New governor of the Bank of Portugal expresses political opinions in first speech

Portugal’s new governor of its central bank, after saying he wouldn’t’ be expressing political opinions, did exactly that in his first public speech since taking office on Friday last week.

Álvaro Santos Pereira, a man who had been out of the political spotlight for a decade, started banging on about housing in his swearing in speech as the new governor of the Bank of Portugal on Monday – a subject already done to death by every politician and commentator from the left, right and in-between over the past few years. But decided to weigh in and give his tuppence worth all the same.

A not very auspicious start for the economist, former journalist and novelist who had been the minister of the Economy and Employment between June 2011 and July 2014 under the PSD-CDS-PP government led by former Prime Minister, Pedro Passos Coelho.

In fact, he himself had said that as governor of the Bank of Portugal he wouldn’t’ be giving political opinions.

Instead, his role is to essentially formulate and implement monetary policy through the European Central Bank’s (ECB) Governing Council, set key interest rates, and supervise banks to ensure financial stability.

He and his teams should also provide economic analysis, collect statistics, and participate in decisions for the entire euro area, not just in Portugal, to achieve the ECB’s objectives of price stability and sustainable growth.

But the successor to Mário Centeno, who was appointed in July, said there was a “problem of a lack of houses” in Portugal (well, that’s news! I don’t think any of us knew that…) and that new construction needed to go ahead, and that local municipalities had a role to play in that.

Álvaro Santos Pereira opined that it was important to “reduce blocks and restrictions” on construction from municipal councils, because, in his opinion, there are “countless restrictions on construction, far more than any lack of financial incentives.”

Well, we know that too. The government knows it and has finally reduced VAT on new build for properties up to €648,000. It is also well known by the Association of Real Estate Developers and Investors (APPII) which had been calling for a reduction on VAT for at least five years.

Giving his first speech at the Money Museum in Lisbon (next door to the ceremonial headquarters of Lisbon City Council), and which forms part of the headquarters of the Bank of Portugal where it has been since the 1840s, he said: “We could not be in a more appropriate place for this ceremony, in the beautiful and historic headquarters of the Bank of Portugal.

“The symbolism of holding this ceremony in such a special place couldn’t be stronger and more important at a time time when the interdependence of central banks has been questioned from some quarters” he said in his 20-minute speech.

Then the former OECD chef economist bullet-pointed his priorities for his five-year term while the former governor Mário Centeno, a clutch of bankers and financial supervisors looked on.

Santos Pereira intends to make changes internally. And some of them promise to be controversial. This is the case with the way he wants to hire the directors and deputy directors of the central bank.

“We will introduce a competition for all hiring of directors and deputy directors,” said the governor. With this, he intends to “increase transparency and promote meritocracy” within the institution.

The change could thwart the intentions of his predecessor. Last week, Mário Centeno tried to approve his promotion from deputy director to director, but to no avail, because three members of the board of directors voted to postpone the decision to a subsequent meeting, with the new governor, according to the online newspaper Observer.

All good so far… and then he moved on to housing. As he did in his parliamentary hearing, Santos Pereira again drew attention to the “dramatic price of houses” (But we live in a free market, so what can be done about it?).. and its impact on the lives of families and financial stability.

“The huge increase in prices in the real estate sector is a factor of concern, particularly when international indicators are taken into account, the average incomes of families, and the housing affordability rate when buying one’s own home”, said the former minister of the Economy.

And here came the policy meddling part. The new governor said the he appreciated the government’s measures to help young people get onto the housing ladder, but “a lot more needs to be done to unblock the constraints on supply”.

And then came the ‘bleedin’ obvious’. “It is essential that municipal councils reduce excessive restrictions on construction, and vital to speed up planning processes, increase the densification of cities, and sort out the lack of qualified labour in the construction sector”.

This led me to feel that I was at a press conference given by the Minister of Housing, or perhaps he filled out the wrong application forms!

Álvaro Santos Pereira fears that by not drastically increasing the amount of housing offer, real estate prices will continue to soar with eventual negative effects on Portugal’s financial stability.

Better was his call to make law and regulations on the financial system less complicated.

“Laws and regulations are essential to the good performance of the economy and the financial system, but there is an urgent need to simplify and simplify them,” said the head of the banking supervisor.

Santos Pereira wants to “eliminate redundant legislation, simplify excessive and unnecessarily complicated regulations, and make the regulatory framework less complex, more agile and more coherent”.

Not a bad idea at all.

“There are countless laws and regulations, not always well coordinated between the various jurisdictions and angles of supervision. It’s time to consolidate and simplify them”, he said.

Santos Pereira also called for the reactivation of the National Council for Financial Stability, so the government, the central bank and other financial supervisors can regularly debate the risks to financial stability, financial literacy, and the combat against fraud and money laundering.

Internationally, Santos Pereira intends to place the Bank of Portugal at the forefront of studies and analyses on the impact of “major trends that will condition and impact our lives and policies”.

The governor wants to deepen knowledge on issues related to the aging population, artificial intelligence, climate change and energy transition and low productivity growth, and discuss the challenges within a “network of central banks”.

“We intend to propose to the other central banks that a  major annual conference to analyse and debate these topics and their consequences for monetary policy and financial stability should be held,” said Santos Pereira.

Photo. The new Governor of the Bank of Portugal (BdP), Álvaro Santos Pereira with the Minister of Finances, Joaquim Miranda Sarmento (Right), gives his first public speech at the Money Museum in Lisbon, on October 6, 2025.
JOÃO RELVAS/LUSA
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