New Eurozone chief at the helm, Cyprus' crisis tops agenda

Dijsselbloem: "austerity and balanced books are important"

22 January, 13:13

(ANSAmed) - BRUSSELS, JANUARY 22 - Jeroen Dijsselbloem, a previously unknown unknown Dutchman with no economic experience but with the type of clear ideas that Germany likes, has replaced Jean Claude Juncker as the new leader of the Eurogroup.

"Austerity and balanced books are what's important because they bring growth", Dijsselbloem said. The first Eurogroup meeting of the year brings up a raft of new issues: a change of leadership; fresh crisis in a southern European country; the fragile possibility of an ESM rescue that allows banks to recapitaize directly, sidestepping the state, and Europe's level of solidity. THE EUROGROUP CHIEF Key points at the top of Dijsselbloem's agenda include, "completing banking mergers, continuing a strategy of consolidation and creating employment." Only Spain voted against Dijsselbloem's appointment while he is a favorite of Germany. Dijsselbloem has no longterm economic or ministerial experience but has been Head of Finance in the Netherlands since last November, and prior to that was a Labour Party spokesman for education. Germany likes him because he tends to agree with their economic polices, in particular on austerity.

"I believe that austerity and balanced budgets are important for the future because they mean more investment and growth. But the road is long and hard", Dijsselbloem said at his first post-meeting press conference.

CYPRUS The Eurozone's ability to respond to crises is under the spotlight once again as Cyprus' debt spirals higher than Greece's.

Cyprus asked for a bail-out several months ago, although a decision isn't likely before the March 1, after the presidential elections. Europe is holding back until it has seen a privatization plan that the current president refuses to submit.

It also suspects that aid could end up in Cypriot banks suspected of concealing shady Russian capital.

As with Greece, Germany is dragging its heels. It wants a task force to investigate possible fraud, and for Russia to shoulder its part of the debt. BANKING AID Recapitalizing banks direct from the ESM rescue fund is a critical decision in the making. The EU promised that once a system of banking supervision was underway banks could sidestep the state - and avoiding burdening it with further debt, by approaching the ESM directly. The decision is being awaited eagerly by Spain, who has already asked for aid, as well as Ireland and Portugal.

But Germany, the Netherlands and Finland want to postpone any decisions until 2014 when the system of banking supervision comes into play. "We still need to discuss things at a technical level", Juncker said, who believes there won't be any progress before June. (ANSAMed)

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