinary if leaders of other countries did not understand the necessity to change the system and not go back to business as usual." But because of her relative pro-capitalism (compared with, say, the Italians) and her relative calm (compared with Sarkozy), she has become a key figure in the frantic backroom negotiations occurring before the announcement of the G-20 agreements.

But has anything come from them? In the negotiations, which have been ongoing for a year, Lagarde has suggested alternatives to Sarkozy's pay caps, such as targeted taxes and regulating what percentage of profits can be paid in bonuses. Reportedly, the French have not won fixed caps on executive pay in the final communiqué, but the document makes concessions to the country's requests for more international cooperation and capital requirements. (The European Commission may impose executive pay standards instead.) This small victory is all due to Lagarde, the sensible voice who allows Sarkozy to be outrageous. Indeed, it's "The American's" insistence that ensured France had a real voice at the table.