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Eurogroup dispute suggests Coalition switchover in December will be rocky

It’s conceivable that Donohoe could stay on as head of EU group even if he’s not finance minister but the row has hurt relations between FF and FG

Taoiseach Micheál Martin with Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath. The forthcoming Cabinet reshuffle is already creating difficulties between Fianna Fáil and Fine Gael. Photograph: Nick Bradshaw
Taoiseach Micheál Martin with Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath. The forthcoming Cabinet reshuffle is already creating difficulties between Fianna Fáil and Fine Gael. Photograph: Nick Bradshaw
Pat Leahy's picture
Pat Leahy
Sat Sept 17 2022 - 01:00

The discord behind the scenes between Fianna Fáil and Fine Gael over the future of the Department of Finance, and the current Minister Paschal Donohoe’s role as president of the Eurogroup, does not bode well for a smooth changeover in the Taoiseach’s office and the associated changes in the Coalition due in December.

Fianna Fáilers are adamant that Donohoe cannot retain the finance portfolio, arguing that the reason why the switchover in the department agreed when the Government was formed was to the preserve the “balance” between the most powerful jobs in the Cabinet.

They also say that Minister for Public Expenditure Michael McGrath, who is expected to trade places with Donohoe, could not be expected to give up the seat at the Eurogroup to enable his colleague to stay on as Ireland’s representative – a point McGrath himself made when asked about the matter at the Fianna Fáil think-in this week.

These are not unreasonable points.

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But so, too, is the case to leave Donohoe in the European role. It is a highly influential position, with access to the highest decision-making levels of the EU. Donohoe attends at least part of the European Council meetings with all the heads of the EU’s governments. He also attends meetings of the G7, the group of the world’s most advanced democratic economies, access that he has used to cultivate relationships with some of the most powerful people around.

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The benefits to Ireland are not just intangible. The agreement of a deal on an international minimum corporation tax rate last year on terms that were favourable to the State was directly related to Donohoe’s access to, and lobbying of, senior international decision-makers, especially the US treasury secretary Janet Yellen, with whom Donohoe has struck up a warm friendship. This is how politics works.

Indeed, the Eurogroup finance ministers are expected to meet Yellen in Washington next month when they are in the US capital for International Monetary Fund and World Bank meetings. Such high-level access is valued immensely by politicians, especially in Washington, where US figures – because so many countries are vying for their time and attention – tend to be rigidly hierarchical. One official recalls seeking a meeting for an Irish minister with their US counterpart and getting an audience with his third-in-command.

Meanwhile, it is the clash of domestic political imperatives and a clear national interest that make the problem so politically tricky. And as often happens, lots of people in the two parties are more intent on blaming each other rather than solving the problem.

Precedent

But as Irish Times Europe Correspondent Naomi O’Leary pointed out in a report this week, there is a precedent which could suggest a solution. The former prime minister of Luxembourg, Jean-Claude Juncker, also held the finance portfolio in his country’s government and headed the Eurogroup from 2005 to 2013. Juncker ceased to be the Luxembourg finance minister in 2009 (becoming treasury minister, as well as prime minister) but remained as head of the Eurogroup while his successor as finance minister also attended the meetings.

The article governing the Eurogroup in the treaties simply says that the members should elect a president of the group, it does not state that the president must be a finance minister.

It is not without difficulty, sources say. There would need to be clarity about who speaks for Ireland; and any member state could object to the plan. But despite its position in the treaties, the Eurogroup is an informal body and can largely make up its own rules. The legal position, sources say, is ambiguous and it is more of a political decision. One well-informed Brussels source is sceptical about it as a way forward.

Eurogroup president and Minister for Finance Paschal Donohoe speaks with colleagues at a meeting of the European Council in Brussels in July. He could lose his presidency if he has to step down as finance minister. Photograph: Stephanie Lecocq/EPA/Shutterstock
Eurogroup president and Minister for Finance Paschal Donohoe speaks with colleagues at a meeting of the European Council in Brussels in July. He could lose his presidency if he has to step down as finance minister. Photograph: Stephanie Lecocq/EPA/Shutterstock

But it’s hard to see a domestic solution. As far as Fianna Fáil are concerned, there is a way to preserve Ireland’s interests, and it is now up to Donohoe to pursue that. They will not, sources say, reopen the Coalition agreement at this stage.

Across Government, however, there is dismay about how the affair has been handled and the obvious divisions that it has caused between the parties. Senior figures in Fine Gael and Fianna Fáil have complained that the question of the Eurogroup was not settled quietly before it became a cause of public dispute between the parties.

It was hardly unforeseeable and has been the subject of speculation in Government circles for some months; The Irish Times first wrote about the issue at the start of the summer. And jockeying publicly for jobs is not a good look for any politician.

Fianna Fáil sources are privately critical of Tánaiste Leo Varadkar’s handling of the issue, especially how he has spoken publicly about it before private conclusions have been reached. So are some people in Fine Gael, citing it as evidence that he and Donohoe are no longer, perhaps, as close as they once were.

Fine Gaelers, for their part, wonder why Fianna Fáil cannot see the national interest at play here. Officials who are neutral wonder if the relationship between Donohoe and McGrath – which is vital for the functioning of the Coalition – will be damaged by the episode.

Reshuffle discussions

Officials also fret about what the difficulties over the Eurogroup issue say about the forthcoming changes in Government. On December 15th, Micheál Martin will resign as Taoiseach (meaning that constitutionally, all Ministers are deemed to have resigned) and be replaced by Varadkar, who will appoint a new Cabinet, based on agreement with Martin.

Recent events do not suggest that the process will be smooth, either in its public-facing parts, or in the private discussions that precede it. And it is worth remembering that such a switchover has never been attempted before as part of a coalition administration. Discussion over the reshuffle is already a daily feature of Government life. After the budget on September 27th, that will only intensify.

Leaders hate reshuffles because they end up displeasing many more people than they please. The ranks of the disappointed who do not secure ministerial jobs will always be vocal. As a consequence, cabinet selection and reselection are usually last-minute, cobbled-together affairs that inevitably turn into political controversies. The events of recent weeks suggest that Martin and Varadkar might be wise to prepare rather more carefully for the switchover in three months time.