Mário Centeno wants his successor as Eurogroup president to fight to complete safeguards for the banking system in the next four years, to ensure savers are protected from future financial crises.
That’s the hope he expressed in an interview Wednesday as he prepares to end his term as head of the finance ministers from the 19 euro countries.
Rather than run for reelection, Centeno has stepped down from his own ministerial position in Portugal, setting off a race to succeed him in the hugely influential Eurogroup post as of July 12.
“I would have preferred to have more files closed in the banking union chapter than what we did,” Centeno said, looking back over his tenure.
The task of completing a long-sought banking union for the euro area, with a shared deposit insurance system, proved insurmountable during Centeno’s two and a half years in the position. Northern European countries, such as Germany and the Netherlands, have remained reluctant to share financial risks with banks from their indebted southern neighbors.
Their opposition has stalled the efforts to meld together the national funds that guarantee savings accounts, with protection of €100,000 per person. Proponents like Centeno argue that sharing risk in a European Deposit Insurance Scheme (EDIS) would reduce the chance of a crisis overwhelming an individual country’s safety net, upending stability for all.
Ministers can still work out EDIS and other measures to protect stability by 2024, when the current EU legislature turns over, Centeno said. The 53-year-old spoke to POLITICO by videoconference from the Foz Palace in central Lisbon, making use of the empty 18th century building after leaving the finance ministry last week.
But the ministers would have to act fast, considering the length of legislative procedures and implementation.
“For that [2024 goal] to happen without COVID, we have to take all decisions [by] the end of 2021, the latest,” he said.
Centeno knows that it’s no easy time for initiatives. Governments are focused on opening up their economies after months of lockdowns implemented to contain the coronavirus.
“The recovery will be a big chunk of the agenda of the Eurogroup in the next few months,” he said. Ministers will be looking to coordinate policies such as how and when to unwind their emergency support measures.
That task will fall to a successor yet to be chosen. Governments have until June 25 to nominate candidates. The winner would set the eurozone’s policy agenda and chair monthly meetings of ministers — making it one of Europe’s top economic jobs, even though the position exists nowhere in EU law.
Treasury officials expect a three-horse race with Ireland’s Paschal Donohoe, Luxembourg’s Pierre Gramegna and Spain’s Nadia Calviño — the latter of whom is tipped by many observers to win.
Some deputy ministers are looking forward to a new president in the Eurogroup chair.
Despite working in relative peacetime, compared to the battles over the Greek rescue last decade, Centeno’s meetings often become all-nighters as ministers — frequently expanded to those from all 27 EU countries, rather than just the 19 from the common euro area — thrashed out topics such as the eurozone budget and its bailout fund.
The Portuguese often settled these long negotiations with the ministers from France, Germany and the Netherlands, leaving others to sleep in meeting rooms or scavenge for food.
“Some Eurogroups, [Centeno] came quite unprepared,” a senior treasury official said on the condition of anonymity, voicing an opinion shared by peers across the bloc. He compared that approach with that of former Eurogroup President Jeroen Dijsselbloem. “The difference with Dijsselbloem is that he had this Plan B in his pocket.”
Centeno dismissed any suggestion he was haunted by the shadow of Dijsselbloem, who chaired two terms from 2013 to 2018, overseeing much of the Greek bailout crisis.
“Believe me that the long meetings were to turn into pink what used to be red lines,” Centeno said. “There was no single failure, in terms of the agenda we set up. On banking union, we would have liked to go faster but the road to completion is more doable today than ever before.”
Styling himself in the job as “coordinator in chief,” Centeno ran into a series of political stumbling blocks on Eurogroup initiatives.
Plans for a eurozone budget were scaled back, in the face of Dutch-led resistance, to a mere €17 billion available over seven years.
That has since been overshadowed by the European Commission’s proposal for a one-off €560 billion fund to help countries recover from the coronavirus crisis, offering money in exchange for economic reforms.
“We need a permanent, not temporary, eurozone budget in place,” Centeno said. Still, he points to similarities between the Commission’s design and the eurozone cash pot.
“Because the structure is so much similar, the only interpretation that I’d like to provide is that we went from an embryo, permanent one of €17 billion euros, to something which is almost 45 times larger,” he said.
Centeno was denied another achievement in the banking union this year when Italy stalled a plan to upgrade the eurozone bailout fund, named the European Stability Mechanism. After the ESM plans appeared to have been settled in some of those late-night negotiations, the government in Rome — riven by infighting — objected to the terms for tapping the fund.
Stalling the process means the ESM won’t be able to carry out another intended function of the banking union: providing a backstop to a separate, industry fund for cleaning up bank failures.
EDIS remains no closer, meanwhile, as the opponents hold to preconditions for unlocking the shared deposit guarantee. Those include reducing the bad loans already stuck on banks’ books. That stockpile will only increase in the aftermath of the pandemic.
Centeno’s biggest success came in April, when he ground out a three-part series of economic support measures amounting to €540 billion for governments as well as companies and workers idled by the coronavirus lockdowns.
The package was hammered out over three days of formal and informal talks — including 16 hours of negotiations on the first day.
Centeno brushed off questions about which minister should succeed him in future talks on such matters. But he did have this parting advice: “Keep finance ministers awake, at all times.”
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