EU Powers Suffer Shock Defeat as Irish Take Key Finance Job

Erwin Oropesa

(Bloomberg) — The euro region’s smallest nations staged an uprising to put one of their own in charge of finance ministers’ meetings and strike a blow against the bloc’s major powers.

Ireland’s Paschal Donohoe won a secret ballot of 19 colleagues Thursday to become president of the Eurogroup, defeating the Spanish favorite, Nadia Calvino, who was backed by the European Union’s four biggest economies.

Germany, France, Italy and particularly Spain were angered by a loss that they failed to see coming, said one official with knowledge of the process. Smaller countries from eastern Europe said they felt that in backing Donohoe they were supporting one of their own, said another.

The fact that both leading candidates came from countries that were bailed out during the sovereign debt crisis is a sign that the EU is ready to turn the page on the divisions of the austerity years. Yet the small countries’ revolt is all the same an ominous statement of intent ahead of summit talks next week where Germany and France are trying to win backing for a massive stimulus package to revive the economy after the coronavirus.

“We need an understanding for the positions of small and medium-sized economies,” said Gernot Bluemel, the Austrian finance minister. “Ireland has pursued a disciplined reform agenda in recent years and knows the challenges and requirements of the European aid mechanisms.”

While the result is a sign of the unease in much of the EU at what are seen as strong-arm tactics from the big countries, it’s also testament to the charm of a 45-year-old Dubliner who positioned himself as a bridge builder who could span the divide between the fiscally conservative northern nations and southern governments hardest hit by the pandemic.

“It’s an interesting coalition you managed to pull together,” the former Irish prime minister and now enterprise minister, Leo Varadkar, told Donohoe at a press conference in Dublin.

Donohoe’s relaxed, personable qualities were present from his earliest days as finance minister in 2017.

He was looking after his children at the family’s redbrick home in north Dublin when two senior officials turned up with the paperwork for the sale of a government stake in AIB Group Plc.

With the Irish taxpayer set for a windfall of 3 billion euros ($3.4 billion), Donohoe told his aides to get a photo of the signing so that he could post it on social media. But when he looked at the picture, he decided that his garb of shorts and a hoodie didn’t quite strike the right tone.

The picture never did see the light of day.

“People like Paschal, regardless of rank,” said Feargal Purcell, a director at public relations firm Edelman who grew to know Donohoe well when he was a government spokesman. “He’s that irresistible combination of intelligence and likeability, a man who smiles and delivers.”

Blue-Collar Votes

It’s been a swift rise for Donohoe, who was first elected to the Irish parliament in 2011. A member of the center-right Fine Gael party, he has since held his seat in the mainly blue-collar area where Mary Lou McDonald, leader of the left wing group Sinn Fein, also has her constituency. As he campaigned for his colleagues’ votes, he told them that background had gotten him used to cut-throat electoral fights.

Donohoe has consistently preached of the need for fiscal discipline, while also endorsing southern Europe’s push for the mutualization of debt during the coronavirus crisis. He’s gone along with international efforts to overhaul the global corporate tax system, while remaining adamant that smaller countries in the bloc need the right to set their own tax rates.

His ascent is also testament to Ireland’s success in building alliances with other like-minded EU nations such as the Baltic and Benelux countries in the wake of the U.K.’s exit from the bloc. Former Irish central bank governor Philip Lane is now the European Central Bank’s chief economist. Former government minister Phil Hogan holds the pivotal job of European Trade Commissioner.

‘Teak Tough’

At the same time, Donohoe is a skilled political operator willing to take tough decisions. As transport minister in 2015, he pushed ahead with the sale of Aer Lingus Group Plc to IAG SA in the face of union opposition and concern it may cost his party votes in his north Dublin district, where many of the airline’s workers lived.

He’s faced down bankers in their quest to win the return of bonuses, banned after the state bailouts and on a recent call with business leaders, he reproached one prominent figure, who had used a high-profile radio slot to call for a cut in sales tax, according to a person who was on the call.

The chief executive would have been better advised to use the time to reassure customers on the safety of his reopened business, Donohoe told him, saying he had heard his tax pitch before.

“People know he’s teak tough,” said Purcell. “And he’s not finished yet.”

(Updates with Varadkar comment in seventh paragraph)

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