Luxembourg’s Pierre Gramegna becomes the new ESM boss

Pierre Gramegna

From the start, there was no doubt about Pierre Gramegna’s abilities. He was Minister of Finance in Luxembourg for eight years until his resignation in 2021.

(Photo: Bloomberg)

Brussels After months of wrangling in the euro group, Luxembourg’s Pierre Gramegna will become the new head of the euro rescue fund ESM. The 19 euro finance ministers decided on Friday evening in a video conference. The breakthrough was possible because Italy gave up its resistance to the Luxemburger.

Federal Finance Minister Christian Lindner (FDP) can be satisfied: he had favored the Luxembourger from the start and has now pushed his man through.

In addition to the successful candidate Gramegna, Eurogroup boss Paschal Donohoe, who conducted the tedious negotiations with great patience, can be happy.

The Gramegna personality turned out to be unexpectedly difficult. There were originally four candidates, none of whom achieved the necessary support of 80 percent of the votes in the ESM supervisory body.

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The big countries Germany, France and Italy blocked each other. One candidate after the other gave up, and Gramegna also withdrew his candidacy in September because the situation seemed hopeless.

Meloni brought the breakthrough

But after the change of government in Italy from Prime Minister Mario Draghi to Giorgia Meloni, a rethink seems to have taken place in Rome. Allegedly, Draghi harbored a personal dislike for Gramegna. After the change of heart in Rome, France also changed its mind. The Luxembourger experienced a surprising comeback as a compromise candidate.

From the start, there was no doubt about Gramegna’s abilities. He was Minister of Finance in Luxembourg for eight years until his resignation in 2021. The graduate lawyer and economist is considered an experienced politician and diplomat.

Above all, it is said in Brussels that he is a good communicator. That is important because, as head of the ESM, he has to promote the euro zone to international investors.

Meloni, Draghi

After the change of government from Mario Draghi to Giorgia Meloni, a rethinking of Gramegna seems to have taken place in Rome.

(Photo: AP)

The 64-year-old has big shoes to fill. His predecessor, Klaus Regling, had shaped the euro rescue package since it was founded in 2012 and was nicknamed “Mister Euro Rescue”. The German retired at the beginning of October, and since then the organization has been temporarily managed by his former deputy.

When he left, Regling advised his successor to remain agile, because you never know where the next crisis will come from. However, the ESM is prepared for all eventualities.

ESM in search of meaning

Gramegna finds an institution that has recently become quiet. In the euro crisis ten years ago, the ESM was at the center of events and saved five countries with cheap credit from bankruptcy. It’s been a long time since anyone asked for help. The 250 employees manage the existing loans and invest the equity of the ESM.

Regling had therefore tried to give the ESM new responsibilities – for example in the form of a stability fund for the currency area. There is also a desire in Brussels to upgrade the intergovernmental organization of the euro countries to an EU authority.

>> Also read: EU countries are in a dangerous tug-of-war with the ECB

Gramegna, on the other hand, does not want to shake the existing ESM mandate. From Berlin’s point of view, this makes him the ideal candidate, because people here don’t believe in an increase in power for the ESM.

Donohoe gets second term

Gramegna is not the only personal matter that the finance ministers have to deal with. At their next meeting on December 5, they also want to confirm Eurogroup boss Donohoe in office. The Irishman’s choice is considered certain because he is the only candidate. The deadline for a counter-candidate had passed this week.

Before his first term, Donohoe had yet to compete for the post. In the summer of 2020, the conservative prevailed against Gramegna, among others. Green Economic Secretary Sven Giegold, then an MEP, criticized Donohoe as a “tax haven operator” – alluding to Ireland’s low corporate tax rate.

Paschal Donohoe

Irishman Paschal Donohoe’s re-election as head of the Eurogroup is considered certain because he is the only candidate.

(Photo: Bloomberg)

But now Donohoe is so undisputed that nobody wanted to compete against him. Soon he won’t even be finance minister anymore because, according to the coalition agreement in Dublin, the office will be handed over to coalition partner Fianna Fail. This means that in future there will be two Irish people in the Eurogroup – one representing Ireland and one as Eurogroup head.

The special arrangement for Donohoe shows how much his colleagues appreciate him. He earned his respect through his tireless search for compromise. In tough disputes, he has proven himself to be an honest broker. He is therefore expected to be re-elected on December 5 for a further two and a half years.

More: Federal government squinting at top post at IMF.

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