Focus: Europe In Crisis: Can a phoenix rise from

Paul Van Buitenen's answering machine message is more interesting than most. "I am still suspended on half-pay and I am sorry but I am not giving any more interviews to the press. If you are family please leave a message.".

After a week which guaranteed him at least a footnote in the history of Europe, the Dutchman, persecuted by his superiors and labelled among other things a religious fanatic and a political activist, can at last relax in his modest suburban Brussels home, safe in the knowledge he has been vindicated.

Last Monday saw the publication of a 144-page report which confirmed everything the whistle-blowing civil servant had alleged. And more. It was unlike any report Brussels had ever seen. For one thing it was free of the leaden, deliberately limp prose which the European Union has turned into an art form. It was blunt, to the point. And it pulled no punches. In any of the 11 EU languages its conclusions could only be interpreted in one way. By 7.00 pm Brussels time on Monday every journalist in town knew that the 20 commissioners were toast.

And it meant that in the biggest constitutional battle in the EU's history, the unelected Commission, which for over 40 years had operated with supreme aloofness, had come off worst in its confrontation with the democratically elected Parliament.

Over at the Breydel building, the headquarters of the Commission, every light in the building was on. Europe's press was massing in the foyer. Upstairs, commissioners named in the report were going through the text, speechless at the verdict. Some had been shown the body of the text the night before but none had seen the conclusions, more scathing and more political than anyone even in Parliament had expected.

The Commission, it said, was out of control. And the fact that commissioners did not know about irregularities, or protested their ignorance was in itself a damning indictment, the inquiry team said. The knockout blow, hitting every single commissioner, was delivered on the last page: "It is becoming difficult to find anyone who has even the slightest sense of responsibility."

Jacques Santer, the president, consulted them one by one. Suspecting it could be a long evening, Hans Van Den Broek, commissioner for external relations, popped across the road to the Pomo D'Oro where the Italian owner was running out of pizzas fast. Passers-by in the street were heard asking each other what all the commotion was for. No one had ever seen such frantic activity at the Breydel.

At 10.20 pm, like Apostles gathering for the Last Supper, the commissioners sat down together for a final time around a huge oval table. There was no need for Edith Cresson's blood on the carpet. The report was so damning a mass resignation was now on the cards.

Just over two hours later a bodyguard emerged from the lift and crossed the foyer of the building. He approached a colleague and gestured with his hands in a way that suggested some one's head had been cut off. "The whole lot - gone," he said.

Upstairs Jacques Santer was on the phone to the German Chancellor Gerhard Schroder. His spokeswoman Martine Reicherts was drafting a resignation statement for the press. Afterwards secretaries and ordinary Commission officials who had lingered all evening out of curiosity could only stand around in shock.

Monday saw the denouement of a story which has been brewing for months, if not years. The first real signs of trouble came in October when the Parliament, persistently relegated to the role of Cinderella in the European power game, and keen to get a bit more respect from the Commission, threatened to block parts of the budget. Refusing to discharge the budget is one of the few powers the Parliament enjoys, but has rarely been used.

Parliamentary anger was fuelled by external audit reports of fraud worth pounds 1bn in the humanitarian aid office of the Commission (Echo). Around this time too, stories began appearing in the French press accusing Edith Cresson, in charge of the multi-billion research and education budget, of nepotism. Her dentist, Rene Berthelot, had a lucrative Commission contract, it was rumoured.

Mr Santer went before Parliament in Strasburg in October to promise an independent fraud office, but at the same time, Mrs Cresson and Emma Bonino, the chain-smoking commissioner in charge of Echo, started issuing libel writs. Mrs Cresson threatened to sue the French newspaper Liberation, and even the Financial Times received a warning for suggesting that Mrs Bonino was left sobbing after being criticised by colleagues for mismanagement. But the rumours would not die down.

By December, things were heating up amid signals from German Christian Democrat MEPs, eager to play to the rising tide of euroscepticism back home, that they would vote against the Commission in the budget vote.

Mr Santer then scored a spectacular own goal issuing MEPs with a dare: back us or sack us. They called his bluff and refused to discharge the budget. Socialist leader Pauline Green, taking the Commission's side, tabled a motion of censure, which was expected to fail, as a tactical way of voting confidence. A vote of censure - unprecedented in the EU's 47-year history - would mean the mass sacking of the entire Commission. The vote was put off to January.

On 6 January - the feast of the Epiphany, traditionally the day when Brussels resumes work after Christmas - Jacques Santer held a New Year press conference, an annual "state of the union"-style address to the Brussels-based media.

Two days earlier the Commission had quietly published the decision to suspend an unnamed official - Monsieur X - pending a disciplinary inquiry, for leaking internal documents. By Wednesday, everyone knew, thanks to a leak from a Green MEP, that Monsieur X was Paul Van Buitenen, a middle- ranking official and an internal auditor, and that his whistle-blowing was potentially explosive. A 30-page document handed to the Greens and a carload of evidence passed on to the EU court of auditors detailed the web of corrupt links which had allowed people like Claude Perry, the French- Algerian sub-contractor, to operate an alleged pounds 10m a year fraud network on the back of Mrs Cresson's budget.

Mr Santer droned on predictably about the challenges ahead for Europe on the eve of the new millennium. Then the questioning turned to whether he still had confidence in Edith Cresson - he had - and whether he intended to remain in office until the end of his mandate. He did.

Suddenly he was being asked to defend the decision to suspend Mr Van Buitenen. Of course it was right, he said. The man had violated the rules of confidentiality and interfered with judicial inquiries. "That would not be tolerated in any administration in the world or in any private company."

But then the questions turned to his own property deals in Luxemburg. His wife Daniele was being dragged into it. How many houses did the Santers own? Were the family's business dealings the subject of a Luxemburg police inquiry, the man from Le Soir persisted? Mr Santer, red-faced and stumbling over his words by now, his glasses still balanced on the end of his nose, looked as if he had woken up in the middle of a bad dream. Even his denials were ineffectual. "I would be amazed if the Luxemburg police were investigating me" as he went on to list the extent of what he called his "fortune": three houses in the Grand Duchy of Luxemburg including one with "magnificent views".

Reinforcements were at hand. Erkki Liikanen, the Finnish commissioner who had been watching on closed-circuit TV, stormed into the basement press room to back up the president and to defend himself against suggestions that his wife had signed a pounds 200,000 contract with the Commission to research the problems of elderly women in Finland. He had never lifted a finger to help his wife's career, he said. As evidence of Nordic transparency he then gave out his wife's mobile telephone number. "Ring her yourselves" he said.

Both Mr Santer and Mr Liikanen and their families were later exonerated of any direct involvement in fraudulent activity or of nepotism, but 6 January marked a turning point. From then on it was open season on the Commission, and the hunt was on.

The drama reached new heights the following day when Paul Van Buitenen gave his first media interviews in one of the dining rooms in the members restaurant of the European Parliament. As waitresses pushed past with plates of roast quail and filet mignon, Mr Van Buitenen stood nervously in a corner surrounded by reporters and TV crews and dropped further bombshells. He had been advised, he said, to leave his home after discovering that Commission security guards were arming themselves with sniper rifles complete with telescopic lenses.

By now the atmosphere was febrile with accusation and counter-accusation. The press was suddenly gripped: an underworld of guns, organised crime, espionage, death threats. This was James Bond territory and things were spiralling out of control.

MEPs facing elections in June were beside themselves with excitement. Seizing on a cause which could deflect attention from the sleaze in the Parliament's own backyard, they began to talk about a censure vote winning the almost impossible two-thirds majority. London police officer turned Labour MEP Mrs Green - leader of the 200-strong Socialists and crucial to any outcome - was in a quandary. Anxious to speak up for Socialist commissioners who she felt were being singled out by Christian Democrat MEPs (including British Tories), she had taken the strategic decision in December to defend the Commission. Now she had little choice but to criticise Mr Van Buitenen. But for most MEPs the decision to suspend him - another Commission own goal - fanned the flames even higher.

The January session of the European Parliament in Strasburg was high noon in the fight between the Commission and its parliamentary tormentors. The censure vote - Parliament's nuclear option, designed never to be used - was to be taken on 14 January. By now, despite Mr Santer's promise of an eight-point clean-up plan and "zero tolerance" on fraud, MEPs were calling for the heads of Edith Cresson and Manuel Marin, the bearded Spaniard who was in charge of Echo when the alleged irregularities occurred. Mr Santer opted to call Parliament's bluff. If they passed a resolution calling on Mrs Cresson and Mr Marin to resign then the entire Commission would have to go.

This had the effect of panicking some Conservatives and Christian Democrats into backing down. Calls grew for a team of wise men to be set up to launch an independent inquiry, a move which would in effect postpone a decision on sacking. Mrs Cresson all the while maintained an air of disdain, choosing to remain seated when she addressed the Parliament with a feeble defence of her record on purely technical issues.

The censure vote was lost thanks to Pauline Green and her Socialist troops, but so narrowly that the result was still a devastating one for the Commission. The 20 commissioners had been literally humbled and forced to sit together as if in the dock of an assembly traditionally regarded as a joke. Worse, they now had to throw their books and filing cabinets open to a team of outside investigators.

The weeks preceding publication of the independent inquiry were marked by rising tension and panic in the Commission. Edith Cresson mounted a charm offensive inviting journalists to her home for dinner where, elegant in a silk trouser suit, she could tell them how she was the victim of a German-led smear campaign. She contacted MEPs, promising to deliver on specific projects she knew they were interested in.

The wise persons' report in substance revealed little new although it added detail and the seal of official authority to allegations well aired in the French and Belgian press. Most of the six cases of fraud highlighted are already the subject of judicial inquiries in Belgium and Luxemburg.

But the context of the report - a constitutional crisis which was badly mishandled by the Commission - meant that its political importance would always be greater than what it actually said. As it turned out the conclusions were in any case damning in the extreme, and not just for Edith Cresson, although it is she who came out worst by far.

But the inquiry suggested that the cronyism and fraud which had come to light - Mrs Cresson's dentist being paid pounds 60,000 to visit his home town on a 40 day "mission", for example - were allowed to flourish in a culture where commissioners as a group neither knew nor cared what went on in the institution they were supposed to be running.

T he impact of this verdict was compounded by Jacques Santer's inept handling of his statement on Tuesday, when just 12 hours after the mass resignation of the Commission he challenged the findings branding them as "wholly unjustified" and suggesting that he himself had been "completely cleared" by the report. Mr Santer's words (which were wrongly translated from French as "I am whiter than white"; what he said was that he was exonerated on a particular point) were seized on particularly in Britain as the sign of a despot clinging to power.

Thanks to what the Daily Mail saw as his "stupefying arrogance" but which insiders saw merely as poor communication, his demonisation was complete. The second day of headlines dramatically worsened the tone precipitating the rush towards the immediate removal of all the commissioners and unleashing an internal struggle over who would come back in a caretaker capacity and who could never darken the door again.

Holed below the water line the Commission is now facing a second phase of the wise persons' inquiry, and a possible purge of the next rung down. Members of the commissioners' private offices, themselves indirectly the target of much of the first report, are secretly relishing the prospect of the top ranks of permanent staff being dragged out from the shadows to accept that the buck also stops with them.

Weeding out the rotten apples like Edith Cresson will certainly be cathartic but putting in place the kind of reforms that Jacques Santer failed to execute could take years. It will take a cultural revolution at the heart of the Commission to change many of the practices and expectations which have made it a lumbering out of control bureaucracy where nationality counts more than merit and where cronyism is a fact of life.

In the meantime all but the most urgent business is now in paralysis as the battle over a caretaker regime rages. Among the casualties of the self-imposed ban on fresh political initiatives are plans for reducing atmospheric pollution and an overhaul of competition policy ahead of EU enlargement to the east.

The full ramifications of the Commission's fall have yet to be appreciated whether in the Parliament or among the member governments and beyond. In addition to the short-term political void, the events of last week have left Europe's governing elite with a longer-term crisis.

The Belgian Green MEP Magda Alvoet, one of those in the forefront of the battle against fraud, predicted that Europe's debacle would become a "purification crisis' from which a phoenix would rise. But can it?

The vilification of the commissioners and the public perception of the EU executive as a deeply corrupt and dysfunctional dragon which had to be slain, surely mean powers must be transferred somewhere else. Yet the Santer Commission was not the worst we have known. It was the first Commission to initiate reforms even if the immense task of carrying them through was too great a challenge for a weak man who did not command the respect of his subordinates.

And if the Commission was headed by a weak man that was exactly what European governments wanted. Jacques Santer was picked because he bore little resemblance to his powerful and charismatic predecessor, Jacques Delors. Up to last week it was a sure bet that Mr Santer's name would never trouble the history students of the future because his motto was that the Commission should "do less, better", and it was the first half of his promise which he kept.

The most obvious way ahead for anyone who bought into Tony Blair's talk last week of democratic legitimacy would be to transfer more power to the European Parliament. But few governments are attracted to that idea, not just because MEPs are still regarded as second-rate politicians but because governments have too much of a vested interest in keeping power for themselves.

Enhancing the democratic legitimacy and accountability of the Commission itself would be another obvious remedy. Why not make commissioners face the electorate? Or allow the European Parliament to elect the Commission president. Or allow the elected president to choose his own team of commissioners rather than accept the leftovers of national politics which so often end up in Brussels.

That however would take us into the kind of federal European superstate territory that only Teresa Gorman and Norman Tebbit still believe is on the agenda.