Centeno’s Exit From Eurogroup Opens Door for Spanish Push

(Bloomberg) -- Spain is likely to make a bid for a top euro-area post after Portuguese Finance Minister Mario Centeno said he would not seek to renew his term as president of the Eurogroup, a position from which he led one of the currency bloc’s most powerful bodies.

The announcement by Centeno, 53, that he would step down from the presidency in July will trigger a race to replace him at the helm of the group of euro-area finance ministers at a critical time for the region, which is in the grip of a deep recession because of measures to contain the coronavirus pandemic.

While the post could be held by any of the bloc’s 19 finance ministers, the successful candidate would need to meet a series of criteria. 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.

That process of elimination makes Spain’s Nadia Calvino -- a Socialist woman from a southern European country -- a strong contender and Madrid is likely to press her candidacy, according to two Spanish officials. The past two presidents of the group were also from the center-left while Jean-Claude Juncker, the first to hold the post, came from the center right. Calvino hasn’t made any comment on the opening.

Calvino has won plaudits from many of Spain’s business leaders for her role in spearheading her government’s economic response to the pandemic, ensuring that an important reform of the country’s labor market wasn’t overturned, for instance. Spain’s Socialists govern in coalition with the far-left party Podemos and executives see Calvino as an important counterbalance to their policy proposals.

She is known as a meticulous minister -- combing the fine print of the battery of measures the government has approved in recent weeks -- and also as a political moderate with a fiscally conservative streak, influenced in part by her time as a top budget official for the European Union in Brussels.

Whoever is selected will be at the heart of European efforts to rebuild after the devastating economic blow of the pandemic and will have to help forge an agreement on how to finance that push.

“The next Eurogroup president needs a plan how to make the EG useful again -- or we can shut it down,” Lucas Guttenberg, deputy director of the Jacques Delors Centre in Berlin, said on Twitter, criticizing the body’s failure to take effective decisions under Centeno’s leadership. “For a new EG president, this means that building trust in the room is the most important task.”

Late-Night Talks

While less prominent than during the euro-zone sovereign debt crisis, the Eurogroup presidency has been a sought-after post, giving its holder seats at the table at all the important and exclusive international fora. 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 11th-hour loans to keep Greece from defaulting and crashing out of the euro.

While Centeno’s tenure was mostly characterized by long debates on the future of the euro area that yielded little progress in areas such as a joint deposit insurance scheme, his last few months on the job saw him oversee significant efforts to agree on a first emergency package to rescue the region’s economy.

While the president of the Eurogroup has no decision-making powers, the role calls for a skilled mediator who can broker agreements when the bloc faces major challenges.

Portuguese Succession

Centeno, who has run the finance ministry in Portugal’s minority Socialist government since November 2015, has been head of the Eurogroup meetings of euro-area finance ministers since 2018. He will be replaced as finance chief by Portugal’s Secretary of State for the Budget Joao Leao.

The Portuguese economy’s contraction in 2020 will follow six years of growth that helped the government cut the jobless rate and narrow the budget deficit. With Centeno as finance minister, Portugal last year posted its first budget surplus since democracy was established four decades ago. While the country’s debt ratio has declined during his four years in office, it’s still the third-highest in the euro area behind Greece and Italy.

The European Commission forecasts Portugal’s economy will contract 6.8% in 2020 and sees government debt increasing to 131.6% of gross domestic product. The Commission forecasts a budget deficit of 6.5% this year, with Portugal’s measures to deal with the coronavirus pandemic estimated to have an overall direct budget cost of about 2.5% of GDP.

Centeno could be a “great” Bank of Portugal governor, current central bank governor Carlos Costa told weekly Expresso in an interview in May. Costa’s second and final term heading the Bank of Portugal ends in July.

©2020 Bloomberg L.P.