Bankers express alarm over eurogroup presidency plan

By Matthew Saltmarsh

Date: 15/07/04

PLANS to create a stable presidency of the eurogroup are gathering momentum but have aroused suspicion from smaller states and the European Central Bank (ECB).

Nicholas Sarkozy, France's finance minister, wants the meetings of eurozone finance ministers to have a two-and-a-half year presidency to improve their working and their external voice. The president would become a "Mister Euro," a voice to represent the single currency.

The current chairman of the group, Dutch Finance Minister Gerrit Zalm, confirmed last week that many eurozone ministers favour the idea of establishing such a stable presidency.

Over the summer, Zalm will prepare suggestions to be distributed to the eurozone members of the Council of Ministers' economic and finance committee. They will meet at the start of September in an attempt to find consensus before the eurogroup gather to reach agreement on 10-11 September.

The eurogroup brings together the 12 eurozone finance ministers, the European Commission and the ECB for closed-door sessions. They can consider, but only within Ecofin decide, some issues relating to the euro area: some aspects of the excessive deficit procedure under the Stability and Growth Pact, exchange rate policy, pre-euro rules, appointing members of the ECB executive and coin issuance.

But the eurogroup's dinner discussions set the tone for what happens at the Ecofin meeting of 25 ministers, which retains formal power. This month, it was the discussion at eurogroup that decided what line would be taken on Italy's budget deficit.

Although the ECB is making positive noises on the record about the prospect of a more permanent eurogroup president, behind the scenes there is some disquiet. Christian Noyer, governor of the Bank of France, said earlier this week that eurogroup "should have a greater influence in financial policy", but not everyone agrees.

Some of the Sarkozy's comments - suggesting the group might become a "counterweight" to the ECB - have alarmed many central bankers, suspicious of the future role of a Mr Euro.

"Two people talking about the euro could create disharmony, especially as regards third parties," said a senior central banker. "There would be some unease."

"Would he be a political counterweight to Mr Trichet?" the banker asked, referring to the president of the ECB, Jean-Claude Trichet.

Much depends on the personality of the chosen Mr Euro. Luxembourg's Jean-Claude Juncker, premier and finance minister, would be seen as a "safer pair of hands" than Belgium's Didier Reynders or Austria's Karl-Heinz Grasser.

Juncker is seen as less prone to prodding the central bank in public on interest rates and other sensitive issues.

Sarkozy's proposal won backing from the large states, some small and medium-sized ones, including Luxembourg and Belgium, and the Commission.

The US has also supported the idea of streamlining EU representation at international financial gatherings. But the plan has met with unease from Finland, Austria and Ireland, while Greece wavered.

Small countries fear losing their opportunity to chair proceedings and hence their influence. For example, Austria's Grasser has been looking forward to a year in the hot seat from next July. Vienna takes over the rotating presidency of the EU in January 2006, but would also chair the eurogroup for the preceding six months because the UK is not part of the eurozone.

Sarkozy would also like to see the eurogroup using a panel of independent experts to complement the analysis of the Commission and the ECB. But this idea is much less popular.

"It's a bad idea as it weakens the Commission," said an official from a mid-sized eurozone economy.

• Matthew Saltmarsh is a Brussels-based journalist.

• Primary Source