Significance of EC Shuffle

Over shadowed by the emergence of Dubai's financial crisis, the European Commission was re-shuffled. France and Finland were given the highly coveted portfolios of internal markets (which is to include financial services regulation) and the economic and financial affairs respectively Michel Barnier and Olli Rehn. Spain's Joaquin Almunia was given the competition portfolio and Belgium's Karel De Gucht has the trade portfolio.

The UK's Ashton was previously given the new enhanced foreign ministers executive slot. To preserve a balance, the UK's Jonathan Faull to the senior staff role of director general of financial services. The UK also appears to be fighting a rear-guard action to dilute the power EU powers of bank regulation.

From one level of analysis, the shift of several key portfolios at the EC would seem to enhance the less free-market, more corporatist countries of southern Europe from northern Europe. It is easy to exaggerate the significance of this and it is in numerous national self interest to do so. However, Jose Barroso, the EC President probably had his reputation enhanced by his reshuffle and he has clear free-market sympathies. He also moved to preserve balance and collegiality. Rather than a difference of kind, the new configuration of the EC could signal a more modest shift in emphasis.

One interesting aspect that appears to be lost on many observers is the apparent lack of ambition and behind the scenes maneuvering by Germany. The prize it appears to be positioning for is the ECB President which will open in 2011. Nothing that has happened seems to undermine Germany's chances and may supporting other candidates for top posts, may have won some political chits that can be used later.

The battle over the shape of post-crisis Europe in terms of reform, regulation and other initiatives should be expected to be a prolonged process. The reshuffle of portfolios at the EC are important but unlikely to be decisive in this battle. Given the other developments, like Dubai, month end position adjusting, and anticipation of the ECB's last policy making meeting of the year, the EC reconfiguration is not the stuff that will drive the euro.