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Wednesday 27 September 2023 Dublin: 15°C
Sam Boal
# euro star
It's a dirty, time-consuming job so why would Paschal want to become head of the Eurogroup?
Experts say that increased Irish influence in Europe could come at a cost.

IRELAND IS STARING DOWN the barrel of an unprecedented economic contraction so you might be wondering why exactly the minister for finance has decided to take on a second, part-time job.

On Thursday evening, Paschal Donohoe was elected head of the Eurogroup in a secret ballot of the finance ministers of the 19 eurozone member states.

The Eurogroup is a peculiar sort of body within the structures of the European Union. It’s informal, it doesn’t have a bureaucracy attached to it, its legal powers are limited and its president doesn’t draw down a plum salary.

So why would he want to take it on and what exactly will he be doing in the new role?

As Ronan McCrea, professor of constitutional and European law at University College London, explains, just because the Eurogroup doesn’t have legal powers, doesn’t mean it’s not powerful.

It’s a politically important decision-making forum for the finance ministers of the 19 eurozone member states, in other words, the countries that have adopted the euro as their currency.

Political reality

The Eurogroup closely interacts with another body, the Economic and Financial Affairs Council (ECOFIN), comprised of the finance ministers of all 27 EU member states. That body is itself a configuration of the Council of Ministers, one of the three main legislative organs of the European Union along with the European Commission and Parliament.

Just before the monthly ECOFIN meetings, the Eurogroup will get together to hammer out the eurozone position on matters that will be discussed among the broader 27.

Effectively, economic policy decisions relating to the eurozone will be made at the Eurogroup meeting and “later ratified at the ECOFIN meeting”, McCrea says.

“A lot of matters that are purely to do with the eurozone will effectively be decided by the Eurogroup, even though they don’t have the legal powers to do that. That’s just the political reality of it.” 

Until the Lisbon Treaty was passed in 2009, the Eurogroup had no legal basis and was strictly an informal meeting between the 19 ministers.

Although it now has some official legal basis, it’s still largely informal. It meets behind closed doors, doesn’t publish minutes and has long been criticised as opaque, secretive and for operating in a legally grey area.

In any argument about the EU and its ‘democratic deficit’, the finger will invariably be pointed at the Eurogroup, one of its least accountable formations.

Winning the World Cup

As president, Donohoe’s role within the group is a very influential one and also a very active one, McCrea says.

“The job is to be the spokesman for the group and to also to draw up the agenda for the meeting. So after the meeting, he’ll be the one communicating the decision of the Eurogroup on a particular issue,” he explains.

As McCrea says, a big part of Donohoe’s job will be to “hammer out compromise agreements between the finance ministers”. But given the general lack of consensus between eurozone member states on most of the big issues, that’s a very tall order indeed.

It may be his job – but it’s his job in the sense that it’s Ireland manager Stephen Kenny’s job to win the World Cup. 

Donohoe will also have to hit the ground running. 

Probably the single biggest issue that the Eurozone faces at the moment is the pandemic-linked recession, which the Commission predicts will shrink the combined euro area economies by an unprecedented 8.7% this year.

Next Friday, Taoiseach Micheál Martin and other European leaders will meet face to face for the first time since the initial outbreak of the virus to hash out the details of €750 billion recovery fund.

Although the scheme is backed by Paris and Berlin, traditionally the two centres of power in Europe, member states are incredibly divided on the plan. In fact, Donohoe’s election as head of the Eurogroup reflects some of the divisions.

Dutch Prime Minister Mark Rutte leads a group of northern European countries — which also includes Austria, Sweden and Denmark — in opposing certain details of the deal and its focus on southern states.

Specifically, the ‘Frugal Four’ countries are against the idea of handing out billions in obligation-free grants to member states with historic levels of debt, countries like Spain and Italy, which have suffered the worst impact of the virus in Europe.

In return for loans under the scheme, those countries want serious reform of the southern states’ taxation and pension schemes.

The ballot may have been secret but we know that the German, French and Italian finance ministers did not vote for Donohoe. They openly supported Spain’s socialist finance minister, Nadia Calviño, who they hoped could push through the plan for the recovery fund as it was originally conceived in May.

Donohoe was seen as a “good compromise candidate”, McCrea says, backed by some of the smaller states, including Austria, one of those conservative northern countries opposed to parts of the deal.

Although the big decisions will be made by the leaders of the various member states, Donohoe will have a role in brokering an agreement between the finance ministers.

The national interest

It’s a dirty job and a time-consuming one at that so why would Donohoe want to take it on?

Apart from the obvious CV benefits if he plans to run for Taoiseach down the line, there are clear national-political reasons as well.

McCrea explains, “An Irish official in a big influential role means that on the big questions an Irish minister will be drawing up the agenda for the meeting, he’ll be playing a key role in coordinating positions. That gives Ireland a degree of influence and the ability to shape the key debates in a way that will favour Ireland.”

However, that influence comes at a cost.

There is an extent to which Donohoe will, at times, be forced to park the national interest to act as an honest broker on matters of eurozone policy. This might eventually include the thorny debate around tax harmonisation and Big Tech companies.

Already, former Greek finance minister Yannis Varoufakis — a long-time adversary of the Eurogroup — has described Donohoe’s election as the “death knell to any thoughts of corporate tax harmonisation in the Eurozone and the EU”.

McCrea sees it the other way around.

“If you’re going to be an effective president of the Eurogroup, you can’t be seen as someone who’s too vigorously defending your purely national interest,” he says. 

“So I think it will mean that our greater ability to influence the agenda more generally might mean that we feel greater pressure to make compromises on Taxation issues.

“But [corporate tax] such a big issue for Ireland,  he’s not going to just give it up.”

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