Irish finance minister Paschal Donohoe was on Thursday picked as the new president of the Eurogroup, a key role as Europe sits in the depths of its deepest recession since World War II.

The group brings together the eurozone finance ministers who help guide European economic policy and where political divisions can be bitter, especially in times of crisis.

Donohoe beat out favourite Nadia Calvino of Spain as well as Luxembourg's Pierre Gramegna for the job, winning at least 10 votes of the 19 ministers, though the final result was not made public.

The job is considered one of the EU's key positions, along with the heads of the European Commission, EU Council and the European Parliament.

Donohoe begins his term on July 13 and will be an important figure in watching over a massive EU recovery plan that is still in negotiation amid angry north-south divisions.

The eurozone economy is set to contract by a record 8.7 percent this year, with mass unemployment and other dire consequences still a possibility.

"I'm deeply conscious that the citizens of Europe ... have become fearful again for their futures, for their jobs, and for their incomes," Donohoe told reporters after the vote that was held virtually.

"The challenges are great, but we will prevail, and we will overcome them," he added.

The choice came as a surprise and was attributed to a campaign by ministers from small countries who were wary of giving the highly strategic post to a European heavyweight such as Spain.

A victory of 'small states against the bigger ones', says on source A victory of 'small states against the bigger ones', says on source Photo: AFP / Paul FAITH

Ireland has angered its partners over the years for its firm opposition to a digital tax, and spirited defence of its low business tax that has attracted US big tech companies to its shores.

The 45-year-old will also be in charge of reviving stalled reforms of the single currency that is widely seen as needing fixing.

Donohoe road to victory began last week by gaining the crucial support of the European People's Party that unites the European conservatives, including Chancellor Angela Merkel's CDU in Germany.

A big fan of Star Wars, Donohoe is regarded as a prudent caretaker who kept his country on the right track after the ravages of the eurozone debt crisis.

Calvino had the backing of southern Europe, France and Merkel, who said she would like to see a woman in the job for the first time.

Her opponents believed the job requires compromise between countries of the north, who adhere to budgetary discipline, and those in the south, who are considered to be more lax.

The north-south split has taken on even greater importance as countries negotiate a 750 billion euro recovery plan that its boosters hope is agreed at an EU summit next week.

It is the second defeat for Luxembourg's Gramegna, who lost in 2017 to the soft-spoken Centeno, who is stepping down after a single term that did not leave a strong impression.