Klaus Regling

Peter Spiegel

Regling, right, with European Central Bank president Mario Draghi at a press conference

Klaus Regling has been the head of the eurozone’s rescue funds – first the temporary European Financial Stability Facility, now the permanent European Stability Mechanism – since the outset of the debt crisis, a perch that has given him a unique insight into the five years of occasionally contentious deliberations over the bloc’s five bailouts: Greece, Ireland, Portugal, Spain and Cyprus.

But as the EFSF turned into the ESM, and as the €500bn ESM gained staff and authority, Regling’s own role in eurozone debates has grown – particularly on the issue of Greek debt, where he has been a frequent and outspoken critic of the argument, made both in Athens and by the International Monetary Fund, that the heavy debt burden is what ails the Greek economy.

Two years ago, in an interview with our friends and rivals at the Wall Street Journal, Regling in essence sounded the death knell for a November 2012 deal where eurozone governments had promised debt relief for Athens as long as it achieved a primary budget surplus – something it achieved by the end of 2013. As Regling predicted, the eurozone did not restructure Greece’s debts despite Athens living up to its side of the 2012 agreement and posting a surplus.

In an interview this week with the Financial Times, Regling has done something similar. As part of July’s controversial €86bn bailout deal, creditors again held out the promise of debt relief. And Regling is now suggesting that even if it does occur, a restructuring will not be on the scale Athens and the IMF had been arguing for just four months ago.

Our story on the Regling interview is here, but as is our practice at the Brussels Blog, we’re offering an annotated (and slightly edited for length) transcript for readers who want to hear more from Regling below. Read more

Peter Spiegel

Eurogroup contenders Juncker, left, and Schäuble

Although the financial markets and many non-Europeans will be watching Friday’s gathering of eurozone finance ministers in Copenhagen to find out how much they will enlarge Europe’s rescue fund, the Brussels echo chamber will be watching for another reason entirely: Just who will be getting three top jobs that must be filled by the time summer rolls around?

Up until the last day or two, the smart money was that Yves Mersch, head of Luxembourg’s central bank, would get the first job on offer – a coveted seat on the European Central Bank’s six-member executive board, taking away a post originally slated to go to a Spaniard, Antonio Sáinz de Vicuña.

But senior eurozone officials said the intense politicking that has occurred in the run up to Friday’s meeting has made Mersch’s appointment less certain. “It’s one of those things that could go one way or another,” said one person directly involved in the talks. “I wouldn’t bank on it yet.”

The politics get very complicated and are directly related to the re-election prospects of French president Nicolas Sarkozy. A detailed explanation of the convoluted twists after the jump… Read more

Peter Spiegel

Following the hugely successful auction of Irish bail-out bonds Tuesday, Klaus Regling, head of the eurozone agency that raised the cash, said the offering “confirms confidence in the strategy adopted to restore financial stability in the euro area”. But is that really what investors were telling us?

To be sure, the first-ever use of the eurozone’s €440bn rescue fund, the European Financial Stability Facility, was an unmitigated victory for Regling and his nascent organisation – though, let’s remember, that the agency which actually did the heavy lifting was Germany’s debt agency, which is rather experienced in such auctions.

And investors would not have flocked to the issue – some €44.5bn in orders came in for a €5bn offering – if the markets thought the euro was about to implode.

But as my London-based colleague and sovereign debt savant David Oakley quoted one fund manager saying: “We are buyers of this bond because it is very safe and offers extra yield over German Bunds.” Which seems to be the prime motivator here. Read more