Eurozone finance ministers on Friday elected Pierre Gramegna, a former finance minister of Luxembourg, to lead the European Stability Mechanism (ESM).
The election caps a race to replace Klaus Regling as managing director of the bloc’s bailout fund, a €500 billion juggernaut set up during the eurozone debt crisis. Gramegna will step into the new role as of December 1 for a five-year term that can be renewed once.
The ESM was set up in 2012 at the height of the debt crisis that threatened the single currency area. Together with the European Commission and the International Monetary Fund — the so-called troika — the ESM oversaw lending to Greece, Portugal, Ireland, Cyprus and Spanish banks, lending a total of €229.6 billion linked to structural adjustment programs.
But due to the austerity imposed by the troika, countries have been reluctant to appeal to the ESM. Even during the coronavirus pandemic, its offers of help were not taken up.
What’s more, Italy and Germany still need to ratify a revised treaty that gives the ESM more powers in the event of future crises. It will fall on Gramegna to seek to convince the holdouts, as well as to re-imagine the fund’s role in the future European economic governance, currently under review.
Four candidates had vied for the job — from the Netherlands, Italy, Portugal and Luxembourg. The Dutchman was the first to pull out, followed by Italy’s candidate. Gramegna and Portugal’s João Leão both stepped back when neither could obtain 80 percent of cast votes.
The votes are allocated to eurozone countries depending on the capital share they contribute to the fund, with France and Germany both having a blocking minority, and Italy mustering one when allied with smaller countries. Berlin had blocked João’s nomination in earlier voting rounds, while Rome and others blocked Gramegna.
In Friday’s vote, Portugal abstained but all others voted in favor.
Gramegna’s fortunes changed when Italy — where a new government was elected in September — decided to back him, enabling him to get the required backing. France also supported Gramegna, according to a finance ministry official.