Mário Centeno Warns of a 12 Billion Euro Squeeze Unless Brussels Relents, and Asks What the Prime Minister Knows That the Rest of Us Do Not

Mário Centeno, the former finance minister and former governor of the Bank of Portugal, has accused Luís Montenegro's government of governing through fear and of spending a financial cushion Portugal no longer has. In an interview with the Conversa Capital programme of Antena 1 and Jornal de Negócios, broadcast this weekend, he warned that unless Brussels revises the budget targets it has set for Portugal, the State will have to find 12 billion euros in cuts over the next two years.

Centeno was responding to the prime minister's recent warning that he does not want Portugal to return to the "times of tragedy" that led to the troika bailout, and his refusal to be "the father of austerity". "When a prime minister frightens us, we should ask ourselves what he knows that we do not," Centeno said. "Governing under fear should not be the norm for a government." He asked Montenegro and the finance minister, Joaquim Miranda Sarmento, to set out clearly the state of the public accounts.

A surplus that belongs to Social Security

The economist rejected the government's account of a healthy surplus. The positive balance of 0.5 percent of GDP reported for the first half of the year, he argued, only appears once Social Security's surplus is counted; without it, "central government is living in a deep deficit". That, in his view, rules out the budget margin the government has announced to pay for new measures against rising prices.

Portugal is in a better position than in 2008 and 2009, he acknowledged, but public spending has been growing faster than the economy. "If something similar to what happened in 2009 unfolds from these figures, I will tell you, we are not prepared," he said, describing the international financial data as "worrying".

"We squandered that money"

Centeno, who ran the finances of António Costa's governments, said Portugal had surpluses in 2023 large enough to face a crisis calmly. "And we squandered that money. I have no other word for it," he said, blaming tax cuts made without keeping reserves. He criticised the government's IRS reductions and one-off bonuses for pensioners, but also opposition proposals to cut VAT on food baskets or on fuel, backed by the Socialists and Chega. He called the State's 400 million euro purchase of a stake in the grid operator REN, financed by borrowing at a time of high interest rates and inflation, "incomprehensible". "We are playing with fire on debt," he concluded.

A book, and a "three-legged table"

The interview coincided with the launch in Lisbon on Saturday of his book Contas Certas ("Balanced Books"), attended by António Costa, now President of the European Council, the Socialist leader José Luís Carneiro and a long list of former ministers. In his speech Centeno recalled the 2015 to 2019 arrangement in which the left-wing parties supported Costa's minority government, which he prefers to call a "three-legged table", and said it worked because there was balance and respect.

Speaking to journalists afterwards, he said politicians today must build that kind of stability from the result of the last election. Asked whether this was aimed at the government, he said it was not only for the executive, since no political actor was doing it, and that it was also why he appealed to the Presidency. He said he was not thinking about his own future: "Legislatures are there to be completed," he said, adding that there are political actors for this task "and I am not one of them". Asked earlier about a return to politics, he said he follows the maxim of never saying never.

The government is due to present the outlines of the 2027 State Budget to the parliamentary parties in the coming days.