SPAIN’S CAMPAIGN for more time to cut its budget deficit descended into acrimony as Luxembourg threatened to veto the move if Madrid did not surrender its claim for a top seat in the European Central Bank.
Protracted haggling over a place on the ECB’s powerful executive board reached a new level as euro zone finance ministers prepared last night to discuss the complex bailout of the Spanish banks.
Spain has long had designs on the post and nominated Antonio Sainz de Vicuna, head of legal services at the ECB. The country considers it a basic right to have a seat on the board alongside other big zone countries such as Germany, France and Italy.
However, Luxembourg premier Jean-Claude Juncker argued otherwise. Under pressure to accept a new term as president of the euro group ministers, he made this conditional on the appointment of Luxembourg central bank chief Yves Mersch to the ECB post.
Mr Juncker won out last night, securing Mr Mersch’s nomination.
While Mr Juncker’s current mandate as leader of the euro group runs out in the coming days, he is again in the frame after France rejected the selection of German minister Wolfgang Schäuble for the job.
The latest indications suggest Germany and France might seek a joint mandate to lead the group, but only after the newly-appoint French minister, Pierre Moscovici, runs up more time on the clock.
The stand-off took a fresh twist yesterday when Luxembourg, one of the smallest euro zone countries, moved to block the granting of an additional year to Spain to settle its deficit if did not abandon its push for the job at the ECB.
Luxembourg was expected to relent in the wake of Mr Mersch’s appointment. The country’s finance minister Luc Frieden made no reference to his government’s position as he arrived in Brussels for the meeting.
“In a time when so many topics are on the agenda, it’s not good to waste time with personnel debates,” he said.
“I think it’s important from an agenda point of view to assign the ECB directors. The term of the head of the Eurogroup is coming to an end. It shouldn’t be too difficult to come to a decision today.”
Luxembourg’s uncompromising stance risked complicating already-difficult talks on the imminent Spanish bailout.
Although a deal last month to provide eventual direct aid to Spanish banks eased some of the pressure on Madrid, the country’s borrowing costs are again on the rise amid doubt over the scope of the arrangement.
In the face of record unemployment and biting recession, Madrid argues that it should have more time to cut the deficit. At this point in the negotiation, most other countries have rowed in behind it.
Mr Moscovici said there was a requirement to “take into account the real situation of the economy and the capacity to meet the commitments and the social and economic difficulties of the population”.
Ministers should look at the proposal in relation to Spain “with a positive spirit”, he said.
Spanish minister Luis de Guindos said there was potential to settle a draft deal on the bailout, but said another meeting would be needed on Friday week to finalise the arrangement.
