As Schaeuble Bids Adieu, Euro Area Prepares for Fresh Chapter

EghtesadOnline: When euro-area finance ministers gather in Luxembourg on Monday, they’ll begin saying farewell to two of the main protagonists from the bloc’s biggest existential drama, Germany’s Wolfgang Schaeuble and Jeroen Dijsselbloem of the Netherlands.

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08 October 2017

Schaeuble, 75, will become head of the lower house of German parliament at the end of October while the Dutch finance minister, who has been chairing the meetings of his euro-area counterparts since 2013, will leave in January at the latest, according to Bloomberg.

The departure of Schaeuble and Dijsselbloem will likely rob the Eurogroup of depth and experience just as France and Germany have joined forces in pushing for closer integration among the countries that use the common currency. While few expect a major policy shift from Berlin, the dynamics of the group will change in one of the most critical phases in its 19-year history.

“This is an important Eurogroup -- the last one before the equilibrium within the institution is likely to change and in uncertain ways,” Mujtaba Rahman, managing director of Eurasia Group in London, said by email. “Schaeuble and Dijsselbloem were domineering personalities: It’s unclear whether the new German finance minister, chairman and Bruno Le Maire will be able to fill that vacuum.”

The departure of the senior statesman and the seasoned mediator come as the group’s focus is also shifting from managing crises to preventing them, with discussions now looking at how to shore up the euro area to better withstand financial shocks in the future.

Originally an informal meeting for finance ministers to exchange views, the group morphed into one of the most closely watched decision-making bodies in Europe. At the peak of the financial crisis the ministers held many, often acrimonious meetings, striking late-night deals on emergency bailouts for five countries, an overhaul of the EU’s banking rules and eleventh-hour loans to keep Greece from defaulting and crashing out of the euro.

No figure was more central to these discussions than Schaeuble.

The veteran politician outlasted all of his peers in the group, including eight ministers from Greece, four from France and as many from Italy. Often referred to as the architect of austerity, he inspired fear and respect in equal measure among many of his colleagues and gained notoriety for his hard line toward Greece.

‘Strong Opinions’

Schaeuble’s long tenure and Germany’s position as the largest economy in the European Union gave him unparalleled influence. But officials say his clout also stemmed from his personality, reflected in the tenacity with which he defended his sometimes unpopular positions, even when faced with strong political pushback.

“Schaeuble had a very strong personality,” Yannis Stournaras, the governor of the Bank of Greece who served as the country’s finance minister for two years, said in a telephone interview. “He had vigor, great resilience, and strong opinions,” he said, adding that Germany’s strong economic performance gave Schaeuble “a dominant role.”

While Schaeuble’s permanent successor remains unknown, EU officials don’t expect economic policy to shift substantially regardless of who takes over, with the finance minister representing well-known German positions such as the opposition to further risk sharing.

Still, matching his clout will be hard for any successor, especially as the euro-area’s political constellation has now changed. With the ascent of Emmanuel Macron in France, Paris has become a more active player in economic issues, leading discussions on matters such as the taxation of digital companies and the reform of the euro area. France’s growing presence in these talks could be a harbinger of a gradual re-balancing of powers.

Economic Stability

The decision on who will replace Dijsselbloem could also herald changes in the group. The Dutch social-democrat gained a reputation as a skilled mediator, able to liaise between parties that didn’t always see eye-to-eye and helping to strike compromises at the peak of the Greek crisis in 2015.

The change marked by the departure of these two leading figures, coupled with the gradual improvement of the bloc’s economic situation, raises questions about whether the group’s fire-fighting role will need to be reprized in the future.

With the debate on euro-area integration now dominating the ministers’ agenda and plans to shore up the currency picking up steam, the group may soon find itself with less to do than over the past few years. As the crisis has subsided, gatherings that used to run well into the early hours of the morning are already now done before dinnertime, and no emergency meeting has been called in over a year.

The 19-nation currency bloc’s economy is on track for the strongest expansion in a decade while consumer and business confidence are at the highest since before the financial crisis.

“We’re in a much better economic situation than we’ve ever been over the last five years,” Karel Lannoo, chief executive officer of the Centre for European Policy Studies, said in a telephone interview. “The debate will be entirely different than it was in the last five years -- we can have a long-term vision now for Europe.”