Tuesday

23rd Oct 2018

Luxembourg leader set to extend euro zone reign

  • Mr Juncker has served as Eurogroup chairman for five years (Photo: European Commission)

Luxembourg's Prime Minister, Jean-Claude Juncker, looks set to receive a fresh mandate under Lisbon Treaty rules as head of the 16-nation group that shares the euro currency.

"We all agreed that in January the Eurogroup president (chairman) will be elected for two and a half years," Mr Juncker told a news conference after a meeting of euro area finance ministers on Tuesday (1 December).

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The Lisbon Treaty – a new EU rulebook that started on 1 December - brings about a number of institutional changes, including the extension of the Eurogroup chairman's working mandate from 2 to 2.5 years.

Mr Juncker's current term is due to expire at the end of 2010, but he now has strong backing from member states to stand for re-election in January.

"He is today the only candidate," French economy minister Christine Lagarde told journalists after the meeting.

The Luxembourg politician has already served as Eurogroup chairman for five years, with Italy expressing an interest in the post earlier this year having failed to secure the European parliament presidency position.

"I see that position would fit our finance minister Giulio Tremonti," Italian Prime Minister Silvio Berlusconi told journalists at the end of a EU summit in June.

Euro too strong

As well as the institutional housekeeping decision, ministers discussed the strength of the euro currency, with all agreeing it was over-valued. The IMF's Europe director, Marek Belka, also attended the meeting and cautioned over the euro's strength.

Mr Juncker briefed ministers on his recent visit to China with EU economy commissioner Joaquin Almunia and European Central Bank chief Jean-Claude Trichet.

"We see it as abnormal that a fast-growing economy devalues its currency in relation to a currency zone where growth performance is far less positive," he said, pointing to China's eight percent GDP annual growth rate.

Euro area growth is forecast to be positive but below one percent next year, with politicians and business leaders concerned the euro's strength versus other currencies is harming the region's export competitiveness.

However Mr Juncker was not overly optimistic about the outcome of his recent visit.

"We came back from China, not exactly reassured but at least we got out message across," he said.

Greece

The ministers also discussed the poor state of Greek public finances, with Mr Almunia citing the need to keep up pressure on the new Socialist government to bring down deficit levels, forecast to exceed 12 percent of GDP this year.

"The problems in Greece are problems of the euro area," he said. The country's debt total is expected to reach 124 percent of its GDP next year, the highest in the euro area.

This has raised the cost of borrowing money on the markets for the Greek government, with investors increasingly concerned about a possible default.

However Mr Juncker moved to quell rumours of a possible bankruptcy, and expressed confidence in the new administration's ability to tackle the challenges. "There is no hint of bankruptcy as far as Greece is concerned," he said.

The Greek government recently announced its budget for 2010 that aims to bring the deficit down to 9.1 percent for that year.

Mr Juncker welcomed the initiative but said other reforms should to be implemented, and did not rule out the need for a supplementary budget later next year.

EU leaders worried about Italy's budget

Some EU leaders warned that Italy's plan to boost its budget spending despite the second largest debt in the eurozone, could hamper efforts to reform the single currency's framework.

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