Luxembourg's Jean-Claude Juncker takes the helm of the 12-nation eurogroup this week aiming to tighten management of Europe's single currency, but the task is clouded by its record exchange market surge.
In particular Juncker faces the daunting challenge of hammering out agreement on revising the European Union (EU)'s Stability and Growth Pact, the tattered budget rule book which underpins the euro.
Juncker, his country's prime minister and finance minister and Europe's longest-serving leader, is well-known for his negotiating skills, but even he may struggle to secure compromise between widely divergent interests.
"The Union lacks economic governance," said Juncker, when he was chosen in September for a newly-created job as head of the eurogroup, the informal gathering of finance ministers of the 12 EU countries which share the euro.
Until now the eurogroup, which meets every month, has been chaired by whichever country holds the rotating EU six-month presidency.
From January 1 the group's presidency will run for two years, in a move aimed at giving a more stable political rudder to help the European Central Bank (ECB) steer policy on the euro.
But Juncker's room for maneuvre is limited by what agreement he can muster from his colleagues. Meanwhile he faces an ECB which jealously guards its independent role in setting monetary policy for the six-year-old currency.
The Luxembourg leader has been careful to avoid treading on the Frankfurt-based bank's toes.
"I intend never to answer questions about euro exchange rates or the possibility of interventions" on the market," he said last week. "I will listen politely and kindly to these questions, and I will never answer them."
Juncker insists his immediate priorities lie elsewhere: in particular reforming the 1997 Stability Pact, whose rules are currently being broken by around half of the eurozone states.
The key challenge will be to forge a compromise between differing views, in principle ahead of the EU's traditional March economic summit.
"There are three positions" on how the budget rules should be revised, said EU monetary affairs commissioner Joaquin Almunia last week.
One group -- including notably Austria and the ECB -- opposes any change; a second bloc including Italy, France and German wants a radical revision; while a third group -- most eurozone states -- wants a moderate reform of the rules.
Juncker has made it clear that he is opposed to major reform, notably a proposal by the EU heavyweights to remove certain spending from the calculation of key figures, including deficit which must not exceed 3.0 percent of GDP.
His aim is to allow the pact -- famously described as "stupid" by former EU commission chief Romano Prodi -- to take more account of economic realities -- for example slowdowns -- in mulling disciplinary action.
"The pact is not stupid, but it will be rendered more intelligent," Juncker said just before Christmas.
Ahead of taking up his new job Juncker has rebuffed the title of "Mr Euro" -- ECB head Jean-Claude Trichet has made it clear that that job description is his own.
But Juncker -- who will henceforth have a non-voting seat on the ECB's governing board as well as at meeings of the Group of Seven (G7) richest countries -- is determined to strengthen coordination with Trichet.
The eurogroup and the ECB have already taken steps to speak with one voice: at recent meetings they have issued joint statements expressing concern about the rise of the euro.
Unfortunately these have had little impact: the euro rose to new heights above 1.36 US dollars in thin trading in Europe over the festive period.
By: N. Peter Kramer
