It sounds like a warning and, said Mário Centeno, it is a warning that must be taken into account: Europe should prepare for “future challenges” and brace itself for “new storms” like those that buffeted it during the euro crisis.

“European governments cannot rest on the laurels they have achieved,” he said, but must remember that the “structural reform effort should be continuous.”

Was this a message for domestic consumption, for Portugal's euro-zone partners, or for everyone at once? The Eurogroup president and Portuguese finance minister was speaking in Lisbon on Monday at a conference on the future of the European Stability Mechanism (ESM), organised by Público newspaper at the Gulbenkian Foundation. Among his listeners was Klaus Regling, the president of the ESM – which helped fund the bailouts for euro-zone countries in difficulty and whose “short history”, as Centeno recalled, “is bound up with the history” of the euro crisis.

In the context of a discussion in Europe about the creation of a European Monetary Fund, and a future that is still under construction, Centeno made a point of going back in time a few years to recall the moment when the “survival of the euro itself” was brought into question and Mario Draghi, president of the European Central Bank, in the  summer of 2012 said the famous phrase that the ECB would do “whatever it takes” to save the common currency. Today, Centeno said, he has confidence in the euro zone – with the common currency once more “an anchor of stability in the world”. Against Euroscepticism he cited a statistic: “70% of the 350 million European citizens support the euro”.

But he also issued a warning, recalling that in the past it was believed that “the accumulation of external deficits was not relevant in a common currency and that the structural differences between member states would be smoothed out in harmonious fashion”. While everything appeared to go well in the monetary union's first few years, the “illusion of prosperity created by currency stability and low interest rates” dissipated with the crisis.

The problem? “The financial crisis was not a simple storm” for which Europe was not prepared. It ended up seeing that financial crisis “turn into a crisis for the euro”.

Today, with the euro zone enjoying growth, countries' focus “should be on deleveraging our economies and increasing potential growth,” Centeno said. “We can't be exposed to new storms as we were in the past. This sounds like a warning, precisely because it is a warning.”

In speaking of the necessity that government prepare for “future challenges” Centeno cited as an example the need to respond to population ageing, because this will put the European model of well-being to the test.

As for the European Stability Mechanism, Centeno recalled that there is among euro-zone ministers “very broad support” for giving the ESM “a new instrument to finance the Single Resolution Fund” for the banking sector. He mentioned other proposals that have been debated, without at any point referring to a possible future European Monetary Fund (EMF).

Strengthening the ESM “should go beyond the new instruments in themselves”, he went on. “Another proposal that we have been discussing aims to strengthen the mechanism's role in crisis management and in designing adjustment programmes. Another idea is giving it responsibilities in crisis prevention, in close partnership with the European Commission and avoiding any kind of overlap".

Este artigo tem uma versão em português

Translation by Douglas Bissell