ATHENS — The country that almost got kicked out of the eurozone is now running the powerful EU body that rescued it from bankruptcy. Greece’s finance minister, Kyriakos Pierrakakis, on Thursday beat Belgian Deputy Prime Minister Vincent Van Peteghem in a two-horse race for the Eurogroup presidency. Although an informal forum for eurozone finance ministers, the post has proved pivotal in overcoming crises — notably the sovereign debt crisis, which resulted in three bailouts of the Greek government. That was 10 years ago, when Pierrakakis’ predecessor described the Eurogroup as a place fit only for psychopaths. Today, Athens presents itself as a poster child of fiscal prudence after dramatically reducing its debt pile to around 147 percent of its economic output — albeit still the highest tally in the eurozone. “My generation was shaped by an existential crisis that revealed the power of resilience, the cost of complacency, the necessity of reform, and the strategic importance of European solidarity,” Pierrakakis wrote in his motivational letter for the job. “Our story is not only national; it is deeply European.” Few diplomats initially expected the 42-year-old computer scientist and political economist to win the race to lead the Eurogroup after incumbent Paschal Donohoe’s shock resignation last month. Belgium’s Van Peteghem could boast more experience and held a great deal of respect within the eurozone, setting him up as the early favorite to win. But Belgium’s continued reluctance to back the European Commission’s bid to use the cash value of frozen Russian assets to finance a €165 billion reparations loan to Ukraine ultimately contributed to Van Peteghem’s defeat. NOT TYPICAL Pierrakakis isn’t a typical member of the center-right ruling New Democracy party, which belongs to the European People’s Party. His political background is a socialist one, having served as an advisor to the centre-left PASOK party from 2009, when Greece plunged into financial crisis. He was even one of the Greek technocrats negotiating with the country’s creditors. The Harvard and MIT graduate joined New Democracy to support Prime Minister Kyriakos Mitsotakis’ bid for the party leadership in 2015, because he felt that they shared a political vision. Pierrakakis got his big political break when New Democracy won the national election in 2019, after four years of serving as a director of the research and policy institute diaNEOsis. He was named minister of digital governance, overseeing Greece’s efforts to modernize the country’s creaking bureaucracy, adopting digital solutions for everything from Cabinet meetings to medical prescriptions. Those efforts made him one of the most popular ministers in the Greek cabinet — so much so that Pierrakakis is often touted as Mitsotakis’ likely successor for the party leadership in the Greek press. Few diplomats initially expected the 42-year-old computer scientist and political economist to win the race to lead the Eurogroup after incumbent Paschal Donohoe’s shock resignation last month. | Nicolas Economou/Getty Images After the re-election of New Democracy in 2023, Pierrakakis took over the Education Ministry, where he backed controversial legislation that paved the way for the establishment of private universities in Greece. A Cabinet reshuffle in March placed him within the finance ministry, where he has sped up plans to pay down Greece’s debt to creditors and pledged to bring the country’s debt below 120 percent of GDP before 2030.

Mario Draghi has a message to the EU’s leaders: I did my bit, now you do yours. Member countries had praised his proposals for fixing the bloc’s sagging economy when he delivered them. One year on, they’re still dragging their feet on actually following the advice — and Draghi is taking on the role of agitator. Europe has introduced few of the recommendations from his European Commission-backed plan to boost competitiveness, which includes continental-scale investments in infrastructure, a revamped energy grid providing affordable power to industry, coordinated military procurement to wean the bloc off of U.S. arms, and a unified financial sector that can pour capital into EU tech startups. Only last month, Draghi warned that governments must make “the massive investments needed in the future,” and “must do it not when circumstances have become unsustainable, but now, when we still have the power to shape our future.” DRAGGING IT OUT   It’s not the first time that the ex-European Central Bank chief has issued dire warnings on Europe’s dimming prospects. When he first presented his report in Brussels, Draghi spoke of the “slow agony” of decline. At the time, EU leaders across the political spectrum heaped praise on the MIT-trained economist’s reforming vision.  French President Emmanuel Macron said that Europe needed to “rush” to deliver the Draghi agenda. Spanish Prime Minister Pedro Sánchez threw his weight behind the reforms to avoid what he called the risk of falling behind in the most “cutting-edge technological sectors.” Even Germany’s Friedrich Merz, who disagrees with Draghi on the key issue of joint EU debt, parroted the economist when he said that Germany would “do whatever it takes” to shore up its defense sector — a reference to Draghi’s now-famous dictum on the eurozone crisis. But while leaders say they agree on the need for a more cohesive EU, behind the scenes the reform agenda is stalling. “The Draghi report has become the economic doctrine of the EU, and everything we’ve proposed since has been aligned with it,” Stéphane Séjourné, the Commission executive vice president charged with industrial strategy, told POLITICO. Still, he admitted that the “’Draghi effect’ too often fades when legislative texts are discussed by member states.”    A report by the European Policy Innovation Council think tank found that only 11 percent of the Draghi report had been acted on. In the field of energy, no actions have been completed at all. “It’s national interests, it’s national policies, sometimes it’s party political,” said MEP Anna Stürgkh, who recently authored a European Parliament study on the electricity grid. Speaking at an event about the Draghi report one year on, the Austrian Renew Europe lawmaker explained that it often came down to individual countries not wanting to share cheap energy with their neighbors.  In the field of energy, no actions have been completed at all. | Hannibal Hanschke/EPA “If they interconnect with countries that have higher energy prices, their prices will go up,” she said. “That is a fact.”  “It’s not the Commission which is not doing the banking union,” Spanish economist and former MEP Luis Garicano said at the same event, referencing the push to break down the thicket of national rules and vested interests that keeps the banking sector fragmented and country-specific. “It’s the governments that don’t actually want to allow the capital to flow from one country to the next.”  That same parochialism comes up again and again, from common debt — vetoed by so-called frugal countries like Germany and the Netherlands — to defense or to financial sector integration. It doesn’t help that countries are tightening their belts after the Covid-era spending splurge, leaving little money to pursue strategic aims. THE BULLY PULPIT    Draghi is a man used to wielding power directly, having injected hundreds of billions of euros into the eurozone economy during his tenure as ECB president. Earlier this decade he served over a year and a half as the prime minister of Italy.  In his latest incarnation as Europe’s Jiminy Cricket — the unheeded moral advisor — Draghi only has persuasion at his disposal. If on the one hand the frantic pace of events has drawn attention and bureaucratic resources away from the reform program, it’s also served as a powerful validation of his thesis. Draghi has long been a proponent of pooled sovereignty — which is to say that the EU’s member countries are more powerful when they act as a bloc, even if they lose some freedom at the national level. The problem is that it’s up to governments to decide to act. By February, Draghi was already chiding governments for putting the brakes on meaningful change during an appearance in front of the European Parliament. “You say no to public debt, you say no to the single market, you say no to create the capital market union. You can’t say no to everybody [and] everything,” he said. Now, as an intransigent U.S. embarrasses Europe on the world stage, Draghi has warned the window for change may be closing. The way that President Donald Trump got the better of EU negotiators, who were under pressure from capitals to come to a deal, was a case in point.  This was a “very brutal wake-up call,” Draghi warned at a meeting in the Italian seaside town of Rimini last month.  “We had to resign ourselves to tariffs imposed by our largest trading partner and long-standing ally, the United States,” he said. “We have been pushed by the same ally to increase military spending, a decision we might have had to make anyway — but in ways that probably do not reflect Europe’s interests.” The Secretariat-General, which reports to President Ursula von der Leyen, has set up a special unit to work on it. | Jessica Lee/EPA EYES ON BRUSSELS If Draghi is the brain that dreamed up the EU’s economic reform program, then the Commission’s bureaucrats are the hands charged with implementing it. The Secretariat-General, which reports to President Ursula von der Leyen, has set up a special unit to work on it. It’s headed by Heinz Jansen, a German official previously in the Economic Affairs Directorate, and eight staff in total. Critics argue this is a paltry number of staff to be attached to the task force, and that the EU executive could have set up a dedicated directorate. “The president attaches great importance to the implementation of the Competitiveness Compass,” a Commission spokesperson told POLITICO, referring to the EU executive’s plans to implement Draghi’s recommendations. According to officials who spoke with POLITICO, the task force mainly works on delivering wins on the ground, pooling funds and channeling them into a handful of core projects that might give Europe a shot at competing with the U.S. and China technologically. The Commission merged several programs into a new €410 billion fund to finance common industrial aims in its budget proposal, and is issuing a recommendation to governments to coordinate their investments this fall. But here, too, that will inevitably trigger tensions. “Can you really imagine a big EU country funding an industrial plant in Slovenia with its own taxpayers’ money?” asked one EU official. “There is a lack of ambition … the EU executive is taken hostage by some big countries.” “For years, the European Union believed that its economic size, with 450 million consumers, brought with it geopolitical power and influence in international trade relations,” Draghi said. “This year will be remembered as the year in which this illusion evaporated.” Jacopo Barigazzi and Nicholas Vinocur contributed reporting to the article.

Mujtaba Rahman is the head of Eurasia Group’s Europe practice. He tweets at @Mij_Europe. In January, the European Commission unveiled a sweeping new strategy to help the EU remain competitive. It was a move that underscored growing worries over the widening innovation and productivity gaps between Europe and its global rivals, and was in direct response to intensifying global competition, stagnant growth, weak demographics and new headwinds from high energy costs, security risks and trade policies. But while political progress to date suggests the EU is still falling far short in closing its competitiveness gap with the U.S. and China, it’s also wrong to conclude that the entire “Draghi” agenda is blocked. Indeed, there are bright spots to be found, including the EU’s efforts to cut red tape, the improving outlook for European defense funding and the consolidation of the bloc’s defense-industrial base. In other areas of the agenda, however — such as deepening banking and capital markets integration or improving the continent’s tech ecosystem — progress remains lackluster. So, let’s take a closer look. First, the biggest advances made so far are in the area of defense. Brussels has now relaxed its fiscal rules to allow countries to spend 6 percent of GDP over 4 years on defense, and for this not to count against their deficits. EU leaders have also agreed to a €150 billion loan facility that will enable member countries with less fiscal space to benefit from cheaper Commission borrowing from capital markets, which will then be passed onto them as loans. The EU has taken formal steps to encourage joint procurement of defense equipment and to prioritize local suppliers as well. And there was, of course, a big fiscal move from Germany, which ditched its debt brake, allowing for unlimited borrowing outside the regular budget beyond 1 percent of GDP, as well as the €500 billion special vehicle meant for infrastructure. The problem, however, is that a very large number of member countries don’t have the fiscal room to ramp up defense spending — certainly not to reach the 5 percent target — unless the EU agrees to more common financing, as it did with Covid-19 and the NextGenerationEU facility. And this depends on Germany leveraging its economy to the benefit of Europe. If Europe really is going to deliver Pan-European defense public goods — such as integrated air defense; a European satellite, intelligence and drone program; and other so-called “European strategic enablers” — it’s going to need common borrowing to do it. Meanwhile, another key priority in Brussels has been reducing administrative barriers for businesses, and EU governments are likely to make significant gains in this area. The Commission has already presented two draft “omnibus” packages to cut red tape, focusing on sustainability, corporate due diligence and investment. The aim? Reducing the regulatory burden without altering the overall direction of sustainability policies. More such bills are now expected on defense, digital, mid-caps and sustainable finance. And the Commission has also adopted a “one in, one out” principle for new administrative requirements, aiming to help further reduce the regulatory burden. This imperative is as political as it is economic, as this agenda is essential to keeping center-right parties on board in both the European Parliament and the European Council. The EU has taken formal steps to encourage joint procurement of defense equipment and to prioritize local suppliers as well. | Oliver Hoslet/EPA Unfortunately, however, this is where much of the good news ends. When it comes to efforts on integrating capital markets, for example — which is a big agenda item — the political obstacles remain formidable. Even though the Commission has presented its latest strategy for greater integration of the EU’s banking sector and capital markets, member countries continue to resist the harmonization of corporate and foreclosure laws, tax regimes, pension systems, and market supervision and infrastructure. And when it comes to the EU’s tech and digital ecosystem — another big ticket item — the bloc still continues to face structural barriers in closing the gap with Silicon Valley, which retains its advantage with European startups hungry for funding and talent. This situation is unlikely to be addressed without the closer integration of EU capital markets. And while the Commission unveiled an ambitious “AI continent” strategy in April, substantive legislative initiatives will take time. Overall, tech is essential to the wider strategy’s success, yet it still accounts for most of Europe’s productivity gap with the U.S., and progress has been too slow. There are other things EU leaders can do in the meantime, however. For example, with the U.S. and the EU now striking a deal on tariffs, Washington’s haphazard approach should revitalize the bloc’s wider trade agenda. The EU-Canada trade deal is a great start in this direction. But the agreement is still in what’s known as “provisional implementation,” which 10 EU member countries have to ratify. And without full ratification, the investment parts of the deal can’t take effect. If successful, the EU-Latin America trade deal, Mercosur, would be an even bigger prize here. Currently, France remains the deal’s biggest antagonist since the country has concerns over agricultural “dumping.” However, Brussels is now trying to negotiate safeguards to satisfy the political concern in Paris that a deal done over French President Emmanuel Macron’s head would invite the far right to power in 2027. Finally, another test on trade will be Brussels’s ability to finalize deals with countries in the Gulf and Asia-Pacific — including India and Australia. The hope with these deals isn’t just to unlock greater market access but also to secure supply chains, while looking to revamp Europe’s industries. U.S. President Donald Trump’s return to the White House has created the potential for a real economic revival in the EU — and the answers are all in Draghi’s report. But even though some progress is being made, EU leaders still need to do more to grasp the nettle and really bolster the continent’s growth prospects.

BRUSSELS — The EU’s top banking cop says he’s “frustrated” by a domestic mindset that’s preventing cross-border banking mergers and undermining dreams of a united European financial sector. José Manuel Campa, chair of the Paris-based European Banking Authority, said he “would like to see more transactions that have a cross-border nature in their economic logic,” but that “we don’t see enough” now. “I feel frustrated because I continue to see domestic mergers with a domestic logic, not single-market mergers,” Campa told POLITICO in an interview. The creation of big pan-European banks is seen as key to creating a unified EU financial system that is open and deep enough to compete with the likes of the United States. But national capitals have repeatedly undermined this push. EU bodies have squared off against governments in recent months over politically motivated moves to block banking tie-ups. The European Commission is investigating Spain and Italy’s interference in big domestic banking mergers as it grows impatient with what it sees as unjustified attempts to block deals already approved by antitrust regulators. Meanwhile, Germany is trying to block Italian lender UniCredit’s takeover bid for the German Commerzbank, in a move the Commission’s outgoing competition chief described as “difficult to accept.” Governments may block banking marriages that they see as a threat to local interests, or to stave off another country’s influence over a national banking champion. But the EU executive, and Campa, want bigger, more efficient banks to help restore Europe’s competitiveness and foster a true single market for banking in the bloc. “The crucial issue is the single market — having a developed single market in the EU,” Campa said. “Being better means taking advantage of the single market.” KEEP IT SIMPLE The EU banking industry has been pushing for simpler rules and lighter capital requirements in recent months, particularly as the U.S. and U.K. pause or lighten their own standards for the sector. Campa said the EBA is “not in favor of deregulation” as “the existing rules have served us well,” with a resilient and profitable banking industry seeing high returns on equity. Germany is trying to block Italian lender UniCredit’s takeover bid for the German Commerzbank, in a move the Commission’s outgoing competition chief described as “difficult to accept.” | Ronald Wittek/EPA But the EU “can build better rules under the logic of the single market,” including completing the bloc’s banking union, he said. One source of complexity that is slowing progress toward a single market for banking in the bloc is the persistence of “home-host issues” — the question of whether banks should be overseen or hold regulatory capital at the level of their group’s headquarters, or throughout all of their subsidiaries. With 21 countries in the EU’s banking union, it’s a fraught issue, with countries with big domestic banking players preferring a lighter approach, while smaller countries that host subsidiaries of big foreign banks would rather lenders hold more capital in their jurisdictions. Fostering a more effective single market for banking would necessitate breaking down those barriers, Campa said. “There are things that we can do … but that requires a significant political consensus because those rules are there for a reason; home-host issues are there for a reason.” The EU’s latest update to bank capital rules, known as Basel 3, applies requirements at the level of individual entities and the consolidated group, as it was politically untenable to find a more simple way of implementing the reforms — a decision Campa said “leads to excess requirements.” The most recent piece of banking legislation negotiated in Brussels, a joint crisis management plan for mid-sized banks, ended up as “an effort in complexity” rather than “an effort in simplification” because political wrangling resulted in a very complex text, Campa said. In those negotiations, countries resisted a move to ease access to EU crisis funds for failing mid-sized banks, meaning that the political deal on the rules imposed myriad conditions for lenders to be able to tap the funds in a crisis. As for banks’ regulatory capital buffers — the cash they’re mandated to hold against risk to avoid future taxpayer bailouts if they fail — Campa said they are “complex in Europe because we have many authorities making decisions,” and that it would be “good to try to clarify” how buffers are set. “The EU system is very complex. It’s not about whether the level of requirements is high or low. It’s just that there are so many different buffers … and they’re set by different institutions. That just leads to complexity and to lack of clarity,” Campa said.

BRUSSELS — The European Commission has issued a legal warning to Spain saying it violated European Union banking and single market rules by intervening in banking giant BBVA’s hostile takeover of local Spanish rival Banco Sabadell earlier this year. The infringement notice, made public on Thursday, reflects Brussels’ growing frustration with what it sees as vested interests of national governments getting in the way of European banking consolidation. This month it also intervened in the Italian government’s imposition of conditions on UniCredit’s bid for Milanese banking rival BPM. The moves suggests the EU executive is taking a more muscular approach to mergers that are blocked for reasons other than financial stability and fair competition. “Consolidations in the banking sector benefit the EU economy as a whole and are essential for the achievement of the Banking Union,” the EU executive said in a statement announcing the action. Last month the Spanish government imposed stringent conditions on the tie-up between the two banks, which had previously been approved by the European Central Bank and the national competition authority. The Commission’s complaint is that the Spanish government does not have the authority to block the merger, as only the ECB’s supervisory arm has the power to do this for banks of BBVA and Sabadell’s size under the EU’s Single Supervisory Mechanism Regulation. It also complains that Spain is creating a barrier to the single market by stopping the tie-up, and that discretionary powers given to the country’s economy minister to block banking deals under the country’s rollout of the EU’s Capital Requirements Directive were misused. The Commission’s competition department is not involved in the action. Formally, a procedure under the EU’s Merger Regulation, which sits within DG COMP’s powers, would not have been possible as the two banks aren’t large enough in the market. But the new move, coming proactively from the Commission’s financial services department in response to an anonymous complaint, could create a rift within the Berlaymont if financial services commissioner Maria Luís Albuquerque is seen to be encroaching on competition commissioner Teresa Ribera’s turf.  BRUSSELS VS NATIONAL CAPITALS The Commission has been in talks with Spain over the case since last year. After the complaint, the Spanish government will have two months to respond. After that, the Commission can challenge the Spanish government at the EU’s top court, in a procedure which could last years and result in major fines. There are other fact-finding Commission conversations taking place, on EU bank mergers, but these conversations are not public. The preliminary talks, known as “pilot procedures,” represent the step before a formal infringement procedure. A similar “pilot procedure” is ongoing with Italy — which used national security provisions to intervene in a domestic banking merger, UniCredit-BPM. The Commission is currently examining Italy’s response to its questions within the EU Pilot, a spokesperson said in an emailed statement. Earlier this week the Commission sent a letter of concerns to Italy warning that it may have violated the bloc’s merger rules with its UniCredit-BPM decision. If the Commission chooses to challenge national blocks of bank mergers more frequently, it would be a direct challenge to governments, who keep their national champions on a tight leash. The German government intervened extensively to prevent a merger between its lender Commerzbank and Italian bank Unicredit, although it did not formally block it.    The Spanish economy ministry said it has received the letter and will “continue to cooperate constructively” with the Commission — although it noted that the laws in question, which include the discretionary powers for the economy minister, “have been in force for quite some years.”

MILAN — On a Friday morning under the boiling Lombard sun, the old men of Italian banking descended on the country’s financial capital to bask in their industry’s astonishing recent run of success. But the avuncular embraces over sugared breakfast treats gave way to nervous gossiping when the time came to discuss — sotto voce — the latest twists and turns in a high-stakes game of ‘Risk’ that continues to convulse this tight-knit family of financial elites — and now threatens a protracted conflict between Brussels and Rome. Over the past six months, the Italian banking sector has been consumed by a convoluted series of bids and counter-bids involving almost every major player in the country. Recently, the drama has veered toward a climactic denouement as a seemingly heavy-handed response from Rome toward one takeover bid in particular set off a conflagration between the Italian government and the European Commission, exposing their contradictory visions for Europe’s financial future. It began last year, when Milanese banking giant UniCredit angered Prime Minister Giorgia Meloni’s government by attempting to take over crosstown rival BPM, which Meloni had hoped to merge with the partially bailed-out Tuscan lender Monte dei Paschi di Siena. In response, Rome deployed screening tools known as the ‘golden power’ — whose purpose is to prevent malicious foreign investment — to impose tough conditions on the bid, which UniCredit claims has effectively blocked it, prompting a court battle that unfolded earlier this week. But more broadly, Rome’s strong-arming has also come into conflict with the grand industrial vision of the Commission, which has placed consolidating Europe’s still-fragmented banking market at the center of Europe’s new — and what it describes as an increasingly urgent — competitiveness drive. Commission officials are readying a warning to the Italian government on its misuse of golden power to hamper UniCredit’s bid for BPM. At the annual assembly of the Association of Italian Banks (ABI) on Thursday, those tensions played out in real-time between financial officials and their industry counterparts — albeit in muted form. On the surface, it was more like an infrequent gathering of a fractious family that wants to keep up appearances over festivities, and there was no explicit mention of the drama in public comments. But on the industry and regulatory side, the speeches contained barely concealed paeans to free-market capitalism and the virtue of unmolested free markets. ABI Chairman Antonio Patuelli, a spry veteran of the scene, emphasized the importance of advancing the European banking union, calling for “common rules for corporate governance, markets, savings and investment.” In a conspicuous swipe at the Italian government — and its controversial alignment with construction billionaire Francesco Gaetano Caltagirone — he added that “competition must always be developed and safeguarded,” and that banks and “non-traditional financial actors … must be subject to the same rules.” But Italian officials painted a different picture, arguing that the EU and those sympathetic to its supranational vision of European industry misunderstand what Italy is doing. The government has already signaled in a recent court hearing that it will fight its doubters to the last, even through the European Court of Justice. Speaking to POLITICO, one Treasury official said Rome’s interventions into UniCredit’s adventures were a genuine matter of national security, as important as boosting defense spending. But as Italian Finance Minister Giancarlo Giorgetti told the ABI attendees, the banks’ pronounced growth has come at the expense of much of their regional character. | Riccardo Antimiani/EPA To him, it’s the EU being heavy-handed, not Rome. “The Italian people elected a sovereigntist government, why are people surprised when we do sovereigntist things?” the person said. Much of the concern over UniCredit’s move stems from broader discontent in Italy over the way its banks have failed to translate whopping gains into tangible benefits for average Italians. After teetering on the edge of cataclysm during the global financial crisis, Italian banks pulled off a dramatic turnaround, bolstering their capital and reducing their holdings of bad debt. But as Italian Finance Minister Giancarlo Giorgetti told the ABI attendees, the banks’ pronounced growth has come at the expense of much of their regional character. “The organizational, income and capital strengthening of Italian banks over the last 15 years has not always translated into more favorable credit conditions but rather into a reduction in lending to businesses,” he said. He highlighted that the “exceptional returns” to shareholders — with UniCredit hitting record profits in the first quarter of 2025 thanks to a major boost from high interest rates — “were made possible thanks to public guarantees… So it is legitimate to ask whether we’re witnessing an excess of ‘financialization.'” There are good reasons for the government to be concerned. Italy, which after Greece has the highest debt in the EU as a proportion of GDP,  is sensitive to large moves involving holders of its sovereign debt. Meanwhile, the country’s countless small and medium-sized enterprises, which make up a major part of the government’s electoral base, are reliant on the kind of easy credit access that BPM — a bank with strong ties to Northern Italy — might be less inclined to give if subsumed into the more international UniCredit. To others, Europe’s ambition to rival the United States on the financial stage might run counter to the more narrow interests of Rome and — more importantly — the Italian people. “The European Union doesn’t understand,” said one Italian regulatory official, speaking on condition of anonymity. “We’re dwarves, and we’ll never seriously compete with the U.S.” Giorgetti himself said much the same, calling on the nation’s banks to “focus as much as possible on doing their part: going back to being banks.” Francesca Micheletti contributed to this report.

BRUSSELS ― Carlos Cuerpo wants eurozone members to wake up and lead Europe to financial union. The 44-year-old Spanish economy minister — who on Friday entered the race to head up the powerful group of eurozone countries known as the Eurogroup — is calling for a major shake-up of a body he says has become all talk and no action. “Going forward, the Eurogroup should be more about decisions,” Cuerpo, a socialist, said in an interview with POLITICO, where he outlined his proposal for sweeping changes to the body. Cuerpo argued that groups of countries ― as opposed to all the EU’s 27 states ― should lead the way to integrate Europe’s financial markets, a long-held ambition in Brussels that has repeatedly struggled to get off the ground. “If you cannot go in terms of reducing fragmentation from 27 to one, you might have to go in different steps and reduce the fragmentation by putting groups of countries together.” This is a major rupture from the incumbent Eurogroup President Paschal Donohoe, whom critics accuse of prioritizing broad consensus over actual decisions in his two terms in office. To everyone’s surprise, in October, Cuerpo launched a “coalition of the willing” ― known as the European Competitiveness Lab ― to finally make progress on a decades-old project to create U.S.-style financial markets in Europe. The EU’s biggest countries ― Germany, France, Italy, Poland, Luxembourg, the Netherlands and Spain ― have signed up to the initiative, boosting Cuerpo’s leadership credentials. He said he will empower this scheme if he’s elected as Eurogroup president. “I expect that all 27 member states would be members of the competitiveness lab at some point.” The Spaniard, however, faces an uphill battle to defeat Donohoe in next Monday’s secret vote by the eurozone’s 20 finance ministers. While many officials praised Cuerpo’s soft skills and “encyclopedic knowledge” of the European economy, others feel alienated by his more radical ideas, such as doubling the size of the EU budget or issuing common debt for defense. Donohoe is the odds-on favorite to secure a third term as he hails from the powerful center-right European People’s Party and appeals to small countries who will tip the balance of the election. Lithuanian socialist Finance Minister Rimantas Šadžius, is unlikely to make it past the first round of voting, according to several officials. | Oliver Hoslet/EPA The third candidate, Lithuanian socialist Finance Minister Rimantas Šadžius, is unlikely to make it past the first round of voting, according to several officials with knowledge of the voting procedures. A simple majority — 11 votes — is necessary to be elected as president. THE EUROGROUP’S MIDLIFE CRISIS The Eurogroup is a club of 20 eurozone ministers who meet every month to coordinate economic policy. During its heyday, it steered the eurozone through the rumble-tumble of the sovereign debt crisis, but lost influence as the euro area stabilized and a more inclusive EU-wide group of 27 finance ministers gained power. The Eurogroup has become a “bland working group” or a “think tank,” according to two EU diplomats, who, like others in the story, were granted anonymity to speak freely. A group of countries — including Spain — have questioned the usefulness of holding monthly meetings in Brussels in an informal report that was seen as mildly critical toward Donohoe’s presidency. Faced with this criticism, Cuerpo said he wants to breathe new life into stalled Eurogroup projects such as creating an EU-wide financial and banking union and strengthening the role of the euro. “We need to be very efficient in coming up with deliverables, otherwise we might be late to the party,” compared to other foreign countries. “Eurogroup needs to have a voice for these new times that actually requires us to face new challenges and call for a revamped Eurogroup.” THE ITALIAN VETO One of the thorniest issues is Italy’s veto over a plan to use money from the European Stability Mechanism — a bailout fund for countries introduced during the eurozone crisis — to rescue failing banks. Populist parties in Italy oppose ratifying the reform over the ESM’s lingering association with strict bailout conditions during the eurozone meltdown. Rome, however, is open to using these funds to provide cheap loans for defense — something that Cuerpo has endorsed in the past. In a sign of détente, Cuerpo said that “we have to help Italy help us on this [ratifying the ESM],” although he shied away from questions on using these funds for defense. “[We need] to provide the right narrative, which is sometimes also an important element around how the ESM can help us going forward in these new challenges as well.” This story has been updated to reflect Carlos Cuerpo’s formal job title as minister of economy, trade and business.

BRUSSELS — Politicians might talk big about breaking down the national barriers that stop Europe competing with the U.S. and China, but everywhere you look they’re doing their best to keep the ones they think matter. Take the EU’s Banking Union project, which first saw the light 15 years ago when the eurozone debt crisis nearly took the financial system down along with the single currency. Regulators have been pleading for years to let a fragmented banking market consolidate and create the kind of continent-wide institutions that can mobilize the vast sums needed to revive a stagnant economy.  But national capitals continue to hobble any deal they see as a threat to local interests — so much so that the European Commission is now investigating Spain and Italy’s interference with big domestic banking mergers. It’s increasingly impatient with what it sees as unjustified attempts to block deals that antitrust regulators have already blessed. In Spain, the government of Socialist Pedro Sánchez has imposed new conditions on Banco Bilbao Vizcaya Argentaria’s €12 billion hostile takeover bid for Catalonia’s Banco Sabadell, an extra layer of scrutiny that is only used in exceptional cases. BBVA swallowed hard and said on Monday that it will proceed with the deal, even though the government won’t let it absorb Sabadell fully for at least three years.  That deal had already been approved by Spain’s national competition authority, while the Bank of Spain recommended the deal to the European Central Bank, which is the direct supervisor of both banks.   “There is no basis to stop an operation based on a discretionary decision by a member state government” when the takeover has been cleared by the competent authorities, Commission spokesperson Olof Gill said. For six months, the Commission has been having a back-and-forth with Madrid over the deal under a procedure called the EU Pilot — an informal dialogue between the EU and countries that can lead to formal infringement procedures. That process is ongoing. “Spanish rules allow for government intervention on general interest grounds, on mergers that have already been reviewed by the competition authority, but this is extremely rare,” Pedro Callol, a Spanish antitrust lawyer, told POLITICO. The only time it has used the power, he said, was in a deal between broadcasters Antena 3 and La Sexta in 2012. ROMAN INTRIGUES There were echoes of Madrid’s behavior in a similar case in Italy, where a bewilderingly complex and politicized struggle for control of the banking system is playing out. The government of Giorgia Meloni has saddled UniCredit’s bid for rival Banco BPM with so many conditions that UniCredit now says it makes no sense to proceed. Rome did so by invoking its “golden power,” which was originally designed to stop foreign takeovers from threatening national security. That move did not go unnoticed in Brussels, where officials opened two distinct probes into the matter, led respectively by the financial services and the competition directorates. It has also triggered an exchange under the EU Pilot, and the Commission “is now assessing the reply of Italian authorities.” Competition officials in Brussels cleared the deal with conditions on June 19, rejecting Rome’s request to hand the deal back to the national antitrust authority. Competition officials also sent Rome a set of questions on its “golden power,” a Commission spokesperson told POLITICO, explaining that only in “exceptional” circumstances can a government interfere with a Brussels merger decision. National interventions in mergers aiming to protect a “legitimate interest,” they said, should be “appropriate, proportionate and non-discriminatory.” The government of Giorgia Meloni has saddled UniCredit’s bid for rival Banco BPM with so many conditions that UniCredit now says it makes no sense to proceed. | Michael Nguyen/Getty Images There are broader concerns over Rome’s entanglements in the banking sector. Government officials have spoken privately of the need to build up a third force in Italian banking that would act as a counterweight to the dominant duo of UniCredit and Intesa Sanpaolo, which they hope would bolster credit access for the small firms and households that make up a sizable bulk of the ruling coalition’s electoral base. According to Rome insiders, the government wants to build this “third pole” around Banca Monte dei Paschi di Siena (MPS), which has been under effective government control since the last in a series of expensive bailouts in 2017. The Commission only approved that bailout on the condition that Rome reduce its influence over the bank as quickly as practicable. With the conditions having been fulfilled, MPS is now on the hunt for acquisitions — with the backing of the government, which is still its largest shareholder, owning an 11.7 percent stake. At first, Meloni’s government aimed to merge MPS with BPM, which bought a large stake in the Tuscan lender last year. When that was derailed by UniCredit, the government changed tack, supporting a surprise €12.5 billion bid by MPS for Milan-based investment bank Mediobanca. The target rejected the offer outright as having “no industrial rationale” and as being structured so as to create significant conflicts of interest at the shareholder level — an implicit complaint about the offer’s political dimensions.   Both the EU executive and Milan prosecutors are now reportedly probing Rome’s handling of its sale of the MPS stake last November amid suggestions that it favored investors close to the government. VESTED INTERESTS AND COMPETITIVENESS CONCERNS The Commission’s frustration is due in part to the notion that banking consolidation, and the broader completion of a single market for financial services, is urgently needed to boost the bloc’s overall competitiveness. EU financial services chief Maria Luís Albuquerque is taking every chance to emphasize that Europe needs bigger banks to compete with U.S. and Chinese rivals. Currently, JPMorgan alone is worth as much as the eurozone’s eight biggest banks put together. Any move to stop such consolidation must be “proportionate and based on legitimate public interests,” spokesperson Gill said. Rome’s three-party coalition may be keeping its cards close to its chest regarding its broader plans, but Spanish politicians haven’t even been trying to mask their motives. Jordi Turull, secretary-general of the Junts per Catalunya party that props up Pedro Sánchez’ minority government in Madrid, complained to TV3 that the Spanish National Commission of Markets and Competition and European authorities had only presented “technical reasons” for allowing BBVA to take over Sabadell. “Now is the time for politics,” he said, arguing that “there are enough reasons” for the government to get involved. Sánchez’ fragile minority government cannot pass legislation — nor a national budget — without the support of Catalan political parties that consider Sabadell’s independence a matter of regional pride. BBVA’s bid to take over the bank, which was founded in Barcelona over 100 years ago, has consistently faced broad political opposition in Catalonia. Separatist and unionist politicians have rallied around the bank, arguing the deal would reduce Sabadell’s presence in the region, particularly in already underserved rural area (they appear to have forgiven Sabadell’s rapid relocation of its domicile to the legal safety of Valencia when Catalonia pushed for independence back in 2017). GERMAN ROADBLOCKS Next in line for Commission scrutiny could be Germany, which is anything but keen for UniCredit to swallow Commerzbank, the country’s second-largest private sector bank. UniCredit CEO Andrea Orcel’s team received permission from the ECB in March to raise its stake to 29.9 percent. It currently holds 9.5 percent directly, and another 18.5 percent indirectly through derivatives, and has warned that converting those rights into physical shares still requires several other approvals, including from the German Federal Cartel Office. But the new government in Berlin hasn’t signaled any greater willingness to allow a takeover than the previous one under Olaf Scholz. Berlin is still Commerzbank’s biggest shareholder, with a stake of 12 percent, and Chancellor Friedrich Merz told reporters in Rome last month that he didn’t see any need to discuss the deal with his Italian counterparts as it was not in the works for now. Such roadblocks are giving Commerzbank the time to mount a vigorous defense. New CEO Bettina Orlopp announced a radical package of measures in February to improve profitability and get the bank’s market value up to a level where UniCredit would struggle to mount a full takeover. That package included some 3,300 job cuts in Germany — precisely the kind of thing that Commerzbank’s unions had been hoping to avoid when they lobbied the previous government to stop a takeover. UniCredit is still holding on to the option of launching a full takeover, but in March accepted that any such process is likely to last well beyond the end of this year. Aitor Hernández-Morales contributed to this report.