Paschal Donohoe: ‘Disease does not lend itself to being defined in economic terms’

Minister for Finance and chair of eurogroup on bank notes, inflation and Omicron impact

Climate activist Greta Thunberg and Irish writer James Joyce would be Minister for Finance Paschal Donohoe's top picks for people to be featured on euro banknotes.

He made the suggestion in an interview with The Irish Times, in which he revealed that Ireland is already dipping into an emergency Covid-19 reserve to cope with the Omicron variant.

The idea of putting well-known faces on the currency was raised as the European Central Bank proposed a redesign of the notes first launched in 2002, to make them more "relatable".

“If it were for next year, I would pick James Joyce because next year is the 100th anniversary of the publication of Ulysses. In Ulysses, he was the first literary imagination to lead our thinking regarding how different national identities could coexist with a broad concept of what it means to be European,” Mr Donohoe said.


But if choosing a note to be issued in 100 years' time, the Fine Gael TD for Dublin Central would opt for Thunberg.

“I think the future of the euro will be about how it has become the currency of net zero, the currency of transitioning to lower carbon use. In the same way as the dollar would have been associated with oil in the last century, it’s an opportunity for the euro to be associated with a different use of energy for this century,” he said.

“Greta Thunberg has laid the most existential challenge in front of my generation, about how we give her generation a future.”

Mr Donohoe spoke in Brussels after a meeting of the eurogroup club of finance ministers of countries that use the euro, which he has chaired since being elected its president last year.

Top on the agenda was inflation, which has piled political pressure on governments across the continent as energy prices mount, and the impact that the new Covid-19 variant Omicron may have on economies.

Wage subsidies

“We’re already using some funding that we had set aside for dealing with the risk of Covid development in 2022,” Mr Donohoe revealed.

Going forward, wage subsidies will be more “targeted” to “those who are affected the most”, Mr Donohoe said, citing “hospitality and the domestic sector” as hard-hit.

He expects inflation to ease in the new year along with the energy price squeeze, and has pushed back against calls for climate measures to be scrapped and to cut gas prices, arguing that ultimately the best solution is for the "role of renewables to grow".

He expressed reservations, however, about proposals for a so-called “carbon border adjustment mechanism” that would place levies on imports into the EU based on the carbon emitted in their manufacturing. It’s a proposal intended to prevent EU industries that adopt greener standards from being undercut but which critics fear would raise prices for consumers. He suggested it “needs to be done Europewide” first, and may need “global architecture”.

As eurogroup president, Mr Donohoe has grappled with the future of the single currency, such as whether the bloc should issue a digital euro and how the EU should regulate cryptocurrencies (he admits he has never owned any).

Some view the eurogroup as a diminished force since the days when it was the cockpit of the response to the euro zone debt crisis.

As an informal gathering, not an official EU institution, it has been accused of lacking transparency. But supporters argue this allows finance ministers to speak more freely and find early common ground, and they credit the format with producing the first draft of the EU’s major economic responses to the pandemic, from the Sure unemployment support scheme to the breakthrough €750 billion joint borrowing programme.

Debt rules

A showdown looms in the next three months over whether the EU should reform its debt rules, which have been suspended to allow pandemic response but are due to return in January 2023.

Member states that have long opposed the spending and public debt limits are pushing for an overhaul, while more fiscally conservative governments back retention. A compromise may be found in exempting certain kinds of spending – such as on climate measures – from being counted in the limits.

Whatever it is, it must be found by March 2022 when the European Commission must issue guidance to member states on what fiscal stance they should have, allowing them to draw up budgets in time for October.

During the pandemic, the EU has discarded the fiscal conservatism of the past and embraced fiscal expansion. A joint statement by finance ministers on Tuesday said that, due to this approach, “the euro area economy is recovering from the recession faster than expected”.

Does this mean that the austerity of the past was a mistake? Mr Donohoe rejects the comparison.

“If you define austerity by the very rapid reduction in government expenditure, and a very rapid increase in taxation levels, and the prioritisation of those changes above all else – that was the response to the crisis of a decade ago,” he says, describing it as “what happens when financial markets will no longer lend either at all, or affordably, to sovereign governments”.

Banking union

"But this crisis is completely different," he continues. "We have used some of the architecture that's been built up in the European Union of a decade ago, to deal with this crisis really differently. But we also recognise that we were dealing with a disease, and that disease does not lend itself to being defined in economic terms. So it's a different crisis, different response."

Mr Donohoe will also lead efforts to push forward long-stalled plans for an EU banking union. In brief, it's about ultimately creating pan-EU protections of bank deposits so that Greek banks will be as sturdy as German ones, while ensuring that credit is available to fund the recovery.

Alongside it are a suite of financial sector reforms, designed to give countries like Germany confidence that they can share the risk.

Asked for the strangest example illustrating why the EU’s financial sector patchwork should be harmonised, Mr Donohoe suggests “hybrids”.

“A hybrid is a financial entity that is seen in two different ways by two different jurisdictions, while continuing to be the same entity,” he explains.

“One legal system could see it as a partnership, and another legal system could see it as a normal company. And because there is a mismatch between how it is legally defined in two different entities, it creates complexity and confusion. That’s a financial services-wide issue.”

Some have wondered whether, with positions due to shuffle around back home in Irish politics, Mr Donohoe may seek a new international job or EU role.

“All my ambition and all my energy is focused on completing the jobs that I have,” he says. His presidency runs until the end of 2022. “I will definitely be standing in the next general election.”