Welcome to hardtalk. Im stephen sackur. The coronavirus pandemic has hit europe hard, but now that most eu Member States have curbed the rate of infection and begun to ease their lockdowns, does the eu have a coherent recovery strategy . Well, my guest today is mario centeno, finance minister of portugal and head of the eurogroup of ministers. Has this pandemic exposed the eus greatest weakness, economic divergence . Mario centeno in lisbon, welcome to hardtalk. Thank you. Thank you, stephen, thank you for having me. We saw deep divisions within the European Union at the beginning of the covid 19 pandemic. Have those divisions been healed . Well, if you look back, you may see that these divisions have played a role in all the debate. But at the end of the day, we were able to act fast in a very flexible way. And for me, as president of the eurogroup, which is very important in a very pragmatic way, we had a few goals to achieve, to react quickly in a sizeable way and in a way that prevents further fragmentation of the European Union and especially in the eurozone. But, minister, if i may, you didnt really react quickly, did you . We saw the Chinese Government offer medical assistance to italy long before other Member States of the European Union. And we saw some of the members, like the dutch, for example, criticising southern European Countries for the weakness of their public finances rather than focusing on offering help. Your own Prime Minister described that as repugnant and small minded. Now, people dont forget these things, minister. They do not forget, indeed. But the fact is, in the economic front, we took ten days in eurogroup to approve the three backstops representing 540 billion euros of support for sovereigns, for firms and for workers. The ecb also took only a few days to raise to the occasion and come forward with a new package of help for banks and for the economic fabric of the European Union and the eurozone. But what we saw and maybe what we still see in the European Union is that politicians across the Member States first and foremost think of the self interest, the National Interest of their own countries. And at a time of crisis like that, it means the European Union finds it very difficult to function collectively. Well, as president of the eurogroup, i cannot deny that i would prefer domestic policy to be a little bit. On the back of our arguments when we are taking decisions for the European Union as a whole, or the eurozone, which is the same for that matter. But in fact, the several trillion euros in measures that were taken at the national and at european level speak probably louder than a few altercations that we may have seen in this process. I know youre dying to talk to me about the, as you put it, the more than trillion euro package that the European Commission wants to put together and push through as a recovery and rescue package for europe, and we will talk about it, i promise you. But before we get there, i just want to focus a bit more on the fact that different nation states, Member States of the eu, are pursuing different policies. Right now, we see it in terms of the easing of the lockdown, where if you visit Different Countries, from austria to germany to france to sweden, all of them are operating their own particular form of post total lockdown strategy. In the case of sweden, they never even had a lockdown. Theyre also operating in different ways in terms of their opening up of borders to each other. Now, youre a European Union, but this doesnt sound unified at all. We are in the middle of a very severe and unique sanitary crisis. This is a matter for many people of life or death, and the personal sentiments are very sensitive at this moment. Compare us with the us you have the same sort of debate across us states. You have the house of representatives making proposals to the senate then the Senate Rejecting them. The debate in the Uk Parliament is not much easier than that. And even across regions in the uk, you see the same sort of scenes. People become very, very sensitive when we talk about issues like life and death. Im afraid that we have also to take that into consideration. Fair point. Fair point, and i understand that. But, as you know much better than me, freedom of movement, for example, is one of the key pillars of the European Union. Because this time it was not only about the economic and monetary union, it was about the Single Market, it was about precisely the Free Movement of people, of workers across europe. People at this time in Different Countries and governments, they need to understand that it was very much the basics of our economies that were at stake and, of course, all of our societies, as well. The Single Market is a pillar for european integration as much as the euro, and both things this time were injeopardy. But explain this to me. I mean, youre the finance minister of portugal. Your economy is deeply dependent on summer tourism, so your government has sent the message that tourists are welcome from all over and, we are opening up. Other European Countries arent sending the same message. We have some internal disputes where, for example, the danes and the finns are telling swedes that theyre not welcome as tourists because sweden has a high rate of infection. We have britain, which admittedly is not any more in the European Union but a very close neighbour, saying that all visitors will be quarantined for two weeks, if they arrive. So it looks like a european mess, and it is an important part of your economy, this notion of tourism and travel within the European Union. How are you going to sort it out . This is a sanitary crisis, and people are very much afraid of their health. And we have to overcome this and we need to make this with a great deal of confidence and safety. I think most of those measures are measures that governments will take at the beginning of the de confinement period, in the exit strategy of the lockdown, in order to understand better how the society and pandemic reacts to this slow movement of openness. And i expect governments to lift these restrictions as soon as we are confident enough with them. But let me ask you bluntly, minister, if i may, do you accept that you in portugal have put economic priority above Public Health priority when youve opened up your country to travellers from overseas because you are so desperate to save your Tourism Industry . Thats an economic decision which could raise serious risk in terms of Public Health. It is true, but take the uk, take the uk example, and then i can give you also the same sort of examples for portugal. Scotland and Northern Ireland, if i understand correctly, are not going as fast as other parts of the country, right, in terms of exiting the lockdown . The same thing is true for portugal. The area around lisbon is a little bit backwards compared with other parts of the country. Ican, for example, tell you that algarve, which is where most of the people from the uk go for holidays, do not have a single case of covid i9 in the last couple of weeks already. So things are going very well there. So if you want to go to algarve, you can feel safe, and please visit as soon as you can. I am also very much eager to visit london in a couple of weeks if its possible without the lockdown, as soon as you guys in the uk feel confident with opening up your borders again. Well, as you say, the situation fluctuates from area to area. I do get that. Lets take a big picture look, though, at the european economy, the state of health of the european economy. We have the imf predicting that the economy could shrink by 10 to 12 overall this year. The ecb, the European Central bank, says that it could go as much as 12 reduction of european gdp. These are absolutely disastrous numbers Christine Lagarde calling it the biggest economic crisis certainly since the second world war. And we see the debt levels in countries like italy projected to rise to Something Like i60 , possibly 170 of national income. How on earth does the eurozone and the wider eu get out of this economic mess . Well, pretty much as all other economies will. This is a temporary thing. This is very, very serious. I agree with all the numbers you gave. They are a very good description of the hardship we will experience in the coming months, but we really need to make this a temporary crisis. It does not come as the regular and usual crises in economics do. Interest rates are low. We were following a very long probably the longest path of Economic Growth in recent history. Unemployment rate was very, very low at the beginning of this sanitary crisis. One of the champions is the uk, but you have other examples in europe and worldwide. So. I understand that, minister. But the problem im getting to is that what you have in the midst of this Public Health crisis is an economic crisis which is exacerbating the fundamental flaws in the European Economic system. And that is all about divergence, because while you have italy, italy, with a National Debt of i60 of gdp, you have the dutch and the danes and the swedes with loads of fiscal headroom. They can do whatever they need to do to manage this economic crisis. The italians have no headroom at all. You, as president of the eurogroup, are on top of a system which is incoherent, such is the deep divergence. We learned a lesson from the past, and we could not afford to have this sanitary crisis to morph into a financial crisis. So we really took the measures that and thats my expectation allow us to evolve through the crisis without creating further fragmentation in the eurozone and the European Union. The measures we took are meant to a specific goal, which is to level the Playing Field of our political response at a National Level so that we can somehow reduce the asymmetries that you are pointing out. We are all going to get out of this crisis with a larger amount of that, and we needed, we really needed, to find a common instrument in the form in this case of common debt issuance to spread the cost of this crisis in a way that we never did before. This is a very important step towards integration. Here, if i may say so, minister, we get to the very heart of the problem. Youve just used this phrase, common debt issuance, which many people might find a bit baffling. But the truth is, what youre talking about is burden sharing, debt sharing. You want now the European Union as an institution through the commission to go to the financial markets, raise vast amounts of money and pump it into those parts of the union that have been most badly affected by the pandemic. Now, i understand all of that, but it is in essence a form of debt mutualisation, and that is a concept which many europeans in the prosperous north, these countries wont accept debt mutualisation. Youve got a very big problem on your hands. The negotiation is under way. I think all countries, including the so called frugal four, understand the importance of the Single Market. You know that the netherlands exports 60 of its gdp and the vast majority of their exports are to the Single Market, to the European Union. So it would be a very significant change in economic model for each of our small open economies if we cannot preserve this vast Single Market. And what we are doing is precisely taking steps that we never thought we were able to travel before. For example, this common debt issuance was an avenue that was basically a dead hand before. But hang on. Weve had several weeks now of. First it was merkel and macron, and then weve had ursula von der leyen, the president of the commission, outlining how this massive Recovery Plan is going to work. And it involves, as you said, in the end, over a trillion euros and it involves long term borrowing and it involves adapting the eu budget for years to come. I understand all of that. But when you tell me everybody has to realise this is vital for the future of the union, the truth is these frugal four, the netherlands, sweden, austria, denmark, these countries have listened to your arguments and theyre not accepting them. I mean, i can quote to you the swedish Prime Minister saying, sweden has all along pushed for the fund to focus on loans, we will not accept grants. Weve got the austrian chancellor saying, were only ready to approve a rescue fund that gives out loans. Theyre not prepared to support your plan. Well, i dont want to enter into each of the countries youve mentioned in terms of domestic policy. But i can only say to you that unions in sweden and denmark play a very Important Role and they dont have such a clear idea on these issues. Also, the greens in austria, they do have a quite different perspective, and they are part of the coalition government. What i want to portray is that, yes, this is a debate, yes, this is quite important to all of us and please judge us by the final agreement. I just want to reassure you that we wont give up in the first difficulty we have. Well, youre going to have difficulties. And give me brief answers to brief questions. Number one, is there going to be conditionality to the giving out of these grants, huge amounts of money to countries like italy . Will there be a demand tied to the grant that italy must restructure, must make some fundamental Economic Reforms . There will be no conditionality attached other than what is typical in the European Union budget. But this weekend, officials in italy already referred to the very strong commitment of italy to put the country in a sustainable path. Well, weve heard promises like that before, minister. And on another level, what if youre wrong . You say that this scheme is going to work because the economic recovery post covid i9 will be very quick. What if youre wrong . What if its not quick . And what if the debt mountain continues to rise . At some point, this is going to be unsustainable. All forecasts point in different directions. But if you want a picture, i can give you one. Think of this as a long, a long, a very long sunday and we are about to enter monday. And as you know, gdp collapses on sundays for our own pleasure and picks up very strongly on mondays when, unfortunately, we have to go back to our offices and factories to work. So this is precisely what we all want. Well, one can only hope the virus recognises the difference between a sunday and a monday, minister. Im not sure that thats going to work. But is this an existential moment for the eu . I think Emmanuel Macron warned a few days ago that the collapse of the eu as a political project was possible if this Recovery Plan doesnt get pushed through and doesnt work. You know, unfortunately, the eu is quite often at the verge of an existential collapse that has been the way many, many commentators describe all challenges to the eu for quite some time. But the resilience of the project, the fact that it is the biggest source of peace and prosperity in europe in the last 70 years. Ah, minister, we hear that phrase all the time. But what do you say to those italians, two thirds of italians, who now say. . Interjecting. Because the counterfactual is very negative. Yeah, the italians now, two thirds of them say that being in the eu is a disadvantage for their country. And at the same time, polls in holland, in the netherlands, say that the dutch will be deeply unhappy if the eu promises to mutualise the debt of a country like italy. So wherever you look at it, north or south, there is a profound problem. What i can say is that the support for the euro is at the highest level ever in history. 76 of euro area citizens approve very strongly the euro. We are providing this network of support to all Member States and to all citizens. I am sure that even in the more sceptical regions, they do understand that. Take the numbers of the netherlands 60 of their gdp is made of exports, and the vast majority of those exports are for European Countries. This is a very, very strong mutualisation of the economic model of the netherlands and denmark. Well. Of sweden, of portugal, spain. Yeah. You have to hope youre right and that scepticism doesnt rise, because we see where scepticism can take a nation it can take a nation like the United Kingdom out of the European Union. Let me end with just a brief question about the state of play in the negotiations between the eu and britain on a future trade agreement. As you know, if there is no agreement to extend the talks, to have an extension to the transition by the end ofjune, they must end by the end of the year. And we get the noises from the eu chief negotiator, michel barnier, and the british side that no progress is being made. How worried are you that there wont be an agreement to extend the talks and the talks will fail and that at the end of this year, the uk will be left trading with the eu on what is called World Trade Organization terms, which will, frankly, not be good for either side . Well, michel is negotiating this for the European Union as a whole, so i think we show that we are more united than ever. We need to understand, of course, the reasons of the uk. But, for me, the crucial thing is still to avoid an exit from the uk. So this is very important for both sides around the table and we need to keep focus on having a deal that serves both the uk and the European Union. But to quote one british minister, he says, i think the covid crisis in some respects will concentrate the minds of eu negotiators, reinforcing the vital importance of reaching a deal. Has this pandemic put more pressure on your side, the eu, to make some compromises with britain . Britain, for example, not prepared to accept this idea of a level Playing Field as part of a preferential trade deal. Well, we have been concentrating from the beginning on getting a deal. I mean, at face value, the argument seems to be a little bit absurd. We need to focus on all aspects of the challenges we have in front of us. And for sure, covid i9 is one of the most important, but we need to also get the other issues done, and i hope we can do that to the benefit of the uk people and the eu people, as well, so that again, going back in a much nicer tone, for you to come to visit us and to have your summer vacations here back and done in portugal. And i think its very important to have all these issues clarified. I look forward to that prospect. Thank you very much indeed forjoining me. Minister mario centeno, in lisbon, thank you very much. Thank you, stephen. Thank you for this opportunity. Hello there, we are going to end this week on a very different note than we began the week certainly. We have lost our area of High Pressure and low pressure starting to take control, it is going to bring windier, wetter, and cooler conditions and thursday looks like being another cool day, cooler than it was on wednesday in fact, and we will have some spells of rain at times too. Our area of High Pressure is continuing to retreat away westwards, low pressure is beginning to develop to our east and that is going to bring further spells of rain. Northerly winds as well which is why it is going to feel on the cool side for the time of year. So, for thursday we start off on a grey note across the south east with early rain. That should clear away and itll turn dry for a time but we will have areas of showers or longer spells of rain moving down from the north scotland, Northern Ireland into northern england. It will turn breezy as well. Windy across the far north of the country as temperatures range from 10 17 or 18 degrees in the south. So, much cooler than how we started the week off. Through thursday night, it stays rather breezy, variable amounts of cloud, further showers or longer spells of rain at times and those temperatures falling to lows of around 5 to around 10 11 in the south. Now, as we head on into friday, we start to see our area of low pressure to the east of us developed further and it starts to push in towards our shores. You can see the isobars squeezing together indicating that the winds will turn stronger through the day on friday. So, it looks like being a blustery one with a bit of sunshine around. But there will also be plenty of showers, some of which will be heavy and thundery particularly across northern, central, and eastern areas. And then later in the day, an area of more persistent heavy rain starts to push into the north of scotland. Here, it will really feel cold for the time of year, nine or 10 degrees. Further south, 14 17 degrees. But you factor in the wind, its going to feel more like autumn than it willjune. Gusts of 50 miles an hour in the north, 30 miles an hour in the south, and those winds pick up further friday night into saturday as you can see our area of low pressure, a real squeeze in the isobars across central and northern parts of the country. And ont be surprised, we could see gusts reaching 60 miles an hour in places. Various sorts of gusts this time of year could lead to some disruption remember, trees in full leaf. It stays very blustery on the cool side on saturday with further showers or longer spells of rain. Then, it starts to quieten down a little bit as we head on into sunday. Those winds begin to ease down, too. This is bbc news with the latest headlines for viewers in the uk and around the world. Im mike embley. 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