Replacing Juncker: the unlikely rise of Jeroen Dijsselbloem.

• Author: Engelen, Klaus C.
• Position: OFF THE NEWS - Jean-Claude Juncker

During preparations for European monetary union, when France and Germany clashed on important issues, Luxembourg s Jean-Claude Juncker was asked to play the role of trusted mediator on the European stage. Often he was helpful in defusing conflicting views.

Juncker was close to German Chancellor Helmut Kohl and trusted by the French leadership who, for instance, fiercely opposed modeling the European Central Bank after the Deutsche Bundesbank as an independent central bank institution. As finance minister and then prime minister of Luxembourg, Juncker symbolized the tendency of the now 27-member European Union and the 17-member monetary union to put representatives from small countries in European leadership positions.

Steering and mediating among the eurozone's finance ministers during the run-up and during the turbulent banking and euro crisis, Juncker was able to look out for the interests of Luxembourg's exceptionally large and globally interconnected financial sector. This explains why he pursued a policy of maximizing bail-outs for investors in eurozone bank bonds up to this day--pushing into the future bail-ins for bank bond investors.

Luxembourg's banking industry holds total assets of more than twenty times its GDE About 90 percent of total bank assets are foreign-owned. The strategically located grand duchy has an investment fund industry with an aggregate balance sheet of around fifty times Luxembourg's GDP and an aggregate insurance industry balance sheet four times its GDP.

Over the years, Juncker has played a key role in organizing a "soft landing" for Luxembourg as a major tax haven by pushing for advantageous EU tax treaties and by improving the governance and transparency of the financial sector. This was in contrast to the government and the finance industry of Switzerland.

So it was no surprise in September 2004, when the "Eurogroup"---comprising the finance ministers of the eurozone member countries--had to install a semi-permanent president, the important job was given to the diplomatically skilled Juncker.

Together with two other former government heads from small EU member countries--Jose Manuel Barroso from Portugal as EU Commission president and Herman Van Rompuy from Belgium as EU president-the threesome has ruled the management of the EU banking and euro crisis during the last several years.

When the threatened default of Greece in April 2010 challenged the eurozone leaders to save monetary union as never before...