Countdown begins on choice for new governor of Bank of Portugal

An uneasy countdown has begun on the choice for the new governor of the Bank of Portugal.

Since Mário Centeno –  the country’s acclaimed ‘Ronaldo’ of all-things-financial – announced last week that he was leaving his post of finance minister within the government and giving notice on his position as president of the Eurogroup, everything looked ‘clear’ for him to walk into the space soon to be vacated by two-term governor Carlos Costa, a man whose 10-year mandate has overseen so many banking collapses that even financial observers have lost count.

But opposition parties have been doing everything seemingly in their power to put a spoke in the works of the ‘revolving door’ set to usher Centeno into this brilliant new career

Even as prime minister António Costa shared the podium with his former right-hand man, saying how much the country owed him for his years of service, MPs in parliament were approving a new law that demands a five-year grace period before ministers can shimmy from the world of politics into the No 1 job at the country’s central bank.

The plan was presented as aiming to  ‘get the law passed in time to block Centeno’s move once and for all’.

There has even been a petition raised, decrying the ‘obscene conflict of interests’ at play, and saying: “We don’t want Centeno at the Bank of Portugal!”

Chances are, however, that this is exactly what’s going to happen.

PM Costa has gone to great lengths to say he can’t understand what all the fuss is about – suggesting his former Finance chief is being ‘treated like a criminal’; the current governor has said ‘as far as he can see’ (which is slightly ironic, as he has been criticised in the past for seeing nothing at all) Centeno “has all the attributes to make an excellent governor”, and perhaps more importantly President Marcelo says there is no reason for Mário Centeno NOT to take up the new post.

“I repeat what I have said before”, said the president. “I can see no problem in what has happened in our monarchy, in the first Republic, in the dictatorship and in our democracy not once but maybe two dozen times before: that members of the government, from the Finance Ministry to ministers and State secretaries, go on to become governors of the Bank of Portugal”.

Several MPs are still gnashing their teeth, but the bottom line is that a Socialist economist does look set to take the reins of the central bank as his former colleagues still hold the reins of power.

And into his place at the Finance Ministry has stepped a man who has been working with him for the last five years – former Budget secretary João Leão, destined, according to Marcelo, to “follow the path of his predecessor”. A safe pair of hands, in other words – with what already appears to be an iron grip on reality.

As Leão was sworn into his mammoth new role at a time of distinct financial complexity, an habitual winge started at Novo Banco that ‘due to the pandemic’ it would be needing some further (taxpayers’) money very soon.

Leão, pictured studiously adjusting his face covering, was quoted as giving Novo Banco ‘a message’: “These issues are extemporaneous”, he said. The president of the bank should concentrate on running it well till the end of the year”.

There is no ‘extra money’ set aside in the Supplementary Budget that the government is presenting to face the mounting expenses of the pandemic – and any murmurs that Novo Banco may try to cash in on a clause relating to ‘exceptional circumstances’ “like a pandemic” is misguided, he added.

Novo Banco is due 3.89 billion euros under the terms of the 2017 ‘sale’ to Lone Star, and so far it has requested almost 3 billion of this amount from Portugal’s indebted Resolution Fund. “No further funds are foreseen beyond the 3.89 billion euros”, stressed Leão, as this total “does not depend on the occurrence of any crisis”.

It was what Expresso’s calls Leão’s ‘baptism of fire’ and he appears to have left the top brass at Novo Banco quietly steaming.

Meantime, João Leão has promised the country that taxes won’t be increasing in this (Supplementary) Budget, or indeed afterwards.

What’s coming is “a series of measures to support businesses and protect the incomes of families to ensure stability in this current adverse context”.

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