Spain’s former economy minister, Luis De Guindos, is set to become the next vice-president of the European Central Bank this coming June. Following the endorsement of the Eurogroup last month, the ECB stated on March 7 that it had no objections to the selection of Luis De Guindos as vice-president. This makes it all but certain that EU leaders will rubber-stamp De Guindos’ appointment at next week’s summit.
The Spanish Government’s aggressive lobbying for De Guindos’ appointment is a clear sign that the country is eager to return from the fringes of EU policy making. Since the financial crisis, Spain has maintained a low-profile on the EU stage, focusing instead on domestic challenges. With unemployment falling and the economy expanding, Spanish Prime Minister Mariano Rajoy has started to flex his diplomatic muscle.
At last October’s EU Summit, Rajoy enthusiastically backed Macron’s call for EU reforms. Specifically, he called for closer military cooperation, vigorous screening of foreign investments, and tougher anti-dumping duties. He also called for greater fiscal governance of the Eurozone, supporting proposals like the introduction of eurobonds, an anti-crisis budget, and a common employment insurance scheme.
How does Spain plan on accomplishing these goals? De Guindos wielded considerable influence and respect in Brussels as economy minister. His move to Frankfurt means that the Spanish Government will need to work ever harder to bring other countries on board with its vision. Therefore, it is no surprise that the prime minister chose vice-president of the European Investment Bank (EIB), Roman Escolano, as Spain’s new economy minister.
Not only is Escolano no stranger to European institutions, he’s also gone on record to support greater European integration. In an interview this past January with Bloomberg he said, “it’s very important to consolidate the shift in tone in Europe… The advances we could see in the coming months in the European framework could be very good and we all trust they will be.” This gusto for EU reform aligns perfectly with Rajoy’s ambitions and will ensure that the government strikes both a credible and consistent tone in Brussels. It should be noted that Escolano will also continue his role as vice-president of the EIB, allowing Spain to continue exercising clout in that EU institution as well.
De Guindos’ appointment is increased evidence of southern Europe’s wider resurgence. Last December, Mário Centeno, Portugal’s finance minister, became president of the Eurogroup. It is hard to believe that just a few years ago these two countries were seen as outcasts in the eyes of economic policymakers. Since then, Portugal and Spain have managed to enact necessary reforms to revitalize their economies and both are expected to bring their deficits below the 3% EU maximum this year. All things considered, it appears that southern Europe has regained macroeconomic credibility and is now in a position to exert greater influence over EU institutions.
What does De Guindos’ move to the ECB mean for the bank? He has an impressive resume, having worked for Lehman Brothers and PWC before becoming economy minister, although he lacks monetary policy experience, which is a crucial element of his next role. It’s also unusual for a minister to transition directly from government to a role at the ECB, thus his unique background makes it a bit more difficult to predict how he will shape the bank’s policy. On the one hand, he oversaw an austerity program in Spain, which could suggest he’ll strike a more conservative tone on the ECB board. However, De Guindos has also expressed his support for the ECB’s bond buying program. Speaking to the European Parliament’s Committee on Economic Affairs in February, he said “my impression is that the approach pursued by the ECB so far has been the correct one”.
De Guindos’ election to the ECB vice-presidency strengthens the perception of Spain as Europe’s comeback kid. However, it is still possible that domestic challenges and opposition within the EU could curtail Rajoy’s broader ambitions. Even so, this appointment has made one thing very clear – southern Europe has rehabilitated its economic reputation and is eager to make its voice heard again.