The Eurogroup of euro zone finance ministers on Thursday elected Ireland's Finance Minister Paschal Donohoe as its new chair, a job that will see him try to steer the group's coronavirus-damaged economies out of their worst recession.
Dubbed "Prudent Paschal" by some local media, the Dubliner eschewed demands for bigger tax cuts and spending increases to deliver Ireland's first budget surplus in a decade. He is also strongly against a potential EU tax on digital firms.
Donohoe was elected after two rounds of votes in which he defeated Spain's Economy Minister Nadia Calvino and his Luxembourg counterpart Pierre Gramegna.
He will take over from the outgoing president Mario Centeno on July 13 and will serve a two and half year mandate until the end of 2022.
Despite criticism for its opacity, and recently for its perceived irrelevance, the Eurogroup remains a powerful institution which played a key role during the financial crises of the last decade, ultimately helping to avoid the collapse of the common currency.
Donohoe will have to steer the 19-nation euro zone out of its worst ever recession, with the European Commission estimating the bloc's economy will shrink by 8.7% this year before growing by 6.1% in 2021 - should the coronavirus crisis be under control by then.
He will have to mediate between a southern bloc which supports a permanent watering down of the bloc's fiscal rules and a northern front led by the Netherlands that prefers a quick return to Brussels' checks on national budgets.
Requirements that states keep fiscal deficits below 3% of gross domestic product and reduce high debt have been suspended during the pandemic, in an unprecedented move.
"As President, I will seek to build bridges amongst all members of the Euro Area, and to engage actively with all member states, to ensure that we have a consensus-based approach to the recovery of our economies and our societies," Donohoe said in a statement after his election.
He added that fiscal policy in the euro zone should return to normal only after the recovery is well underway.
EU economics commissioner Paolo Gentiloni said he was confident Donohoe will play a crucial role "at a time of unprecedented challenges" for the euro zone.
"In times of crisis the appropriate fiscal stance is one supportive of economic activity. We must not rush in pulling back our economy stimulus as this may harm our economy," Portugal's Centeno said in his farewell message.
But, maintaining his traditionally balanced approach, he added: "What is temporary should be treated as temporary".
Centeno fully saw his role as a mediator, in the footsteps of Luxembourg's Jean-Claude Juncker.
Juncker held the post from its creation in 1998 until he was replaced in January 2013 by former Dutch finance minister Jeroen Dijsselbloem, who was seen as less diplomatic. (Reuters)
Source: www.businessworld.ie
