Finance Minister Paschal Donohoe pulled off a coup on Monday as the first foreign visitor to meet German Federal Finance Minister Christian Lindner.
The new German tripartite coalition is led by Social Democratic Chancellor (SPD) Olaf Scholz, former counterpart to Mr Donohoe as Minister of Finance.
Meeting Mr Lindner, leader of the Liberal Democratic Party (FDP), was an opportunity for Mr Donohoe to probe how much – or how little – reform ambitions euro members can expect from Berlin’s new administration in the post-pandemic era.
In a joint press briefing ahead of the talks, Donohoe set the bar high, predicting that Lindner would bring “a tremendous level of commitment, energy and expertise.” . . well the passion ”.
It drew a nod of approval from Mr Lindner, who turned 43 last Friday. As he listened, his worried eyes scanned the small gathering, his left hand moving in and out of his pants pocket.
He nodded again in approval when Mr Donohoe promised, as Eurogroup leader, to bring members back to sustainable public finances in a post-pandemic era.
This greener, more digital future was a place, said Donohoe, “where the contribution of the private sector – and not just the role of public capital – is crucial to enable us to achieve this ambition.”
The Irish visitor, after effectively citing the Liberal finance minister as one of the priorities of his own coalition, suggested that an ideal way to achieve this would be to complete the banking union.
It was designed a decade ago in response to the financial crisis and the euro crisis, and Germany has consistently refused to complete the banking union proposal for a common deposit insurance system for the eurozone. Berlin fears that German savers will rebel against the prospect of being responsible for the savings – and the debts – of other people’s banks.
The new government is still opposed to common deposit insurance but is open to the idea of a “reinsurance” system, with contributions linked to the risk levels of the banking sector in each member state. Indeed, according to German officials, the other banks of a member state of the euro zone would bail out the savers of a national competitor before triggering the fund at the level of the euro.
“We are open to progress, but we also need to make progress on other aspects,” Lindner said of the banking union.
Speaking later, Mr Donohoe said he was convinced that Berlin sees how a completed banking union can help unlock private finance to, in turn, finance a model of green transformation of industrialized economies – made in Europe. .
Germany’s reinsurance proposal to break the banking union deadlock could, he said, provide “a good basis for engagement” with other countries.
“An agreement on the banking union will be extremely difficult,” he said in Berlin. “But we will get this deal, the will is there.”
After talks with German Economy Minister Robert Habeck, the co-leader of the Greens, as well as opposition MPs, Mr. Donohoe had a private dinner with Mr. Lindner at the residence of the Ambassador of ‘Ireland.
Many Eurogroup colleagues, hoping for greater flexibility from Berlin, hope that Mr. Donohoe will be able to convince the new Minister of Finance to show the same pragmatism at the euro level that he is already showing at home.
At lunchtime on Monday, a Bundestag committee heard legal and economic arguments for and against Lindner’s plan to reallocate € 60 billion in pandemic aid to finance climate-friendly investments.
Looking at it, the Die Welt daily suggested on Monday that no one should underestimate Mr Lindner’s political flexibility. He’s only been in the job for a few weeks and that suggests he’s already gone from a free market hawk to a Houdini track record with a sideline as a green investment guru.
“This one-man show,” Die Welt snorted, “is one of the most remarkable political achievements of the recent past.”
After his meetings, Mr Donohoe declined to question whether he thought Berlin could – as Paris and others hope – make permanent the single Next Generation Europe Covid-19 recovery fund, co-funded directly by the ‘EU, and worth 750 €. billion.
“I think it’s reasonable to say, before you start thinking beyond the stimulus fund, that all effort should be put into its implementation,” he said.