MNI: Spanish Eurogroup Bid Undermined By BBVA, NATO - Sources

A Spanish-led bid to oust Irish Finance Minister Paschal Donohoe from the chairmanship of the Eurogroup of eurozone finance ministers seems to have fizzled out, as Spain’s European standing has been hit by domestic scandal, a frustrated banking merger and its reluctance to boost defence spending, officials in Brussels told MNI.

Spanish Finance Minister Carlos Cuerpo had been seen as a heavyweight challenger to Donohoe for some time following determined lobbying by Madrid, but sources now doubt that he will throw his hat into the ring to succeed Donohoe. A corruption scandal has raised doubts over the political survival of Prime Minister Pedro Sanchez, and Cuerpo would be a candidate to succeed him as caretaker PM in the event he resigns, officials said.

At the same time, the chances of a Spanish candidate beating Donohoe, who is bidding for a third term, have been seriously compromised by unhappiness with Madrid’s decision to block BBVA from merging with rival Banco Sabadell for at least three years, which deals a blow to progress on European banking union, officials said. In addition, Spanish defiance of calls to sign up to for a new NATO commitment to boost defence spending to 5% of GDP by 2035 has been taken as a lack of solidarity with other member states. (See MNI: Joint Europe Defence Funding In EC Budget Talks-Officials)

Until recently, the Socialist Cuerpo had been seen as a strong competitor for the post of Eurogroup chief, and his chances had been given a further boost by a non-paper issued by the euro area's big five countries last week, calling for more focused and tightly managed agendas and meetings of the body. 

DONOHOE BACKERS

The non-paper tapped into a sense among some officials that Eurogroup deliberations have been allowed to go on for too long and have strayed from the core mandate of coordinating national fiscal and economic policies as well as advancing key integration projects like banking union and capital markets union. 

Other sources though defend Donohoe's stewardship, pointing out that a sequence of non-eurozone EU presidencies, the latest being that of Poland, have made it harder to contain talks within the euro-20. New issues, like defence and competitiveness, have also made it harder to demarcate discussions between Eurogroup and the ECOFIN which brings together all 27 EU state finance ministers. 

EU countries have until Friday afternoon to submit candidates' names but the decision of conservative European People’s Party leader Manfred Weber and Donohoe's fellow EPP-affiliated finance ministers to back him for a third term now look like putting him in a secure position, sources say. 

"Donohoe now has a comfortable majority," said an EU source close to the race.

The election will take place at the July 7 Eurogroup meeting where each of the euro area finance ministers can cast one vote if a vote is needed.