Paris, Berlin look to shake up euro zone leadership

France and Germany have thrown their weight behind creating a permanent president for economic policy in the euro zone, a role that would mark a fundamental overhaul of how the currency bloc is managed.

Their backing calls into question the performance of Dutch Finance Minister Jeroen Dijsselbloem, who was appointed chairman of the Eurogroup of finance ministers of the 17-nation currency area in January, to serve initially for 2-1/2 years.

Dijsselbloem, who succeeded Luxembourg Prime Minister Jean-Claude Juncker, has unsettled financial markets since taking office, especially with comments about Cyprus and how bank depositors could finance future bailouts.

Those views, while supported by some at the European Central Bank and the European Commission, have irked other officials in Paris, Berlin and Brussels.

At a meeting in Paris on Thursday, President Francois Hollande and Chancellor Angela Merkel agreed to propose to fellow leaders appointing a permanent Eurogroup head, which France has long favored.

"A full-time president of the Eurogroup with reinforced powers, including the possibility of delegating power to other euro zone ministers," their joint "contribution" to next month's EU summit said under the heading "Reinforcing euro zone governance and legitimacy".

Merkel's spokesman said the aim was to create a position with a much more dedicated focus on euro zone issues.

"It should not be a euro zone finance minister but a president whose job would be to coordinate work intensively," said Steffen Seibert. "It will be a very demanding job."

The Franco-German document said the proposal should be implemented within two years. It also said euro zone leaders should hold more frequent summits than the two annual sessions they already have and be able to instruct specialist ministers of the euro zone to work more closely on issues such as employment, social affairs, research and industry.

Both moves could widen the gap between a euro zone core and other member states of the European Union that are not in the single currency, and put national governments rather than the European Commission in the driver's seat.

When he was appointed, Dijsselbloem, 47, had only been a minister for a couple of months and had little experience of finance. But he was seen as the best of those available from among the 17 ministers that sit in the Eurogroup.

His style has been remarkably different to Juncker's, who held the job for nearly 8 years and was accustomed to the backroom dealing of European Union politics. Juncker once said that "when it becomes serious, you have to lie".

TOO OPEN?

Dijsselbloem, on the other hand, has been all about telling it straight, but his openness, especially over Cyprus, is what has most unsettled markets and put EU leaders on edge.

"He has not covered himself in glory," said one French policymaker after Dijsselbloem told Reuters in an interview that unsecured bank deposits could be used to bail out banks in future rescues, in much the same way as in Cyprus.

"As (former French President) Jacques Chirac would have said, he missed a good opportunity to shut up."

Speaking on a visit to Greece, Dijsselbloem said the euro zone did not need a permanent Eurogroup chief now, but the question could be revisited in late 2014.

"The Eurogroup is now functioning under my presidency and I will be happy to do that at least until the end of 2014," he told reporters in Athens, adding that he did not feel insulted.

Dutch Prime Minister Mark Rutte was more dismissive.

"The risk of a permanent chair of the Eurogroup is that it will become a political position and it will create more inter-institutional competition between the European states," Rutte told reporters. "We are strong supporters of its independence. The current construction is the one we prefer."

If a permanent president were to be established it would likely require a change to the EU treaty, which will only come in time, suggesting that even if the idea does gain momentum, Dijsselbloem will see out his 2-1/2-year term.

A German official, who requested anonymity, denied that the plan to create a permanent Eurogroup president reflected any dissatisfaction with the work of Dijsselbloem. He indicated that Berlin had changed its mind about the role itself.

"It's no secret that we've had our doubts about the idea of a permanent president but that was mainly because we didn't want a figurehead with no resources at their disposal," he said. "Now this post has been given the resources, so we can support it."

The official said creating a permanent Eurogroup chief and dedicated euro-area structures within the European Parliament, as proposed in the Franco-German paper, might require amending the EU treaty.

"I'm not saying it will but we can't rule that out," he said. The "contribution" did not mention treaty change.

One of the benefits of having a permanent president is that the job would be based in Brussels with its own secretariat and would not be answerable to one national parliament.

As it stands, Dijsselbloem has to brief the Dutch parliament before every meeting of the Eurogroup, an obligation that can limit the privacy and scope of Eurogroup discussions. Juncker was not so beholden to Luxembourg's parliament.

Also, Dijsselbloem's communications staff are all based in The Hague, which can make it difficult to coordinate the policy message with officials in Brussels.

"The most important thing for a chairman of the Eurogroup is that he discusses issues in his group - when you do it in public it could be that doors get closed very rapidly," said a senior EU official involved in deciding on the position.

"It is the end of the debate when you are very open or candid."

(Additional reporting by Stephen Brown and Noah Barkin in Berlin and Paul Taylor and Mark John in Paris; Writing by Luke Baker; Editing by Paul Taylor)