Paschal Donohoe will not comment on if he will stand for top EU finance role

Vacancy in European Stability Mechanism leader role comes as speculation about Minister for Finance’s next move grows

Minister for Finance Paschal Donohoe has refused to comment on whether he would consider being a candidate to lead the European Stability Mechanism (ESM), a body that manages hundreds of billions of euro in loans as the currency area’s bailout fund.

As current president of the Eurogroup, Mr Donohoe is in charge of managing the process to find a replacement for the ESM’s outgoing managing director Klaus Regling, whose term ends this week.

There is speculation about Mr Donohoe’s next move as a December Government reshuffle has cast doubt on his ability to remain as Eurogroup president for a second term, as the post is typically held by a serving finance minister and Fianna Fáil’s Michael McGrath may take up this role.

After he chaired a Eurogroup meeting of the euro zone finance ministers dedicated to discussing their responses to the economic challenges posed by the energy crisis, Mr Donohoe was asked whether he would run for the ESM role himself.

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“My only focus is on finding a replacement for Klaus, and ensuring that we have a managing director in place that can continue with the functioning of a deeply important economic institution of the euro area,” he said in response.

“Given that it’s my job to oversee this process and to try to deliver a compromise candidate and somebody who can reach the required threshold of support within the euro area, I’m not going to comment on any other candidates including myself in relation to this.”

Mr Donohoe noted that his mandate as Eurogroup president “continues all the way until December” and his work as Ireland’s Minister for Finance was his focus.

A previous effort to find a replacement for Mr Regling was abandoned in September after neither of the final two candidates — the former finance ministers of Luxembourg and Portugal Pierre Gramegna and João Leão — could reach the required majority support of 80 per cent in the Eurogroup.

Mr Regling told journalists that if necessary an interim managing director could be appointed, as it was legally necessary for someone to be in the role to sign off on decisions regarding the €300 billion in loans and €300 billion in bonds that the fund manages.

The Luxembourg-based body was established to extend emergency financing to euro zone member states that fall into financial difficulty, potentially a crucial role as the EU grapples with a possible impending recession.

Reflecting on the end of his term, Mr Regling said that just as when he took the helm of the ESM on its establishment during the euro zone crisis in 2012, “Europe is again facing a difficult economic situation”.

“Markets expect a contraction of the economy during the next several quarters and depending on the energy supply, there could be a recession next year,” he warned, noting that the energy price increase represents “the biggest trade shock Europe has seen since the second World War”, and that it “implies an income loss that cannot be fully compensated by fiscal measures”.

The Eurogroup finance ministers issued a joint statement on Monday agreeing to co-ordinate national measures to avoid creating distortions in the single market, and to “refrain from policies that would add to inflationary pressures”.

Naomi O’Leary

Naomi O'Leary

Naomi O’Leary is Europe Correspondent of The Irish Times