BCG tries to limit Gaza work fallout

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0:32Good morning from the Financial Times. Today is Wednesday, July 9th. And this is your FT News Briefing. The European Union is closing in on a trade deal with the U.S. And a consulting group is in hot water for its post-war plan for Gaza. Plus, European Commission President Ursula von der Leyen is facing a no-confidence vote. How big of a deal is it? But, you know, if she loses some support there, that would be a question mark over her next four years in the job. I'm Mark Filippino, and here's the news you need to start your day.

1:14The EU and the U.S. are so close to a trade deal they can basically taste it. But it might be a little bit bitter for Europeans. The reason? The agreement would hit them with higher tariffs than the ones the UK got in its trade deal. Here are the details. This would be a temporary framework agreement that sets Trump's so-called reciprocal tariffs at 10 % while talks continue. That's the same as the baseline duty imposed on the UK. But here's where things diverge. Diplomats tell the FT the EU does not expect the same access to the US market as certain British products are getting. One diplomat even said, quote, the UK agreement was better, and they said it was surprising, given how long the EU spent negotiating.

2:05European Commission President Ursula von der Leyen is pushing back against a no-confidence vote this week, and yesterday, she showed she's not pulling any punches. But what we have just heard from Mr. Piperia was clear for all to see. It is taken right from the oldest playbook of extremists. Polarizing society, eroding trust in democracy, with false claims about election meddling. But despite all the drama, this could just be for show. Here to talk more about this is the FT's EU correspondent, Andy Bounds. Hey, Andy. Hi, Mark. So, Andy, tell me a little bit more about this no-confidence vote. Well, this no-confidence vote has been triggered around a number of issues, but the chief one is what's been called Pfizer-Gate here in Brussels, which is basically an exchange of text messages between Ursula von der Leyen and the Pfizer CEO, Albert Bula, while they were negotiating a vaccine deal.

3:04The commission has never revealed these messages, never even said whether they still exist. And what happened was the New York Times took a case to the European Court of Justice saying they should find them, and the Court of Justice agreed. So this prompted a bit of a crisis. A lot of lawmakers are very angry about this. They're also angry about the way Vonderlion runs her commission, which is quite centralized and not always consulting parliamentarians. And there were a number of other issues in there as well, including election claims that the commission had interfered in domestic elections by banning TikTok and so on in certain instances.

3:39How often does this happen? I can't imagine that a no-confidence vote is called regularly. No, it's very rare. I mean, it's 11 years since the last one. The most famous one was 1999, where indeed the commission survived the vote, but then it became clear that a second vote would sink it, and they actually resigned en masse. And that was mainly over corruption allegations. Now, which lawmakers are pushing this, Andy? Well, in this case, it's a Romanian from the nationalist AUR, which is a far-right party. He's managed to gather the 10 % of the 720 members necessary. Most of them are from the right wing.

4:14They are mostly Eastern Europeans who are vaccine skeptics in some cases and also just very angry with von der Leyen, not least because the commission has been withholding money from governments like Hungary and the old Polish government, which has now been replaced over concerns about the rule of law. Do you see this no confidence vote passing? No. No. That's it. No. Can you tell me a little bit more about that? Well, I mean, you'd have to get two-thirds of lawmakers and half of all MEPs. It's a very high bar. Von der Leyen has a lot of support along the centrist bloc. The socialists have said they're not going to vote with the far right to defeat her, even though they have their issues with her.

4:54And the same for the Liberal Renew Group and the Greens. But the biggest threat to Von der Leyen comes from her own side, the European People's Party. If some of those members decide to abstain, it's unlikely we'll vote against. But, you know, she loses some support there. That would be a question mark over her next four years in the job. The EPP has never really felt she's one of theirs, even though she's a German Christian Democrat. She's more liberal average and she's more green. And therefore, there are some concerns about whether she's prepared to do the kind of ripping up of some of her first term policies on the environment, regulation of business in a way that the center right is really pushing for.

5:33Yeah, you bring up a good point, Andy, and it touches on the ideological split of the European Commission. What does this instance that we're talking about, there's no confidence about, tell you about the future of the EU? Yeah, well, it's no surprise there hasn't been one for 11 years because it was just inconceivable. The centrist majority would turn on one of their own commissioners and commission presidents. and what's happened in the elections of 2024 was that the far right did very well took about 25 percent of the vote and that gave them seats and power in the european parliament and now the epp the centrist the conservative center bloc can either jump right and do deals with them or they can go left and stick with their traditional partners among the socialists and the greens and liberals but it means on every issue there's a sort of new coalition to be built and on certain priorities of the EU, like, you know, helping Ukraine win the war against Russia, you know, enforcing the rule of law and values and fighting climate change.

6:32All those policies are far, far harder to deliver. Andy Bounds covers the European Union for the FT. Thanks, Andy. Thanks very much.

6:47Boston Consulting Group is trying to limit the fallout from its Gaza work. BCG helped develop a controversial aid program for the Enclave and estimated the cost of relocating Palestinians out of the Strip. And in response, the Save the Children charity suspended its partnership with BCG. The FT's Stephen Foley has been covering this and joins me now. Hey, Stephen. Hi there. So tell me a little bit more about the fallout that we're seeing here. Well, Christoph Schweitzer, who's the CEO of BCG, has sent out a message not just internally, but also externally to alumni and clients of BCG talking about this work.

7:27He says that even if this work was not in any way, shape or form a formal BCG project, the association with it, it's real, it's deeply troubling, and it's reputationally very damaging, he says. Now, we saw that in Save the Children yesterday, saying that it had suspended its partnership, a long-time partnership with BCG, and it's obviously proving incredibly controversial internally inside the firm as well. The messages from the CEO are addressed in part to colleagues, many of whom have become very upset to discover that BCG is doing work such as this. Yeah, I mean, that relationship between BCG and Save the Children is more than 20 years old.

8:08So I want to ask, Stephen, why is BCG's work in Gaza considered so controversial? Well, this particular project began as pro bono work back in October of last year, as people were sketching out what grew to become the Gaza Humanitarian Foundation, a new kind of aid project in Gaza meant to circumvent the UN and bring in aid in a way that is different from what had been done before. Now, that project as it grew became a project that did not get multilateral buy-in and has been condemned by the international community. The piece of the work that we highlighted over the weekend and which is incredibly controversial is that a team working for the partners on this project helped model a post-war Gaza now, as well as the economy and the economic development and the real estate investment.

8:59That model also included assumptions about the cost of relocating Gazans outside of the Strip and assumed that 25 % of Palestinians would leave the enclave. And what does BCG have to say about your reporting? They're saying in their internal investigation, which is being done with a third-party law firm, that's confirmed much of what we've been reporting, including about this post-war reconstruction project and the financial modeling that we've talked about here. They're saying that the project was very much done off the books, under the radar, without the approval of senior leadership. It's being blamed on two partners who disobeyed orders and circumvented the normal protocols.

9:41But they also say that it's exposed process weaknesses, and they're talking about reviewing those processes. Steven, what are the lessons learned here for BCG and, I guess, other global consulting firms, too? Well, I mean, I'm sure listeners will remember that other firms have been through reputational crises of a very similar nature. McKinsey has spent a great deal of time and indeed money resolving issues related to its work for opioid manufacturers and accusations that it helped turbocharge an epidemic of addiction in the US. In all of these cases, the firms say they are spending a great deal of money improving their risk processes, making sure that projects and clients are approved, reviewed, and monitored.

10:29But this raises a question, doesn't it, about whether all of these processes are fit for purpose. That's the FT's Stephen Foley. He's our U.S. accounting editor. Thanks, Stephen. Thanks so much.

10:43You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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