Portugal Is Pushing for Top Job at Europe’s Expanded Bailout Fund

(Bloomberg) -- Portugal wants to increase its clout in Europe by taking over the helm of the euro area’s 500 billion-euro ($525 billion) bailout fund, a major creditor to the country during the financial crisis.

The government in Lisbon is campaigning hard for Joao Leao, a former finance minister, to replace Klaus Regling as head of the European Stability Mechanism, according to people familiar with the matter, who asked not to be identified discussing confidential information.

Luxembourg’s former finance minister Pierre Gramegna, Menno Snel, a former state secretary for finance from the Netherlands, and Italy’s Marco Buti, an experienced senior EU official, were also nominated by their respective nations on Monday.

Paschal Donohoe, the president of the Eurogroup, said in a statement that the currency bloc’s finance ministers will discuss Regling’s successor at a meeting May 23. They will confirm their choice June 16 in their capacity as ESM board members, before Regling steps down in October.

In 2011, Portugal became one of the first countries to request financial aid from the ESM’s predecessor, the European Financial Stability Fund. Lisbon was offered 78 billion euros, of which 26 billion euros came from the EFSF.

Greece, Ireland, Cyprus and Spain also asked for assistance after the euro area set up its bailout tool to contain the fallout of the financial crisis.

The Portuguese government will start repaying the principal of its loan from 2025 under the mandate of the new chief of the ESM, which will also have expanded powers.

Euro-area finance ministers agreed in early 2021 to turn the ESM into the backstop of the Single Resolution Fund to resolve failing banks. In addition, the institution will also have a bigger say in designing future bailout programs, including by assessing a country’s ability to repay their loans.

Italy still needs to ratify the revised ESM treaty before it enters into force, while Germany needs the validation of its constitutional court before completing the ratification process.

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