EU ministers meet to restore faith in flagging eurozone

European Union finance ministers gather in Brussels tomorrow for a crucial meeting to restore confidence in the single currency zone, after growth figures released on Friday exposed the increasing fundamental differences developing between the healthy "core" nations and the troubled periphery.

The ministers are also expected formally to agree the appointment of Mario Draghi to succeed Jean-Claude Trichet as president of the European Central Bank from this October. Mr Draghi is currently head of the Italian central bank and the Financial Stability Board, the "club" for G20 central bankers and bank regulators. Extremely well respected by his peers, "Super Mario" has been the front-runner for the ECB job since Axel Weber, former president of the Bundesbank, unexpectedly walked away in February.

Mr Draghi easily won the support of his "home" leader, Silvio Berlusconi, plus the backing of President Nicolas Sarkozy and Chancellor Angela Merkel, who, countering critics who said inflation "is as Italian as pasta with tomato sauce", said last week of Mr Draghi: "His views are very close to our ideas of the stability culture and solid economic policies."

One complicating factor is the "north-south" balance on the six-member ECB board. With Mr Trichet going, and Mr Draghi arriving, the board would be made up of two Italians, one Portuguese, one Greek, one Belgian and one German – and no French or Dutch representatives. Therefore, the peripheral economies would be over-represented compared with the northern "core" economies.

Mr Draghi is faced with some big challenges as new president. With the eurozone finance ministers certain to approve a ¤78bn (£68bn) bailout of Portugal tomorrow, attention will shift to Greece, where markets regard a "restructuring" of its debt as a matter of "when and how" rather than "if".

The ECB holds around 20 per cent of Greece's stock of national debt and faces losses of around ¤30bn if, as many expect, a "haircut" of 50 to 70 per cent is imposed if bonds are devalued in a restructuring. There is also the possibility of a "second credit crunch" hitting Europe if confidence collapses again.

Mr Draghi will also face the acute dilemma of whether to press for further increases in eurozone interest rates, a process begun by Mr Trichet. While the "core" nations of Germany, France and those closely integrated with them, such as the Netherlands and Austria, are growing fast, peripheral nations are struggling. Portugal, for example, has slipped into recession again, and economists worry whether a relapse and a fresh round of crises would follow further hikes in rates by the ECB.