FINANCE; Pg. 10

Karina Robinson - The New York Times Media Group

BERLIN

'Are you Catalan?'' asked Joaquin Almunia, the European commissioner for economic and monetary affairs, after I spoke to him in Spanish at our first meeting last year.

Not a good start. Suggesting that someone who was raised in Madrid might be from Barcelona is as unwelcome as asking Canadians where in the United States they are from.

But Almunia doesn't seem to have a problem with rubbing people the wrong way. On a recent rainy day in Berlin at a conference on fiscal policy in Europe, Almunia made himself unpopular with the German minister of finance, Peer Steinbruck, by suggesting that Germany was lagging behind its euro-zone peers at taking advantage of economic recovery to cut debt.

''Germany could be more ambitious in 2008,'' he said to Steinbruck, warming to his new mantra that European economies need to be prepared to deal with the medium- to long-term challenges of an aging European population.

Almunia used to have to remind finance ministers that the Stability and Growth Pact, which underpins the euro, has two main pillars: an annual budget deficit no higher than 3 percent of gross domestic product, and a ratio of public debt to GDP no higher than 60 percent.

But with the average nominal budget deficit for EU members having fallen to 2 percent of GDP, and with the debt-to-GDP ratio declining for the first time since 2002 (though still high), the need for admonishment has dropped to almost nil. A number of countries, including Germany, have cut their deficits as European growth has recovered.

There was also a ''revision'' of the pact in March 2005, according to Almunia, who helped negotiate it. Critics, however, called it a ''loosening.''

These days, Almunia, 59, is campaigning to ensure that governments don't squander the gains of the good years.

''We can't act in the same way as we did on climate change,'' he said, pointing out that Gro Harlem Brundtland, the former prime minister of Norway, first reported on the phenomenon to the United Nations 20 years ago, as chairwoman of the World Commission on Environment and Development.

''We can't wait for 2015 to see the negative impact of old age making social security unsustainable,'' he said.

Europe's old-age-dependency ratio, or the ratio of non-working people to working ones, is forecast to rise to 51 percent by 2045 from 25 percent now, according to figures from the European Commission. Almunia said EU citizens would understand the problem by 2015, but that it may be too late by then to take effective action.

When asked whether the European Central Bank's goals should be modified to include job creation, Almunia said tersely: ''You have to ask the question in French.'' French politicians, in general election mode, have been blaming the ECB for the strong euro, which they say has hurt exports and discouraged French companies from hiring.

''I don't lose time on that discussion,'' Almunia continued. ''Good monetary policy is necessary for economic growth and employment, but by itself does not create employment.'' If anything, he added, the ECB's monetary policy ''is still accommodative.''

A graduate in law and economics from the University of Deusto, one of the Jesuit-run educational centers in Spain, Almunia is certainly capable of displaying the Jesuitical talent for diplomacy. In 1982, as minister of employment and social security in the country's Socialist government, he led a negotiation with the labor unions that formed one of the bases of the Spanish economic miracle.

But someone who worked with him for a number of years, and who asked not to be quoted, said that, during his time as Spain's minister of public administration from 1986 to 1991, Almunia had such a poor relationship with Carlos Solchaga, the economy minister then, that he was unable to get funding to modernize the state apparatus.

''I got along very well with him,'' Almunia said of Solchaga. ''But in 1987 he didn't give money to anyone, not even God, because we had just joined the EU and he was obsessed with getting the peseta into the euro, so these were years of fiscal consolidation.''

That experience probably comes in handy when dealing with the new EU states looking to join the euro zone. Hungary has twice had to abandon target dates for joining. Lithuania was refused entry. Romania, according to the country's central bank governor, Mugur Isarescu, recently declined an informal invitation by the ECB president, Jean-Claude Trichet, to join a few years before its 2014 target date.

The implication may be that the target dates are too ambitious, and Almunia acknowledged that in some cases this was true. But he added that there was a political economy dilemma involved. Inflation conditions for the euro are the most difficult of the criteria to meet, but recent members also need to expand their economies, which involves credit expansion and wage growth. Combining this with low inflation implies trade-offs - or, as Almunia calls them, ''nuances.''

On the personal front, Almunia, who is married and has two children, said that the lowest point in his life was when he lost the Spanish Socialist Worker's Party primary elections to a rival in 1998. He disagreed with the assertion by a friend, who also asked not to be quoted, that he joined the party many years ago because he felt like an ''outsider'': on one hand, he belonged to a well-known Basque family, on the other, his family had no money.

''We weren't millionaires but I never lacked for anything,'' Almunia said. ''We were haute bourgeoisie. The reason I joined was because for my generation, which fought against Franco in the 1960s at university, it was the natural choice.''

He also disagreed with former colleagues who said that as a boss he was quick to blame others for failures and equally quick to ascribe successes to himself alone.

''I am not good at massaging my image,'' he said.

Karina Robinson is senior editor of The Banker. This article is adapted from her monthly column.

April 15, 2007