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Luxembourg ex-finance minister on track to run eurozone bailout fund


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The will-they-won’t-they wrangling over who is to succeed Klaus Regling at the helm of the eurozone bailout fund may finally be coming to an end. The Luxembourg-based institution is now expected to get a Luxembourg national to run it, Pierre Gramegna, the only candidate to be discussed in a video call later tonight.

In other eurozone news, Ireland’s Paschal Donohoe is likely to stay on as president of the eurogroup after his name was the only one to be put forward by yesterday’s deadline. Eurozone finance ministers will formalise that on December 5.

The Financial Times interviewed Ukrainian president Volodymyr Zelenskyy in his Kyiv office, which had no water supply on Wednesday as a consequence of Russia’s continued attacks on the country’s infrastructure. But by yesterday morning power had been restored and water was running again, thanks to the remarkable resilience of energy workers, mine removal personnel and officials. “This is a war about strength, about resilience, it is about who stands stronger,” Zelenskyy said.

Two councils are happening today in Brussels — one on migration (which might provide some side-chatter about the expansion of the border-free Schengen area), and a trade council that will mostly revolve around deteriorating relations with the US.

And with relations between Ursula von der Leyen and her own political family somewhat tense (to say the least), we’ll look at a letter the centre-right group wrote complaining about the European Commission’s alleged power grabs.

Second time lucky

It was supposed to be a straightforward process but the race to succeed Klaus Regling at the helm of the European Stability Mechanism turned out to be quite the rollercoaster ride, write Sam Fleming and Valentina Pop in Brussels.

The process kicked off in spring, when a call for candidates to replace Regling returned four names. These were João Leão of Portugal, Marco Buti of Italy, Menno Snel of the Netherlands and Pierre Gramegna, who had recently stepped down after a long stint as Luxembourg’s finance minister.

However, efforts to find a candidate, presided over by Paschal Donohoe, foundered during the summer and, by last month, officials had to go back to the drawing board after no single candidate managed to garner the 80 per cent of votes needed to win the post.

The change in government in Italy appears to have helped unlock matters, as Rome confirms it is now prepared to support Gramegna for the post. Officials are planning a special board meeting of the ESM today and are increasingly confident that the Luxembourg politician will cross the necessary threshold.

All the angst-filled wrangling over the ESM’s leadership is slightly odd, given the relatively peripheral role it has been playing in the eurozone of late.

The eurozone bailout fund, and its predecessor the European Financial Stability Facility, created in 2010, was in the thick of the action during the sovereign debt crisis, under the steady hand of Regling, who retired in October.

But even though the institution sought to play a role in the Covid-19 crisis, offering pandemic credit lines with minimal conditionality, no capital drew on the loans. Rome has been particularly dismissive of the ESM’s offering, given the stigma that taints its funding among Italian politicians.

Meanwhile the European Central Bank has played a crucial part in quelling squalls in the sovereign debt markets, while the EU now has the NextGenerationEU common borrowing programme, worth up to €800bn, to help member states restore their economies.

The ESM has plenty of lending firepower but there is little sign that it will be called upon. That is obviously a good thing: no one wants to see an overworked and overstretched bailout fund in euroland. But the question for Gramegna — if he wins the backing of the eurozone finance ministers — is whether he can spell out a clear vision for the ESM’s continuing role in the euro area architecture.

Should the ESM be turned into a European version of the IMF? Tell us what you think and click here to take the poll.

Power grabs and olive branches

Ursula von der Leyen’s efforts to assuage anger in the European parliament at being left out of the decision making process during the bloc’s latest crisis has resulted in even more ire from lawmakers, writes Alice Hancock in Brussels.

In a letter to EP president Roberta Metsola seen by Europe Express, von der Leyen offered to set up a “contact group” with MEPs “to share information and deepen dialogue on the energy crisis response”.

The letter was drafted in response to rising criticism, including from within her own political family, the centre-right European People’s party, that the European Commission was too quick in invoking emergency powers that circumvented parliamentary scrutiny.

The olive branch was not well received, however.

Lawmakers across the political spectrum expressed dismay at the “abusive” use of emergency power, according to those present at a meeting of the parliamentary group leaders yesterday. Metsola has yet to respond.

Centre-right group leader (and fellow German) Manfred Weber said that the use of those powers (based on article 122 of the EU treaty) “is simply unacceptable. Not only is it undemocratic, they have already taken so much time that we cannot speak of an emergency anymore.”

The parliament would reject von der Leyen’s offer outright, he added.

The use of article 122 has become increasingly controversial since the commission first employed it during the Covid-19 pandemic. Most recently, it was used to push forward regulations on speeding up the permitting of renewable energy projects, which the commission has said is part of its effort to diversify away from Russian gas supplies.

Following a widespread disagreement among member states over the commission’s plan to cap gas prices this week, one EU official wryly observed that von der Leyen now had a “two-front conflict on energy”, from both the council and parliament.

Chart du jour: German yields

Line chart of Difference in two and 10 year Bund yields (percentage points)  showing German yield curve ‘inversion’ highlights economic worries

Germany’s yield curve inverted for the first time in 29 years in early November, though the difference between the yield on two-year government debt and 10-year had narrowed marginally yesterday.

What to watch today

  1. Trade ministers and interior ministers are meeting separately in Brussels

  2. Nato secretary-general Jens Stoltenberg holds a news conference

Smart reads

  • Tracking deals: The European Council on Foreign Relations has put out this useful tracker of bilateral deals struck this year by capitals (and the EU) with alternative gas producers to Russia. Top of the pops: Italy, followed by the EU and Germany.

  • Fortress Europe: As long as they can’t agree on how to distribute migrants internally, EU capitals will continue to focus on striking deals with countries to take back rejected asylum seekers and beefing up border security, writes the Centre for European Reform.

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Valentina Pop

By Valentina Pop

Valentina Pop is the Europe Express editor, the FT's daily Europe newsletter. A polyglot journalist of Romanian extraction, she was previously with The Wall Street Journal, EUobserver and The Economist.

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