Juncker carries on

After months of stagnation, the changes of personnel at the Eurogroup are getting underway. At their meeting in Brussels, eurozone finance ministers agreed to nominate Luxembourg's Yves Mersch as one of the directors on the board of the European Central Bank (ECB). That was the condition under which current Eurogroup president Jean-Claude Juncker had agreed to remain in his position.

On Tuesday morning, Juncker announced that he'd been re-elected for another two years, but left no doubt that he doesn't intend to stick it out for the entire term. "It is not my intention to fulfill this mandate in all its length," he said. "I will step down by the end of this year or by the beginning of next year."

France steps on the gas

Another item in the personnel package was the appointment of the German Klaus Regling to head the eurozone's permanent rescue fund, the ESM. He already heads the current temporary fund, the EFSF.

But it's still not clear what will happen after Juncker goes. The new French government has rejected the man who had been favorite to succeed him, the German finance minister, Wolfgang Schäuble. As to whether he will end up with the job anyway, Schäuble commented after the meeting merely, "We'll leave that up to the bosses."

Meanwhile, the French finance minister, Pierre Moscovici, was full of praise for the decisions taken at the recent EU summit. That was no surprise, since the southern European countries, with the support of the new French president, Francois Hollande, had won significant concessions against the resistance of the German chancellor, Angela Merkel. The most important of these was the decision to allow eurozone members who are in financial trouble - as well as banks - easier access to money from the rescue funds. Moscovici wants to see the change implemented promptly.

"I think the decisions have established a solid basis, and now it's a matter of putting them into practice," he said. "Let's move forward, and do so as speedily as possible." The main issue for him is getting help to the highly indebted Spanish banks.

Spain can expect help for its banks

His German colleague is not in such a hurry. Schäuble reminded the others of the conditions which had been agreed. First, there needs to be eurozone-wide bank regulation in place. "That needs time, it's complicated, it's not easy," said Schäuble, and, responding to German fears that savers and taxpayers would have to take over Spanish bank debts, described media speculation about joint liability as "completely absurd."

But it's not only Germans who are worried about that. The Dutch finance minister, Kees de Jager, also made it clear that banks must be "well regulated before a country's banks can be supported by all the other countries." The Netherlands and Finland are the countries which have expressed their concerns most emphatically, and it's not clear whether and how quickly their fears can be allayed.

All the same, the finance ministers were able to agree in principle to lend the Spanish banks up to 100 billion euros ($81 billion), with a first instalment of 30 billion going out this month. The final decision will be made at a special meeting of the finance ministers on July 20.

Draghi sees a light at the end of the tunnel

At least the ECB president, Mario Draghi, seems optimistic, unlike so many others. On Monday, he told the currency committee of the European Parliament, "The euro is here to stay and the euro area will take the necessary steps to ensure that." The situation today, he said, was significantly more relaxed than six months ago, but the countries affected still had to do more to improve their competitiveness and budgetary stability.

"Progress is evident," he said, "and that's why I'm very hesitant, not to say reluctant, to say, 'No, we should slow down, we should go back, we should reconsider,' because now we are starting to see the first signs of progress in many of these countries, especially, I would say, in Ireland and Portugal."

Draghi also spoke about the controversial issue of pooling debt, which, for many critics, will lead to the strong countries permanently having to support the weak. He described the idea of a common debt redemption fund as "intelligent," but said this would be the end of a process.

"We are gradually aiming towards fiscal union," he said, "but a fiscal union cannot start from being a transfer union. This will be the arrival point."

But there are enough people who reject the whole idea of a transfer union. Chancellor Merkel said recently that there would be no joint liability for debts "in my lifetime," and that's being interpreted as just such a rejection.

Author: Christoph Hasselbach / mll
Editor: Joanna Impey