Dutchman set to become new Eurogroup head
BRUSSELS – The new Dutch finance minister was poised on Monday to take over as head of the eurogroup, the group of the 17 eurozone finance ministers, which would give him one of the top jobs in the eurozone’s battle to end its financial crisis.
Among his first challenges, besides overly high debt and unemployment levels in several of the bloc’s nations, will be to help negotiate a bailout for Cyprus that has been delayed again amid disagreement on its conditions.
Jeroen Dijsselbloem, 46, had broad support ahead of a finance ministers’ meeting in Brussels, where the new eurozone chairman was to be elected. “Restoring further trust in the euro and building economic prospectives for the countries, that’s the main task at hand,” he said upon his arrival.
“I think we have to work on growth and new jobs and at the same time we have to balance our budgets,” he added.
Dijsselbloem (DIE-sell-bloom) served in the Dutch parliament as a member of the center-left Labor party for most of the past decade and became finance minister only in November. His candidacy came as a surprise because of his lack of experience, but he emerged as the compromise candidate among Europe’s main political groups and between economically stronger and weaker nations.
The Netherlands’ top-notch AAA credit rating and longstanding support for German positions on the need for budget discipline, free trade and fighting inflation made a Dutch candidate a palatable choice for Berlin’s center-right government. Dijsselbloem’s affiliation with the Labor Party, meanwhile, made him an acceptable choice for France’s Socialist President Francois Hollande.
“He’s the candidate, he’s the only one, so obviously he’s the best,” French Finance Minister Pierre Moscovici said.
The ministers will have an “open and demanding” discussion during which Dijsselbloem will have to lay out how he plans to lead the Eurogroup and how he wants to reconcile policies promoting growth and the necessity of consolidating the budgets, Moscovici added.
Outgoing Eurogroup President Jean-Claude Juncker, who is also prime minister of Luxembourg, has over the past three years been at the heart of efforts to avoid a breakup of the euro, a currency used by 330 million people. He has weathered all-night meetings and wee-hour press conferences with global markets hanging on his every word.
Juncker, who has held the post for eight years, said Monday he was relieved to step down.
He also dashed hopes for a quick solution to the eurozone’s latest problem, the cash-strapped Mediterranean island nation of Cyprus, which is seeking a bailout from its European partners.
“I believe we won’t be able to make a decision today. … That will probably happen in March,” Juncker said. Cyprus will be discussed but negotiations are ongoing, he added.
Cyprus is seeking rescue loans of about ¤17 billion ($22.6 billion) – almost equivalent to its annual gross domestic product. About ¤10 billion would shore up the country’s ailing banks, with the remainder meant to keep the government afloat.
The bailout could push Cyprus’ debt to 150 percent of GDP, a level economists consider unsustainable for such a small economy.
In creditor nations such as Germany, Europe’s biggest economy, the bailout has been met with skepticism amid allegations that Cypriot banks have helped launder Russian money and facilitated tax evasion.
German Finance Minister Wolfgang Schaeuble told the daily Sueddeutsche Zeitung that it was unclear whether there would be a bailout at all, because it wasn’t clear if a Cypriot bankruptcy “would endanger the eurozone as a whole at all.”
If Europe and the International Monetary Fund balk at bailing out Cyprus, which accounts for only 0.19 percent of the eurozone’s economy, the country could face bankruptcy within months, possibly forcing it to leave the eurozone.
Moscovici hinted that Europeans wouldn’t let Cyprus down, stressing that the priority must be to secure “the integrity of the eurozone.”
Cyprus has been shut out of financial markets for over a year and currently gets by on rescue loans from state-owned companies. The government says it won’t be able to pay its bills beyond March.
The ministers were also set to discuss the slow progress in implementing a European banking union, a cornerstone in the bloc’s effort to stabilize its financial system. Member nations have strong differences over who should bear most of the cost of further bank rescues – Europe’s new bailout fund or national governments.
Spanish Finance Minister Luis de Guindos urged his counterparts not to get worked up over the issue of direct bank recapitalizations for now but to send a clear “political signal that there is progress with the banking union.”