Mário Centeno: Address - Eurofi Financial Forum 2020
Address by Mr Mário Centeno, Governor of the Bank of Portugal, at the Eurofi Financial Forum
2020, Berlin, 11 September 2020.
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This time is different. This is a sanitary crisis turned into a severe economic downturn,
unbalanced across sectors, and with harsher consequences in some Member States.
No imbalances. No moral hazard.
The unprecedented uncertainty led to severe forecasts, but the second quarter outcomes turned
out better than expected. In the third quarter, we expect a rebound in GDP growth.
However, risks are still very high and their impact maybe amplified if this turns financial.
Monetary policy response was strong, stabilizing the financial markets and providing abundant
liquidity to economic agents.
On the fiscal side, the process was led by an initial agreement at the Eurogroup level. Three key
safety nets for workers, businesses and sovereigns were established in less than 10 days.
Afterwards, leaders agreed on a package of 750 billion euros.
National fiscal authorities responded with a strong resolve. Allowing automatic stabilizers to act
and adding a significant support for firms and workers to secure employment and the European
social fabric.
This time was different.
In total, a package of measures amounting to almost 6 trillion euros has been approved
throughout Europe.
The speed and scale of the response explain the success, so far, in the containment of the
sharp contraction, but also contributed to economic rebound and the recovery in the years
ahead.
Agents embedded in their expectations and, therefore, their decisions these decisive policy
actions. Going forward, policy makers cannot defraud them because the work is far from
complete. Monetary policy PEPP should remain flexible, and Next Generation EU funds should
be used efficiently.
The "whatever it takes" stage, must be followed by the "whatever is worth".
At the national level, decision makers will have to ensure that funds will be used to finance
adequate investments and reforms.
At the European stage, a level playing field must be warranted among sectors and among
Member States.
It's crucial that the convergence process is not disrupted, but rather promoted. The absence of a
solid convergence of Euro Area Member States, puts at stake a solid and robust growth of the
Euro Area. That's why we need monetary and fiscal policies at the same time.
All crises entail some form of reallocation. The sudden stop and go of this crisis resembles a
Vshaped, but the final miles of this process will be characterized by an increase in labor market
churning, always full of risks, but much needed to promote the return to previous GDP levels.
Reallocation is necessary, but conditions should be provided for it to increase efficiency and
growth.
The financial system will have a determinant role.
The flexibility provided by the supervisors should continue to be used to grant credit to the
economy, allowing for a proper transmission of the monetary decisions. This cannot morph into
a financial crises.
Economies are getting out of the current crisis with a debt level definitely higher. Their
sustainability is dependent on the decisions taken at this stage. A wise usage of the funds will
allow our economies to overcome the debt problem.
Finally, let me stress the temporary nature of the monetary and fiscal measures in response to
the temporary crises. However, their premature withdraw can be detrimental to the rebound of
our economies. We need to keep them for as long as they are needed.