December 6, 2010 5:49 am

The judges’ verdicts

Marco Annunziata

Marco Annunziata, chief economist, UniCredit

In a year defined by the eurozone sovereign debt crisis, for me the best minister was George Papaconstantinou, who underwent a trial by fire as Greece came to the brink of default and became the first member of the monetary union to be saved by the International Monetary Fund. He has proved remarkably effective at navigating treacherous European Union politics, securing domestic acceptance of unprecedented austerity measures and rebuilding some measure of investor confidence – almost impossible tasks.

Brian Lenihan of Ireland did all he could but eventually succumbed to the magnitude of the problems in his country’s banking sector.

In Spain, Elena Salgado made an important contribution, abandoning denial and blaming of speculators in favour of pushing for fiscal consolidation and some labour market reforms, which she marketed very effectively.

Anders Borg has made Sweden the poster child for fiscal prudence, as healthy fiscal balances have helped make his economy one of Europe’s fastest growing.

Sadly, some of the most visible and active ministers played a negative role. Germany’s Wolfgang Schäuble has pressed forcefully for a sovereign debt restructuring framework in a way that often ended up fanning the flames of the crisis. Luxembourg’s Jean-Claude Juncker has employed simplistic anti-investor rhetoric.

Robert Bergqvist

Robert Bergqvist, chief economist, SEB Group

In 2010, the sense of common purpose among finance ministers waned and tensions between nations intensified – at the global level as well as within Europe.

In Europe, most countries had failed to focus on running budget surpluses when growth was strong. Public debt ratios are still rising rapidly in many of the continent’s economies. The job of finance ministers now is to stop them growing and to reduce them to more sustainable levels. But will politicians be able to implement the measures needed? Will people accept their decisions, and interference in domestic policies by other countries?

For me, Anders Borg receives the highest score. Sweden’s economy is expected to grow by 5 per cent this year; government debt is only 40 per cent of gross domestic product – and falling. His contribution was to manage public finances carefully – and credibly – during the crisis. He also launched reforms of the labour market and the supply side of the economy. The country’s strong balance sheet and its management of its 1990s banking crisis gave the minister a disproportionately strong global voice. But Sweden’s current strength, and indirectly the success of Mr Borg, is based on the economic policies implemented by Göran Persson, who held the post in the mid-1990s.

Jacques Delpla

Jacques Delpla, member of the Conseil d’Analyse Economique, Paris

In my view, the worst minister is Ireland’s Brian Lenihan. He took the decision to guarantee his country’s banks in September 2010 without thinking through the consequences. The effects of that decision on the country’s finances have become evident this year.

Portugal’s Fernando Teixeira dos Santos and Spain’s Elena Salgado introduced positive reforms but overall remained too timid in restructuring their economies and putting the state on a sustainable debt path.

On the other hand, three bold and inventive finance ministers stand out. The best is Greece’s George Papaconstantinou. He has undertaken more budget and structural reforms than any European Union country ever. While this may not prove to be enough to avoid a sovereign debt restructuring, he deserves credit .

The second is Germany’s Wolfgang Schäuble. He pushed to allow a possible debt restructuring for European sovereign bonds. He has also overseen reforms that will allow his country’s banking regulator to impose debt-for-equity swaps (including for senior bondholders) on failing banks in order to avoid future public bail-outs.

The third is the UK’s George Osborne. He has implemented a bold fiscal consolidation but, unlike Mr Schäuble, has been shy in reforming the banking system.

Michael Heise

Michael Heise, chief economist and head of corporate development, Allianz

There is no real lodestar this year. Nonetheless, I take my hat off to Greece’s George Papaconstantinou for his sterling efforts to tackle the fiscal mess he inherited. He emerges as my winner. More power to his αγκώνας (elbow).

This has been another annus pretty horribilis for the ministers. But after some hesitation – particularly by Germany – policymakers again rose to the occasion with a €750bn backstop fund agreed in May. The set-up averted the immediate crisis and soothed market nerves – at least for a while. In autumn, however, the sovereign debt crisis flared up again, with Ireland and Portugal caught in the spotlight.

In late October, finance ministers and their bosses fended off attempts by the European Commission to take control of sanctions on fiscal miscreants. The European Union’s fiscal rules were tightened but the levers were left in the hands of the politicians. But the decision to establish a permanent crisis resolution mechanism spooked the bond markets, forcing finance ministers to clarify that “haircuts” would not apply yesterday or today but only from 2013.

As the year draws to a close the euro crisis has come back to the boil. Finance ministers may be wondering how many rocks and hard places await them next year.

Gilles Moec

Gilles Moec, European economist, Deutsche Bank

European governments spent this year trying to deal with systemic problems in the financial sector while at the same time attempting to fix, under severe market pressure, structural flaws in the single currency. Strong leadership was needed, which has put the finance ministers of the biggest member states in the spotlight. Sensitivity to market reaction and a knack for quick decision-making were qualities much in demand. We gave a premium to those who took a leading role in shaping the European response to the sovereign crisis by helping to find a compromise between restoring fiscal soundness in the medium term while swiftly fleshing out emergency measures that have finally brought about financial solidarity mechanisms in Europe.

Finance ministers in peripheral countries being targeted by the markets – such as Portugal, Ireland, Greece and Spain – were faced with very different issues from those in relatively sheltered core economies. For the peripherals, the ranking was based on the capacity to endorse extremely unpopular measures and to act pre-emptively. Ultimately whether or nor public finances were effectively brought under control, irrespective of the degree of courage shown in the process of trying, is the litmus test.

Erik Nielsen

Erik Nielsen, chief European economist, Goldman Sachs

My vote for finance minister of the year goes to Greece’s George Papaconstantinou, with the UK’s George Osborne and France’s Christine Lagarde as close runners-up.

Admiration for Mr Papaconstantinou should be seen in light of the challenges he inherited when he took over last year. I give him credit for working through the complex details and designing what was realistically the best attempt possible to address his country’s weaknesses through policy reforms – though credit is due also to the advisory role played by European Commission and International Monetary Fund staff. Mr Papaconstantinou also deserves credit for his influence in pushing through extremely difficult reforms at home in the face of sceptical factions inside his own party and an increasingly hostile opposition.

I see Mr Osborne as a very close runner-up, primarily because of his lucidity and the domestic influence that enabled him to enact a tough but necessary fiscal adjustment programme.

I also see Christine Lagarde as a close runner-up – mainly for the star quality that continues to allow her to outshine European (and global) colleagues. I admire her lucidity, but wonder at times about her interaction with her German counterpart. Domestically, she often appears overshadowed by the presidential staff.

peter vanden houte

Peter Vanden Houte, chief eurozone economist, ING

If there is one lesson European finance ministers learnt in 2010, it is that the crisis is not over until it is over. While the mood was good at the start of the year, politicians rapidly lost their grip on the decision-making process. Indeed, financial markets forced the ministers of peripheral countries to address their budgetary situation much more swiftly and dramatically than they had initially envisaged.

The Greek crisis also showed that it is dangerous to bicker when the house is on fire. Germany’s Wolfgang Schäuble helped delay the operation to save Greece, making things even worse. On the other hand, his approach was well received at home. Moreover, Berlin was quick to decide on austerity measures, setting an example for the rest of Europe.

While both France and Germany pushed for a European approach in financial market reform, it was Didier Reynders of Belgium who scored points internationally by brokering several important deals between the European Parliament and European Union governments. As part of an outgoing government with limited responsibilities, he was helped by his domestic situation.

Few ministers of finance will look back on 2010 with nostalgia. If anything, 2011 is unlikely to be much better. On the agenda are difficult changes to EU treaties, and markets remain vulnerable to bouts of unrest.

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