The 'Ronaldo of Finance' who did not generate consensus

Mário Centeno's five years at the helm of the Bank of Portugal (BdP) were often controversial, especially with the change of Government, where some political clashes with Luís Montenegro became visible to the naked eye.

The varnish cracked when the governor of the supervisory body warned, at the end of last year, of the risk of having a deficit again next year, despite the Public Finance Council later pointing to a similar scenario.

At the time, the Prime Minister drew attention to the fact that “no other entity”, internal or external, was sharing the governor’s “pessimism”. According to Luís Montenegro, the BdP data “appears to be the opposite, since there is no other entity that shares the pessimism expressed by the Governor of the Bank of Portugal”.

These messages led political scientist José Filipe Pinto to point out that the “appointment is the responsibility of the Government, but it must take into account two elements: the one that derives from professional credibility and the one that derives from the political element”, stating that “in relation to the first, Mário Centeno has a profile that has proven to be perfectly suited to the role, the problem lies in the political element”, he stresses. And he recalls that the governor was for a long time seen as a possible candidate for the Presidency of the Republic by the opposition party. “Even though he was not a member of the PS, he was part of its political area. But it is true that Mário Centeno has behaved abusively in relation to the image of the Government”.

Political scientist Paula Espírito Santo sees these differences as natural, given that we are dealing with an Executive with a different political colour. “It is natural that the Government does not identify with some of its public positions on such important issues, particularly with regard to the return of the deficit for this year”. And she does not hesitate: “There is a divergence of positions, not to mention the clear ideological divergence”. However, these divergences in relation to deficit and growth forecasts and debt levels also occurred with the Socialist Government in power. One of these cases concerned criticism of the government's budget execution, with Mário Centeno warning of delays in public investments in the RRP (Recovery and Resilience Plan) and the underutilization of the budgetary margin for productive investment, leading the Finance Minister at the time to say that the execution was subject to "technical restrictions" and that public finances were "in line with European targets". And statements such as "independent institutions are not only useful when they agree with the government" or "the Bank of Portugal does not make forecasts to please political narratives. It makes forecasts based on data" were made quite frequently by Centeno and responded, in a way, to the criticism made by Fernando Medina, the Finance Minister at the time, regarding the divergence of forecasts.

Salaries create unrest The most recent and also controversial change was the salary increase for BdP administrators, who this year saw their monthly incomes increase by a historic 7%. At issue was not only the salary increase for civil servants, but also the end of the 5% salary cut applied to politicians and public managers since 2010. Centeno now receives a salary of 19,496.39 euros, while his deputy governors, Clara Raposo and Luís Máximo dos Santos, saw their salaries rise to 18,277.87 euros per month, while the administrators – Francisca Guedes de Oliveira, Helena Adegas, Luís Morais Sarmento and Rui Pinto – now receive 17,059.35 euros.

This unease eventually led the Minister of Finance, Joaquim Miranda Sarmento, to reveal that he would study salaries at the banking supervisor and to convene the BdP Salaries Committee, the first in more than 10 years, to analyze the salaries of the central administration.

But before this 'episode', the 'war' over Hélder Rosalino's salary had already become public – he was appointed Secretary General of the Government, but ended up withdrawing after the Governor of the Bank of Portugal stated that the regulatory body would not assume the salary of around 16 thousand euros. Despite criticism regarding the salary mass applied at the BdP, Centeno always rejected the idea that the supervisory body paid salaries "outside the table", stating that there was "no discretion in salaries" and that the regulator's salary policy followed a collective regulation instrument, with there being essentially two careers in the supervisory body: the technical career and the management career.

However, it is curious that about two years ago he had drawn attention to the dangers surrounding wage increases, stating that, in the short term, wage increases and profit margins may seem like advantages but that in the medium term they were “bad for everyone”, for workers and shareholders, because they cause inflation and require central banks to take measures to combat it, by raising interest rates.

Problems began with the appointment It is true that the conflicts began with the appointment of Mário Centeno as governor of the Bank of Portugal in 2020. This is because his direct transfer from Finance Minister to this position raised serious doubts about the institution's independence. At the time, opposition parties accused António Costa's government of "politicizing" an independent entity and of having a "political revolving door".

In fact, the President of the Republic only accepted his appointment after a legal opinion guaranteeing that he did not violate the "impeachment law", but doubts surrounding Centeno's ability to maintain a neutral stance given his recent political past continued to linger throughout his term.

Conflict of interests António Costa's proposal for Mário Centeno to succeed him as interim prime minister, after his resignation in November 2023, also generated high political risk, with implications for institutional credibility, the separation of powers and the independence of the Bank of Portugal.

And the fact that this invitation was made without formal coordination with the President of the Republic, who rejected the proposal and chose to dissolve Parliament, did not provide any greater peace of mind to the case, creating doubts about the neutrality of the position.

In fact, the uncertainty about who made the invitation has caused much ink to flow. Centeno even confirmed to the Financial Times that he had received an invitation from Marcelo and Costa to “reflect and consider the possibility of leading the Government”. Hours later, in a statement published on the Presidency’s website, Marcelo denied the Governor of the Bank of Portugal, who was almost immediately asked to provide clarifications: “Following the events triggered by the resignation of the Prime Minister on 7 November, he invited me to reflect on the conditions that could allow me to take on the role of Prime Minister”, adding that “the invitation to this reflection resulted from conversations” between António Costa and Marcelo Rebelo de Sousa, but that “it was not possible to resolve in this short space of time all the conditions for carrying out what was requested of me. Thus, there was never an acceptance of the position, but only an agreement to continue the reflection and finalise it based on the decision that the President of the Republic would make”.