Portugal's Centeno Gets Top Economic Job in New Euro Chapter

(Bloomberg) -- Portuguese Finance Minister Mario Centeno will be the next head of one of the euro area’s key political bodies, a change of guard that comes as the currency bloc seeks to enact ambitious reforms following the worst financial crisis in its history.

The decision to elect Centeno to lead the meetings of euro-area finance ministers came after two rounds of votes. Luxembourg’s Pierre Gramegna lost in the second round, while Slovakia’s Peter Kazimir and Latvia’s Dana Reizniece-Ozola dropped out after the first.

“It’s an honor because of the relevance of this group, of the quality of my colleagues, of the importance of the job we have to carry over the next two years,” Centeno told reporters after the voting. “We have a time window to further prepare our economies and societies better.”

Finding a replacement for Jeroen Dijsselbloem, whose term ends in January, proved difficult, officials said, partly because the position requires a complex set of criteria be fulfilled. Top roles at European institutions have been traditionally divided along both geographical and political lines -- between North and South, East and West, big and small countries, and between conservatives, social democrats and liberals.

Closer Integration

“You can’t always win in life, but I think we had an honorable score here,” Gramegna said after the meeting. “A lot of work has to be done now, a lot of proposals are on the table to strengthen the eurozone and here Luxembourg will make its contribution.”

For Reizniece-Ozola, the process was very useful for Latvia. “We were really visible and put onto the political stage,” she said, adding that the result is a clear sign to younger member states “that we have to work twice as hard as we have done so far to put us on the political stage even higher.”

Slovak finance chief Kazimir echoed the sentiment, saying that “for us, it’s important that even the biggest players have noted that Slovakia has an opinion on the future of the eurozone -- not everybody has it.”

The election of a minister from a country that depended on emergency bailout loans to stay afloat less than four years ago underscores the extent to which the euro area has turned a page since. Moving on from the sovereign debt crisis that threw the euro into existential turmoil, the bloc is stepping up efforts to strengthen its economy and proceed with until-recently controversial steps for closer integration.

Key Figure

As president of the Eurogroup, Centeno will be a key figure in euro-area debates and developments. Originally designed as an informal meeting for finance ministers to exchange views, the group morphed into one of the most closely watched decision-making bodies in Europe.

At the peak of the financial crisis the ministers held many, often acrimonious meetings, striking late-night deals on emergency bailouts for five countries, an overhaul of the EU’s banking rules and eleventh-hour loans to keep Greece from defaulting and crashing out of the euro.

Still, while the worst of the crisis is behind the euro area, Centeno will have his work cut out for him as efforts to reform the single currency and push ahead with several controversial reforms pick up steam.

While consensus has emerged among the bloc’s 19 members on the need to shore up the euro, key differences between them will need to be bridged in order to reach a compromise on the matter.

Reform Agenda

For France, which has been pushing for further integration, Centeno’s appointment is seen as vital to the ‘‘window of opportunity’’ on Macron’s euro-reform agenda, according to a French official, as the Portuguese finance chief’s view of what steps the bloc must take is close to the one in Paris.

Still, highlighting the challenges Centeno will face and the scrutiny under which he will be operating, Germany’s congratulations came with a warning.

“We will judge Mario Centeno by whether he continues to pursue a policy of stability,” said Ralph Brinkhaus, deputy caucus chief for Merkel’s Christian Democrat-led bloc in the Bundestag.

©2017 Bloomberg L.P.