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CNBC Interview with Mario Centeno, President of the Eurogroup


Below is the transcript of an exclusive interview with CNBC's Joumanna Bercetche and Eurogroup President, Mario Centeno.

JB: There's some big challenges coming up for Eurozone integration in the next couple of months - we've got a key meeting coming up in June. Major two challenges are going to be the completion of the Eurozone banking union project and also the transformation of the so-called bailout funds the European Monetary Fund. The first question I want to ask you is do you see a willingness on the part of all members of the Eurozone to actually proceed with this project?

MC: I'm sure that all members understand the importance of completing the reform institutional setting. Everyone around the table is engaged in the discussion then you may say that there are different perspectives on these specific issues but we all understand the importance of using these what I refer to as a unique window of opportunity both because of the economic results and the political cycle that we are now entering until the European elections to complete the decisive task of reforming the Eurozone.

JB: Can you actually see the Eurozone moving towards a risk sharing model euro-wide?

MC: We already agreed that risk sharing and risk reduction need to go hand in hand. We have been implementing many, many measures, radical measures on the risk reduction side and we've been successful at doing that. So now we need to evaluate where we stand. This was already considered in 2016 to be to be done and take the next mile and put together measures that cope with production and risk sharing.

JB: And of course it will take time and there will be a certain amount of sequencing that needs to happen before these measures come into place. We just heard from Mr. Scholz who said that European reform is a number one priority for the German government but then equally it's the same Merkel has said that it can't just come at any price. So in terms of sequencing where do you think we start and what measures do you think we can expect to see over the next 12 to 18 months that would really solidify some of the discussions?

MC: We need to understand that we are doing this because everyone believes that it is good for everybody for every country to be better equipped to face the future to face the cycle the change that we eventually have at some point in the future so we need to be better equipped. In that sense we are all net winners of the decisions we are about to take. And this is the spirit. This is also to say that each country, each government each Minister of Finance has to invest some political capital on this because we firmly believe that it is important. In June we have to decide on a more detailed roadmap and certainly as you were referring to this will be a sequencing process, a phased process step by step taking measures that need to take a very comprehensive set of instruments to achieve these goals. I think we can prioritize finalizing the banking union the backstop facility for a single resolution fund taking care of what is making a more robust European stability mechanism so that crisis management in Europe can be improved in the future. But then looking at longer term issues like institutional design and fiscal issues at this stage the goal is to define better define the road map and get into specific timing for the whole process.

JB: And of course be better equipped for the next time a crisis or recession actually hits the Eurozone. But I want to ask you also about some exogenous challenges and one of the big themes that has come up here is that of the trade war rhetoric between the United States and the rest of the world. And I just wonder on a Eurogroup level how concerned you are whether this has really been built into your discussions and possibly whether or not you're thinking about some form of retaliation against the U.S. if they go down this route?

MC: We've been experiencing a very good period in terms of economic outcomes in Europe. This is certainly the result of the decisions we made in the last five, six years to respond to the crisis. And Europe is a very open economy. The European, euro area is one of the most open economies in the world more open from among the largest economies in the world. And this is very important for us to keep. If there is one thing that economists agree and there are not that many things that you can take economists to agree upon, free trade and the benefits of free trade is one such thing. We want to preserve the multilateral cooperation that we achieve that WTO. And this is very important for Europe. Of course we do know that there are decisions that are against raising barriers tariffs and protectionism. Europe is aware that for example the decisions with Europe now temporarily we told by the U.S. administration. We think it's very important to continue cooperation so that these can be made permanent and we can continue in a multilateral view to deepen our economic integration to develop world trade. This is certainly for the benefit of everybody.

JB: Now one other big decision that needs to be taken in the next few months is that of Greece and there are reports that there's going to be a meeting between Eurozone finance ministers at the IMF tomorrow to discuss some elements regarding the Greek program. I just wonder whether or not the divides between the two sides regarding debt relief has finally been bridged?

MC: We are in a good position to finalize the program with Greece. The Greek authorities have done an amazing job implementing prior actions and achieving targets within the program. This takes us to say that the Greek economy is out of the woods. We think a successful exit is within perfect reach in August. There are a few issues on the table data that relates with the debt relief measures and those for the medium and the long term we are working with all the institutions to reach an agreement on that. And my sense is that indeed we are much closer to close the gaps than we were before. And there is again I mentioned before the political investment in the capital, political capital into these and both parties are very much committed to reaching an agreement.

JB: And of course the IMF has emphasized the importance of achieving the primary surplus. And if you look at their updated forecast for Greece they're pretty much in line with the European Commission. So you have to think that at least as far as primary surplus is concerned the bridges is divided, the bridges has been covered. And therefore many people are now expecting the next step to be that debt relief.

MC: Everyone is interested in Greece being able to stand on its own feet and be able to exit successful from the program and have market access and that new economic model that has been constructed in the last years to succeed. So technical issues I think are pretty much settled. We now have to enter into the political dimension. It's very, very important for the Greek society to take full ownership of the process. And the key ingredient for success, and now I can take also the mirror image of the Portuguese example is for these processes to be able to be confirmed across political and economic cycles. And I think that Greece will be able to do to achieve this.

JB: Do you still see a role for the IMF and Greece in the future?

MC: There is there is a specific program for that. We think if there are conditions and we think we are working to create those conditions that the IMF can continue associated with the Greek developments in the future. But it is very, very important and this is the political message that we have to keep pushing to is to Greek society, the Greek authorities to take this sense of ownership into the measures that are needed in the future to guarantee that Greece is in a sustainable growth path. Combined with also fiscal policy that guarantees market access and financing conditions, good financing conditions for the Greek economy. This is the most important issue.

JB: I want to ask you something that's a little bit close to home for you actually it is for you that the Portuguese turnaround story is a very successful story. When you think of countries within the Eurozone who managed to turn their prospects around but there was a lot of scepticism when the government was being formed a couple of years ago because it was a minority government and people didn't believe that a minority government could actually have an impactful effect on the economy. We're seeing a rather similar situation in Italy today because there really isn't a government and when a government will be formed it will eventually be a minority government. So my question to you is what guidance can easily take from the Portuguese template to apply it to their own economy so that we can start seeing growth levels pick up in Italy as well.

MC: Recently we tend to be quite a little bit anxious about the results of the elections in Europe if you go back you see the Dutch the French the Germans the Austria. Every time there are elections in Europe people, commentators and politicians start to fuss a little bit about it. So its better, it's very good if we can take a more long perspective on these issues and understand that the government's solutions that were the result of these electoral processes confirm in each of these cases the European project, the European dimension and certainly with a very strong degree of idiosyncratic policies that is naturally in Europe. The Portuguese case is precisely the same, the same thing. We were able to commit to targets - we actually the government prepared itself very well to go into office and implement a policy that starting with the financial sector stabilization and completing these with a very rigorous and determined fiscal trajectory that finally was able to put our debt to GDP ratio on reducing pass, this was the result of this preparation and the commitment with the goals of Portugal in the European context. This is the main thing that I can take out of the Portuguese example to other examples in Europe. Italy is certainly one such example. We face similar challenges within of course different contexts. I think we need to be confident that whatever solution comes out of the democratic process that is initiated by an election in this case in Italy will fulfil this main and common goals of all of us in Europe. With a common share sense of possibilities, because we do share a common currency, we are benefiting all European countries of the good economic situation of Europe. And this will also make certainly easier to find solutions around trade.