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Economy

Spaniard set to become Eurogroup chief

Luis de Guindos is Spain's economy minister. The 54-year-old is considered to be the architect behind the cleaning up of the country's banks. He is now expected to become president of the Eurogroup.

"I already have a job thank you very much. Actually I have two and I am actually liking the combinations and that's all I can say . . . what the future may bring - we will wait and see," the current head of the Eurogroup Jeroen Dijsselbloem said recently, referring to the positions he holds in The Hague and Brussels. He was answering to questions on whether he would take up a position at the European Commission (EC).

Although Dijsselbloem hasn't quit his post to switch to the European Union executive, his tenure as the head of the informal body that brings together the finance ministers of eurozone countries will come to an end in early 2015.

Spanish Economy Minister Luis de Guindos is now set to succeed Dijsselbloem. During a visit to Spain on Monday, August 25, German Chancellor Angela Merkel officially endorsed de Guindos for the position. It would be the first time that a non-finance minister will hold this office.

De Guindos is set to become a full-time president of the Eurogroup. The position has so far been a second job, often carried out in the evenings, which does not reflect the significance of the group, many experts say.

The group's head deals with requests for assistance from countries affected by the economic crisis. Dijsselbloems's predecessor Jean-Claude Juncker spent days talking on the phone to prevent Greece from a disastrous financial crash.

Spain aims to boost recovery with €6.3bn stimulus package

In addition, the head of the Eurogroup also leads the Board of Governors of the Luxembourg-based eurozone's bailout fund, the European Stability Mechanism (ESM). The powerful financial institution currently has around 80 billion euros in paid-in capital and is a firewall for the eurozone nations against future financial crises.

A reformist?

The 54-year-old de Guindos, who has been Spain's economy minister since 2011, is credited with reforming the country's banking sector, which was brought to its knees by the housing crisis. Many ailing financial institutions were nationalized and restructured.

However, the cleaning up of banks and the associated costs to taxpayers, which ran into the billions, has been controversial in Spain. De Guindos, however, has always countered criticism by arguing that the collapse of banks would have had much worse consequences.

Spain, meanwhile, has exited the EU bailout program, which propped up the nation's banks with a 41-billion euro shot in the arm. Madrid also repaid 1.3 billion euros at the beginning of June, even though repayments on the rescue funds were not due until 2022.

The economy has also been growing at a better rate than expected, with the government projecting a 1.2-percent expansion for this year. In 2015, it estimates an even higher rate of 1.8 percent. Despite the positive developments, the country is still plagued by high unemployment and increasing government debt.

A man with a past

De Guindos' appointment as economy minister in 2011 by conservative Prime Minister Mariano Rajoy was met with plenty of sarcasm, as he worked for the collapsed US bank Lehman Brothers between 2006 and 2008. Now, of all people, he was expected to lead Spain out of its worst economic crisis and solve the country's unemployment and debt problems.

At the end of 2008, de Guindos joined the auditing firm PricewaterhouseCoopers (PwC) and two years later, he took over as the head of a finance research center set up by PwC at the IE Business School in Madrid. Analysts say that in this period, he became one of the leading economic policy thinkers among Spanish conservatives.

Athe beginning of his career, he worked as secretary of state for economic affairs. During that time, he started to establish a network in Brussels which could come in handy now.

Good reputation


The economy minister also has a good reputation abroad. German Finance Minister Wolfgang Schäuble praised de Guindos as an "outstanding economy and finance minister." In its efforts to overcome the crisis, Schäuble believes, Spain is on the path to success.

The "sound fiscal policy" and the reforms introduced by de Guindos have led to greater confidence over Spain's economy among members of the Eurogroup. Even Spain's Prime Minister Rajoy will welcome if de Guindos takes on more responsibilities. Rajoy praised his economy minister's "excellent work" in Spain and Europe, according to the Internet portal ABC.es.

Spanien Immobilienkrise Geisterstadt Valdeluz Archiv 2011 - A view of the deserted town Ciudad Valdeluz, near Yebes, Guadalajara province, Spain on March 25, 2011. Valdeluz is probably the starkest example of the spanish property crash. Originally intended to be home to 30,000 people, this new city, 60km from Madrid, currently has only 400 residents. Final building work in the city was halted in the summer of 2008, when the national economy started to slow in response to the global crisis. As yet there has been no date set for the resumption of work, leaving about 75% of the city unfinished. Photo by Mario Fourmy/ABACAPRESS.COM

Valdeluz, a ghost town: a result of the real estate bust

De Guindos' future task will be much more demanding. On the one hand, the president of the Eurogroup has to prevent a divide between crisis-hit and thriving countries. On the other hand, he has to be tough on fiscal failings. Moreover, his public statements are closely monitored by investors and can have a significant impact on the financial markets.

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