Centeno: ‘I do see good reasons to support green investment under the fiscal rules’

Mário Centeno, President of the Eurogroup; Minister of Finance of Portugal, speaking during Challenging the Dominance of the Dollar session at the World Economic Forum Annual Meeting 2020 in Davos-Klosters, Switzerland, 23 January. . [World Economic Forum/Ciaran McCrickard]

Speaking to EURACTIV in Davos, Eurogroup President Mario Centeno remained hopeful about the eurozone’s stalled reform process, saying there are “good reasons” to support ‘green’ investment as part of a broader review of EU fiscal rules due later this year.

Eurogroup President and Portuguese Finance Minister Mario Centeno spoke with EURACTIV’s Jorge Valero on the sidelines of the World Economic Forum in Davos.

Eurobonds, or an euro-denominated safe asset, came up as one of the big outstanding issues for the euro in Davos. When and how will they see the light of day?

We have been expanding our agenda, deepening the topics on which we have been working, as part of what we call the steady state of the banking union.

An euro-denominated safe asset goes a little bit beyond the banking union itself, as it involves issues related with capital markets union. They are not going to come in the next two years. But in the December Eurogroup we agreed that it was very important to use the new institutional cycle to gain momentum for this agenda.

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EU finance ministers failed to reach an agreement on Wednesday (4 December) on the reform of the EU’s bailout fund and move to political discussions on the European Deposit Insurance Scheme ahead of the Euro summit next week.

The December Eurogroup failed to reach agreement on the reform of the EU’s bailout fund, the European Stability Mechanism (ESM) even though it was considered as a low-hanging fruit on the reform agenda. There was also no agreement on the roadmap to complete the banking union, the minimum you expected to be achieved by the end of 2019. Were you disappointed? Did you take it as a personal failure, or as the Eurogroup’s failure?

The Eurogroup’s work was completed. But national debates are still going on. I am referring obviously to the Italian debate. On the ESM, the news I got from Rome is that they are more constructive now in that respect. We can close the very few pending legal issues around the terms of reference for the collective action clauses (CACs) that were presented to the Conseil d’Etat in France.

You always have to make everybody feel comfortable, because these decisions are taken by unanimity. Besides, they are drafted very carefully because they are market sensitive. Now we have a very positive solution.

Are you concerned about the political instability emerging again in Italy?

I don’t comment on domestic issues. What I can say is that we have 19 mature democracies. The euro itself is at the highest level of approval ever in the euro area. The latest barometer says that 76% of euro area citizens consider the euro important or very important for their lives. This is reassuring for for our job, of course.

Elections are held, and the political internal debate is always quite intense. I can give you an example. I have already met four Austrian finance ministers since I am a member of the euro group, which means that governments rotate. This is not a problem for countries and certainly not for the euro area.

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Will the European Deposit Insurance Scheme (EDIS) to protect European savers across the eurozone see the light during this mandate?

I think we’ll have a shot.

Would you bet your savings on it?

[Laughs]. My savings are not worth it. I think we’ll have a shot. We know about the opportunity and I see people committed to it.

In the coming weeks, the European Commission will launch a consultation on the review of the Stability and Growth Pact. Excluding ‘green’ investment from the deficit calculation is one of the most controversial ideas in the reform. Do you think this proposal will move forward?

There is one thing that we must agree on: we must have coherent policies in Europe. Especially for those initiatives where a European perspective is needed.

Climate change is not only an important global issue, but also a European policy chosen by countries. We must move all our policies together on this. Otherwise we are decoupling, and citizens would stay a little bit disappointed and puzzled.

Therefore, I do see good reasons to consider that we will be able to support green investment. If it’s not in the context of the review of the fiscal rules, it would be in terms of the Communication of the European Commission (on the implementation of the Stability and Growth Pact), also adopted by countries, to make room for these investments to happen.

Another leg of the review of the Stability and Growth Pact is getting rid of the structural effort and the output gap to estimate what member states have to do to balance their public accounts. It seems there is more consensus on this issue, given the complexity of current rules. Do you expect we will have simpler rules?

First, let me say that the current rules have worked very well in the past. They brought us into a position in which there is no country under an excessive deficit procedure. We have very close fiscal stances. This is the result of the multilateral surveillance.

Having said this, we can improve the clarity of the rules. That’s the basic approach that I think you can follow. If this involves picking different indicators than the existing ones, this can be done without jeopardising the overall structure of the very important multilateral system.

The seven-point recipe to improve EU's messy fiscal rules

The European Fiscal Board has recommended major reform of the Stability and Growth Pact in order to simplify the EU’s spending rules and favour productive investment in the era of low-interest rates.

Would you like to continue as Eurogroup president?

I am focusing on completing this term. By the end of the semester, we will see how things develop. There’s no decision…

…But is there willingness?

I like a lot what I do, but a term is a term.

[Edited by Frédéric Simon]

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