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Juncker Takes Euro Act Offstage in Handoff to Newest Minister

January 22, 2013

Luxembourg Prime Minister Jean-Claude Juncker

Luxembourg Prime Minister Jean-Claude Juncker, left, is seen with with International Monetary Fund Managing Director Christine Lagarde at a Eurozone meeting on Nov. 12, 2012. Photographer: Georges Gobet/AFP/Getty Images

Luxembourg Prime Minister Jean- Claude Juncker, Europe’s most seasoned politician, was either making up policy on the hoof or had blurted out a decision that was supposed to be secret.

Briefing reporters close to midnight on Nov. 12, Juncker mumbled that Greece’s debt-reduction timetable was being extended to 2022 from 2020. The ad-lib earned an instant rebuke from International Monetary Fund chief Christine Lagarde. It also hastened moves to push him out of the job as chairman of the group of 17 euro finance ministers, two European officials said.

“I was trying to express myself in a so-timid way that you couldn’t understand,” explained Juncker, flanked by Lagarde and European Union Economic and Monetary Commissioner Olli Rehn.

Juncker’s remark after the Brussels meeting wasn’t his first gaffe since emerging as a leading spokesman for policy makers battling the financial turmoil spawned by Greece in 2009. The 58-year-old Juncker has incarnated both the clandestine politics that flailed for three years at a solution and the spirit of improvisation that, for now, has kept the currency intact.

“Despite the tendency to improvise in a number of memorable out-of-office-hours press conferences, Juncker was functional in helping buy time for Europe,” Silvio Peruzzo, an economist at Nomura International in London, said in an e-mail. “In a sense, he had the most challenging part of the job, which was having to communicate the state of affairs about the euro area, not being the key decision maker.”

Treaty Signer

A Luxembourg government minister since 1984 and prime minister since 1995, Juncker has spent his career shaping the common currency. A signer in 1992 of the Maastricht Treaty establishing the EU and euro, Juncker was the intermediary between Germany and France in hashing out the deficit-limiting stability pact in 1996 and in softening it in 2005. He ceded the euro post yesterday, to Jeroen Dijsselbloem, who has been Dutch finance minister for all of 78 days.

Capable of sphinxian circumlocutions in French, German, English and his native Luxembourgish, Juncker combined back- channel diplomatic instincts with an embrace of the media, especially in Germany and France. Speculation that he would drop his part-time euro job accompanied each of his three reappointments.

The Luxembourger’s reputation for ambiguity was legendary. Asked about his effectiveness as a communicator late yesterday, Juncker said “it’s very difficult to communicate in the name of 17 governments.”

Impossible Task

“If you look at how sometimes the different governments sometimes sent different, if not sometimes opposing messages into the world, then it’s of course not possible for the one who is supposed to speak in the name of them all to send a uniform message,” Juncker told reporters in Brussels after Dijsselbloem’s appointment was announced.

Spats with the European Central Bank and an alternating friend-and-foe relationship with the leaders of Germany and France, the euro’s main patrons, marked Juncker’s eight years in a role he himself crafted.

The 1997 compromise foreseeing that finance ministers from the single-currency countries “may meet informally among themselves” was the Luxembourger’s handiwork, setting up a steering committee with ill-defined powers to accommodate rival national interests.

Conflicting Goals

France wanted a council that would evolve into an “economic government.” Germany pushed back, fearing a French ploy to curb the ECB’s autonomy. And Britain, now considering an exit from the EU, wanted a seat even though it wasn’t going into the euro.

While the euro group obtained EU treaty status in 2009, it is still informal, with competing views over whether its leader should be a moonlighting finance or prime minister or a full- time appointment. Whatever the case, the unpaid chairmanship carries little power beyond the ability to set the agenda, orchestrate who speaks when in meetings and announce the outcome.

Starting with the euro’s birth in 1999, it rotated along with the EU presidency, until the baton was passed in 2005 to Juncker, then Luxembourg’s finance minister in addition to prime minister. Initially, he was tapped for a two-year term.

In defiance of smoking bans recently imposed in EU buildings, Juncker granted himself the right to puff during euro policy discussions -- his unique privilege, a nicotine-free fellow finance minister once groused.

Spokesman’s Role

His main public role amid the European market turmoil has been chief spokesman, a task that clashed with his desire to conceal market-sensitive information and his temper after round- the-clock conferences.

Juncker’s covert streak was at work on May 6, 2011, when he issued a denial -- which soon emerged as untrue -- of an emergency meeting on Greece he was hosting at a secluded Luxembourg chateau. Eleven days later, the overt Juncker floated -- in breach of a promise to fellow ministers -- the “soft restructuring” of Greek bonds.

The irritable Juncker was at work when he abruptly canceled a post-meeting briefing on March 30, 2012, after learning that his Austrian counterpart, Maria Fekter, had already divulged the decision to cap new rescue lending at 500 billion euros ($668 billion). Fekter subsequently apologized.

“He certainly was not the leader that we needed to do crisis management,” said Paul De Grauwe, a professor at the London School of Economics.

Full Juncker

All of his facets were on display in last November’s press conference after the euro panel failed to nail down the new Greek package in talks with Lagarde, a past and present rival. As French finance minister in 2010, Lagarde was in the mix for the euro group job; now, as IMF managing director, she was pressing European governments to absorb more of Greece’s debt.

Instead, the freelancing Juncker said, the Europeans wanted to delay the deadline for bringing down Greece’s debt to a “sustainable” level by two years to 2022.

“Zweitausendzweiundzwanzig,” he said, giving the new date in German in a translator-free press room. “That was not a joke.”

Lagarde, unamused, responded: “We clearly have different views.” The deal with the IMF to keep Greece solvent took two more weeks. By then, pressure was mounting to accelerate the departure of Juncker, who was talking about giving up the euro post sometime in 2013.

Candidate Shortage

The problem was the shortage of eligible candidates.

Finance ministers from the four, and soon to be five, countries in aid programs were ruled out at the start. Belgium and Luxembourg had recently gotten central bank posts and were out too. Italy already has the top job at the ECB and Finland the European Commission’s economics portfolio.

Finance chiefs from two eastern countries, Estonia and Slovakia, were too far from the center of the policy making universe. Slovenia is teetering on the edge of a bank-aid program. A German or French chairman wouldn’t have sat well with smaller countries.

Enter Dijsselbloem, 46, with a background in farming, fishing, and education and youth issues. The transition from one of Europe’s most senior to one of its most junior political figures followed the process-of-elimination principle that often governs high-level European appointments: the Dutchman was the only remaining viable candidate.

Inexperience

Handing off to the most callow of euro finance ministers was facilitated by two factors overcoming Dijsselbloem’s inexperience: he hails from one of the euro area’s five remaining top-rated countries, and the Netherlands hadn’t gotten a plum European post since Neelie Kroes was made antitrust chief in 2004.

“One would hope that he really succeeds in making sure that Europe speaks with one voice, and imposes a greater discipline,” said Alessandro Leipold, a former IMF official who is now chief economist of the Brussels-based Lisbon Council, an independent research group.

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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