Luxembourg’s Mersch, Juncker Take Euro Posts; Regling Wins ESM
Luxembourg, the richest country in the 17-nation euro zone, claimed two top economic-policy positions and Germany held on to a third in the climax of months of wrangling over high-level appointments.
Luxembourg’s Yves Mersch, Europe’s longest-serving central banker, was named to the European Central Bank’s Executive Board. Prime Minister Jean-Claude Juncker’s term as chairman of euro finance meetings was extended and Germany’s Klaus Regling, head of the euro-area’s temporary bailout fund, was named to run the permanent one that starts operations soon.
The appointments at a meeting of euro-area finance ministers in Brussels end five months of bickering over personnel, a reflection of the power politics and national egotisms that have frustrated attempts to deal with the crisis.
Mersch “is really independent,” Juncker told reporters in Brussels early today after the ministers met for nine hours. “Very often I was the victim of his independent statements.”
Mersch will take the ECB post vacated by Spain’s Jose Manuel Gonzalez-Paramo, stripping Spain of its claim to a permanent seat on the Frankfurt-based bank’s six-member Executive Board. Mersch defeated a Spanish nominee, Antonio Sainz de Vicuna, head of legal services at the ECB, as well as Mitja Gaspari, former head of Slovenia’s central bank.
France’s presidential election in May had prolonged the haggling over the package of appointments, leaving an ECB board seat empty for the first time when Gonzalez-Paramo’s term ended on May 31.
Spain’s leverage to push through its lower-profile candidate was hampered by its pursuit at the same time of as much as 100 billion euros ($123 billion) in aid for its banks.
As Luxembourg’s representative on the ECB’s wider policy- setting council, Mersch, 62, has earned a reputation as an inflation hawk. He is the only central banker in office continuously since the euro debuted in 1999.
“Mersch will do his bit to reinforce the reputation of the ECB as an inflation fighter,” said Christian Schulz, senior economist at Berenberg Bank in London. “That could make markets nervous at times.”
With the ECB now run by Mario Draghi of Italy with Vitor Constancio of Portugal as vice president, northern countries backed Luxembourg’s candidate as a way of arresting a perceived shift of power toward southern Europe.
Luxembourg is one of four euro-zone countries to emerge from two years of fighting the debt crisis with an AAA credit rating still intact.
Mersch’s arrival will leave two top-rated countries, Luxembourg and Germany, with board representation. The remaining seats are held by Italy, Portugal, France and Belgium. The six members are joined once a month in Frankfurt by the 17 heads of national central banks to set interest rates.
Mersch requires an endorsement by all 27 European Union finance ministers, followed by a European Parliament hearing, non-binding vote and final confirmation by euro-area leaders before starting an eight-year term. The parliament has no power to block ECB appointments and has never issued a negative recommendation. Its next weekly session starts Sept. 10.
Juncker, who said he will step down in late 2012 or early 2013, was present at the creation of the euro, serving as Luxembourg’s finance minister during the Maastricht Treaty negotiations of 1991. He became prime minister in 1995 and has run euro finance meetings since 2005.
“He’s not on a temporary contract,” French Finance Minister Pierre Moscovici said. “He has a mandate.”
A speaker of French, German, English and the national Luxembourgish tongue, Juncker was a go-between in negotiating euro deficit rules in 1997 and in dealing with a German and French bid to water them down in 2005.
Juncker has supported a hybrid of policy proposals, pairing Germany’s insistence on fiscal rigor with backing for a gradual move toward a joint borrowing system.
The appointment of Regling, 61, to run the permanent European Stability Mechanism ensures continuity in the management of rescue borrowing and aid distributions. A former German Finance Ministry and European Commission official, Regling has been in charge of the temporary fund, the European Financial Stability Facility.
The startup of the 500 billion-euro ESM is delayed due to a German high-court ruling on a temporary injunction, due this week. Italy also has yet to ratify it. The ESM will be built up as the temporary fund is wound down.
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