Bank of Portugal: The siege on Centeno tightens

Mário Centeno has been largely criticized by his successor, Álvaro Santos Pereira, who this week in Parliament established independence as a priority for his term as head of the Bank of Portugal (BdP). There is no date yet for his inauguration, as after the hearing with the deputies, he must await the opinion of the Committee on Budget, Finance and Public Administration, and only then will he be appointed by the Council of Ministers – his appointment was approved by the Government on July 24th.

It's true that the former Finance Minister may remain on the supervisory board as a consultant. This is a possibility offered to the bank's executives and approved by the board of directors, but, according to Nascer do SOL's findings, it's simply a possibility still being analyzed by Centeno.

"I don't know what Mário Centeno will do. As an employee of the Bank of Portugal, he has the right to stay on as a consultant. I would never stay on the bank's staff after becoming governor, but everyone does what they want," Álvaro Santos Pereira said in Parliament.

Speaking to our newspaper, João César das Neves argues that "common sense recommends a removal," adding that "maintenance would be strange in any case, and even more so in the particular situation of the current governor, who has been involved in several conflicts during his long career within the Bank and in the Government."

Regarding the supervisory body's independence, the professor doesn't hesitate: "The Bank of Portugal enjoys considerable independence from political power, as it operates within the supranational framework of the ECB. In this area, Europe has a significant advantage over other countries. More problematic is its independence from those under supervision, as the financial problems of the past decade have clearly demonstrated."

Furthermore, alongside the controversies surrounding the Executive branch, we must also take into account the appointment of Álvaro Novo as the governor's chief of staff just days before Centeno's departure. This appointment was ultimately dismissed by the future governor of the Bank of Portugal, who considered it a position of trust and close proximity. "A chief of staff must work very closely with the governor. My chief of staff will not be Álvaro Novo, but Filipa Santos, my former chief of staff," he clarified.

The headquarters building is also far from peaceful. Santos Pereira emphasized that "structural decisions on these matters should not be made at the end of the mandate," but expressed his willingness to evaluate the matter.

An opinion shared by César das Neves, for whom "it seems a principle of common sense, whatever the position, not to impose structural options for the future in the final months of the term."

Pedro Ferraz da Costa, also critical of these decisions, admits to our newspaper that "it's completely absurd." In fact, he goes even further in his criticism: "Those boys at the Bank of Portugal report directly to God and do whatever they please. We have 750 BdP employees, while the Central Bank of Spain has about 400."

It should be noted that, as Nascer do SOL has already reported, the sale of buildings and the release of rented spaces is the central bank's solution to pay for the regulatory agency's new headquarters on the former Feira Popular site in Lisbon. The idea is to centralize all employees on the former Feira Popular site. Our newspaper understands that the space on Almirante Reis should be vacated by the end of September, and only then can it be sold, but not for now.

Currently, the space still houses some areas of the bank, but many have already completed the transition to another building on Avenida Álvaro Pais. Our newspaper understands that some processes will not be transferred, which means it will still be some time before it is completely dismantled.

Also for sale is a plot of land in Alto dos Moinhos, Lisbon, and the Bank of Portugal will free up space on Rua Castilho, also in the capital. Only the Money Museum will remain in Baixa. According to the central bank, all of these operations will cost around 10 million euros.

This is a higher value than the one estimated in May, when the promissory purchase and sale agreement was signed with Fidelidade, when an investment of nearly €192 million was announced. "The completion of this acquisition meets the needs of the Bank of Portugal at both functional and institutional levels and represents the culmination of a process spanning more than four decades of searching for a unique location in the city of Lisbon," the institution announced, adding that this concentration of services will allow "a reduction in annual operating costs by more than €5 million. The subsequent sale of Banco de Portugal's real estate assets will finance a substantial portion of the investment."

Risks with no solution in sight

In economic and budgetary terms, Álvaro Santos Pereira admits that it is necessary to "maintain fiscal discipline," as public debt still exceeds 95% of Gross Domestic Product (GDP). The goal is to maintain the path of reducing public debt in order to have "room for maneuver" to respond to "unexpected shocks" and an economic slowdown. "There is no room for complacency," he said at the hearing.

A warning welcomed by João César das Neves, who believes this path "seems indispensable," noting that Portugal, despite its strong financial results in recent years, still cannot be said to have a healthy budgetary situation. According to the economist, the unstable political situation must be added to this. "All of this leads to permanent electoralism, and as such, every precaution is essential in this matter," he emphasizes to our newspaper.

Uncertainties related primarily to military conflicts and trade restrictions in the global economy also complicate this picture. "The global economy is unusually uncertain due to various risks, ranging from protectionism to excessive debt in various spheres, to a rise in military aggression," says César das Neves, adding that "there are many latent threats, and no one knows quite what to expect. Internally, things are better, with the main problems stemming from the inability to manage politically."

Pedro Ferraz da Costa also states that "no one knows what will happen" and recalls a "series of complicated issues" on the table, namely Social Security and the National Health Service. "Every year, the NHS's costs increase, and the feeling it gives outsiders is that the service is getting worse because of the increase in health tourism and immigration, and it's unpleasant to ask citizens to pay more taxes or ask the European Union for subsidies," he adds.

The governor-designate also had a word to say about prices in the real estate market, arguing that "there is no room for complacency," as he believes the sector is one of the platforms for ensuring financial stability. He recalled that Portugal was the country in the Organization for Economic Cooperation and Development (OECD) where prices increased the most relative to disposable income, pointing to a "mismatch between demand and supply" as the reason behind the rise in the last decade.

While this is certainly one of the long-identified headaches, César das Neves states that it's a sector with several structural problems, which can't be cured by isolated measures. "Several far-reaching measures would have to be implemented, impossible within the fragile political framework," the professor emphasizes.