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The Foretold Election of Mario Centeno as Eurogroup President

Published on , , Twitter: @euinside

On December 4, eurozone finance ministers chose their new president for the next two and a half years - Portuguese Finance Minister Mario Centeno. With the election of the successor to the current chairman, Jeroen Dijsselbloem (the Netherlands, Socialists and Democrats), the so-called Eurogroup opens a new page in its history, at a time when a series of deep changes in the functioning of the eurozone is forthcoming. The election on Monday showed that the Eurogroup has come a long way in its institutional evolution - a way in which member states learned a lot about each other during the gruelling crisis in the eurozone, and especially along the hardest of them - the crisis in Greece. The eurozone has come a long way in its democratic development as well.

Unlike the opaque choice of the first Eurogroup chairman, Jean-Claude Juncker (Luxembourg, EPP), and the election of Jeroen Dijsselbloem in 2013, when he was the only candidate, Mario Centeno was chosen more transparently and democratically, despite the fact that his choice was pre-announced. This time there were four candidates for the post. Apart from Mr Centeno, the finance ministers of Luxembourg (Pierre Gramegna), Slovakia (Peter Kazimir) and Latvia (Dana Reizniece-Ozola) were nominated. However, weeks prior to the regular Eurogroup meeting on 4 December, it was already known that the Portuguese minister of finance had gathered the most support.

Moreover, just before the start of the meeting, President Jeroen Dijsselbloem blundered during a conversation with Dutch journalists, saying that Mario Centeno was his successor. He asked the media not to quote him, but as these briefings are webcast live by the audiovisual service of the Council of Ministers, there was no way this blunder could be ignored.

Why was Mario Centeno elected?

The name of the Portuguese minister of finance surprisingly appeared before the Eurogroup on the 4th of December. Surprisingly, because until now he has not been mentioned as claiming the post, unlike Peter Kazimir, who is one of the frequently mentioned potential candidates for the position, and he himself has never hidden his ambitions. Luis de Guindos was a candidate for the position for a long time as well, however he never officially submitted his candidacy. Pierre Gramegna has also always been a very active figure in the work of the Eurogroup, but his candidacy never had any real chances, primarily because he is from Luxembourg. Another problem is that he is from a party that is a member of the liberal political family, and the inter-party deal is to give the post to the Social Democrats.

Mr Gramegna himself said before the start of the meeting that he would had not run at all if he thought he had no chances. He has a very rich experience as minister of finance. Unfortunately, the vote was secret and the Eurogroup refused to publish the results, so we cannot see how many ministers supported Mr Gramegna. Jeroen Dijsselbloem announced that Centeno was elected in the second round of voting, suggesting that the race was strongly challenged, but it is unclear with whom. Peter Kazimir was one of the most likely candidates because checks a lot of boxes - he comes from a party that is from the Social Democrats' family, from a new member state, and his views are very similar to those of Jeroen Dijsselbloem in terms of fiscal discipline and Greece, which means he is acceptable to the left, to the right, and to the centrists. But his problem is that he comes from a country that is in a friendly company with illiberals and European opportunists - the Visegrád Group. Over the years, he has gained much experience and was quite active and direct in his comments (very often in English) on sensitive topics on the Eurogroup agenda. That is why he was very much loved by the Brussels media.

The most unlikely, most unexpected but most interesting candidate was the Latvian Finance Minister Dana Reizniece-Ozola. She is 36 years old. She has been in office for less than a year, which is not a problem, as Jeroen Dijsselbloem was also a minister for just five months when he was elected head of the Eurogroup (somewhat because that). Dana Reizniece-Ozola is a chess champion and received her Master's degree at the International Space University in France. She is a mother of four children. After Centeno's election, she stated that this is probably due to the fact that old member states still dominate. She sees this as a clear signal that the younger member states must be twice as active as they have been so far. She explained her candidacy by saying that she wanted to shed light on Latvia.

Despite the indisputable qualities of all the candidates, Mario Centeno won for one major reason. He comes from a country which symbolises the end of the crisis that marked the evolution of the Eurogroup over the past decade.  Portugal is one of the five countries which had adjustment or rescue programs. It is considered one of the successful stories in the long wandering of the eurozone in search of the most appropriate tool to help countries in crisis. Mario Centeno, who has been the finance minister since 2015, has undoubted merit for this success, although Jeroen Dijsselbloem has repeatedly stressed that the previous government has merit, and that shouldn't be ignored.

Dijsselbloem's legacy

When the former Dutch finance minister took over the Eurogroup's presidency in early 2013, the eurozone was already showing signs of a crisis, but the recovery was hesitant and unconvincing. This was the year of ideas for the future of the eurozone. The first report of the four Presidents was just published describing the new outlines of the currency union. The construction of the banking union was yet to come. Cyprus was already in bankruptcy and was one of the reasons for the headaches of eurozone finance ministers. Greece was still on the agenda, Euroscepticism was beginning to emerge as a factor, and significant compromises were already being made with the European semester. This was also the year of the first enlargement of the euro area with the accession of Latvia.

Jeroen Dijsselbloem met no competition for the post, but he did have a strategy, which was officially published. The greatest challenge for him then was unemployment and making economic growth sustainable. Five years later, the eurozone is in flourishing health - it has marked economic growth for 18 quarters in a row. Unemployment is still a problem in some countries, but the trend is tending towards a convincing decrease. Public finances have been significantly improved. The most difficult moments of Jeroen's two mandates (2 x 2.5 years) in his own words were the situation with Cyprus, the change of government in Greece in 2015 and the establishment of the banking union.

Jeroen Dijsselbloem, in front of journalists after the end of the December Eurogroup, said that during the Cyprus crisis, many difficult decisions were taken. Then the approach changed. A few days later, on December 7, before the Economic Committee of the European Parliament, he explained in much greater detail the great drama that had begun with Cyprus in 2013, and admitted of mistakes made. The program was supposed to start much earlier, but instead, the Cyprus government left things out of control for too long. In fact, the then Cyprus government was counting on shedding responsibility, and therefore did nothing until the election, and afterwards counted on unconditional financial support from Russia.

Another problem was that Cyprus did not like much of the solutions offered by the Eurogroup. Ultimately, a completely new type of rescue program was launched, in which the banking system was bailed in with investors taking great losses. Many ministers demanded this decision from the beginning. Dijsselbloem has firmly rejected criticism that the bailout program damaged the deposit insurance scheme, reminding everyone that Cyprus had not had such a scheme before. He stressed that if the approach that was applied to Greece, ie bailing out all banks and investors, were chosen, it would have completely bankrupted Cyprus, and today the country would have also had a huge debt.

Dijsselbloem admitted to mistakes with Greece, but stressed that in the then situation it was not possible otherwise. In response to the charges of the Greek MEP Notis Marias (ECR), Mr Jeroen Dijsselbloem explained that in many countries, huge mistakes have been made in the pre-crisis period and bad policies had led to accumulation of risks, excessive lending to the economy, unproductive investments. During the crisis, major mistakes were also made in the way the EU responded. There were many improvisations in the first rescue programs. "Personally, I believe that the way we dealt with banks was very expensive and not very effective", he said. In the first phase, investors were bailed out, many of whom were outside Greece. This, he said, was a fundamental mistake.

However, he expressed hope that Greek politicians are at least as critical as he is to his own decisions in the past. This is important in order to avoid such problems in the future, he said. With regard to the banking union, Jeroen Dijsselbloem said the problem was set in the road map agreed in 2016. Then a decision was made on what to do specifically for risk reduction and risk sharing. The bad thing, however, is that it was not specified when exactly everyone would be happy to move on to the next step and now it is skillfully used by countries that do not want to take this next step. Dijsselbloem also denied allegations that an austerity policy has been pursued during his term of office.

"The strategy of the Eurogroup has never been austerity. Full stop. The strategy has always been structural reforms, making our economies more resilient, more competitive, improving productivity. Second, working towards sustainable finances. The strategy has always been twofold or threefold", he said.

The end of a feud

Happiest with Mario Centeno's election was the European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici (France, Socialists and Democrats). He did not like Jeroen Dijsselbloem from the start, and they were often in conflict, especially with regard to the management of the Eurogroup. A remarkable verbal shootout broke out between them after the end of the September Eurogroup when Mr Moscovici was asked to comment on his views on more democracy in this intergovernmental format. "In my view, democracy is about democratic accountability that means that you have an executive, that means that you have leadership, that means you have a debate and that you have control. And I must say that this is not fully the case of the Eurogroup". The decision, according to Pierre Moscovici, is the creation of a eurozone finance minister, who is also the chairman of the Eurogroup.

Jeroen Dijsselbloem reacted sharply to this remark. "I simply do not agree with - and this, I think, is indeed a matter of difference of opinion - that intergovernmental cooperation between ministers is not democratic. To that I have strong objections. My parliament and many parliaments in eurozone scrutinise our work - the legal sides of it, the financial sides of it and certainly the political sides of it. There are lively debates throughout Europe where the minsters, members of the Eurogroup, have to give full explanation and get criticised for their work in the Eurogroup", Jeroen Dijsselbloem said. On December 4, Pierre Moscovici did not conceal his happiness with Mario Centeno's election, reminding for how long he had been calling for the two-hatted decision for the Eurogroup as well.

This is a model like that of the High Representative of the European Union for Foreign Affairs and Security Policy Frederica Mogherini (Italy, S&D), who is both the president of the Foreign Affairs Council and a Vice-President of the European Commission.  Moscovici wants such a decision for the Eurogroup (for the ECOFIN respectively) as well. On Wednesday, one of the proposals in the Commission's euro area package is precisely about the future European finance minister. However, according to Jeroen Dijsselbloem, this idea is too broad and still quite vague.

Although both come from the same European political family, their views have also varied considerably over other topics over the past five years. While Moscovici was finance minister, France received significant concessions under the European Semester for the first time, and then, as a commissioner, he often faced the direct style and determination of Jeroen Dijsselbloem, who has always insisted that the fiscal rules be respected.

On Monday, Pierre Moscovici first started with his expectations for the new head of the Eurogroup. "You will need to steer the work of the Eurogroup on the deepening of our eurozone and there's no secret that the Commission will make proposals on that in two days from now [they were officially presented on 6 December], and also to ensure a smooth conclusion of the Greek programme. And we will count on your leadership on these and other challenges. I want to assure you that you will be able to count on my strong support and that of the Commission, of course", said Pierre Moscovici, who was France's Finance Minister when Jeroen Dijsselbloem was first elected to the office. He then had objections to his elections until the very last moment.

On Monday, however, Mr Moscovici did not save the praises of Jeroen Dijsselbloem, but he also did not conceal his expectations that the Eurogroup's current policy will leave with him. He said that with him leaving a long chapter in the history of the Eurogroup will be closed. "When you took the Eurogroup presidency, the euro area was still facing a kind of existential crisis and you played a key role in steering the Eurogroup through those difficult and sometimes dramatic times. Challenges were immense, the way ahead was often not obvious and we found a way. And I think it was largely due to the way you managed to act, thanks to your patience, to your attention to detail, extreme technicalities and efficiency", said Pierre Moscovici.

In front of MEPs of the economic committee on Thursday morning, Dijsselbloem said he does not expect the Eurogroup's policy to change seriously. According to him, the Eurogroup will, in a realistic way, insist on retaining its president. Ministers strongly believe that a distinction between the Eurogroup and the Commission should be maintained. He also stated that changing the president doesn't necessarily mean changing the Eurogroup policy.  Many of the Group's policies are rooted in the Stability and Growth Pact and other agreements, decisions are taken unanimously. He advised his successor to work hard to preserve the integrity of the Eurogroup and to draw the tasks ahead of him - to work on the next phase of building the banking union. Now is the best time to finish reforms.

From the very cautious statements of the newly elected president, Mario Centeno, it can be said that he will bet on continuity. He told journalists on Monday he would be nothing more than a president of the Eurogroup, as the main work must be done by the member states, the Commission and all other European institutions. For him, the main priority will be to seek consensus, "which is also what Jeroen left us as heritage". "We have to continue the way the Eurogroup paved in the last 5 years to generate consensus", said the Portuguese Finance Minister. "We have to take the lessons of what we just finished and complete what has to be completed in precisely the same way as we did until today", he added.

Mario Centeno is 51 years old. He has been the minister of finance since November 2015. He was an economist at the Central Bank of Portugal, a member of the European Commission's Economic Policy Committee. He is the author of several scientific publications, books and book chapters on topics such as labour economics, econometrics, macroeconomics and contract theory. He graduated economics from the Technical University of Lisbon and has two magistrates. The first is Applied Mathematics from the same university, and the second is in Economics from Harvard University. He will take over the presidency of the Eurogroup on 13 January. The next meeting of this format will be on January 22, when it is expected to be decided on the next tranche of Greece's rescue program.

His main task will be to balance the various interests during the debates on the future of the eurozone. Whether he will be the ally Pierre Moscovici has been dreaming of is yet to be seen. If this happens, and if Martin Schulz's Social Democrats in Germany get key positions in the future ruling coalition in Germany, the balance in the eurozone could be seriously violated. The currency club has emerged from the crisis, but that does not mean that the way forward is clearly drawn. On the contrary, it will float in uncharted waters, which requires no less sobriety and determination than that of  Jeroen Dijsselbloem. Can a person from the European South offer it? Judging from Portugal's rescue program, the positive response is not unrealistic.

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