An Interview With Italian Prime Minister Enrico Letta

Opinions about events beyond our borders.
Oct. 17 2013 9:51 PM

“We Need Stable Markets”

An interview with Italian Prime Minister Enrico Letta.

(Continued from Page 1)

L.W.: So they don't need capital?

E.L.: No, they are good.

L.W.: Didn't the ECB give Italy a round of LTRO [long-term low-interest] loans?

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E.L.: The ECB, of course, is playing a very important role at the European level for stabilizing the euro and for creating a stable situation for the banks.

L.W.: Are banks able to extend credit to small and medium-size businesses?

E.L.: In the budget law, we put a new capitalization for the funding of [small and medium-size enterprises] that is a way to put a public guarantee for loans focused on [them].

L.W.: You have a dangerously high level of debt-to-GDP ... and the [International Monetary Fund] just said you have a negative growth rate of 1.7 percent.

E.L.: In the year 2013. But our forecast for 2014 is to have 1 percent growth. And the IMF forecast is 0.7 percent for next year, so it's not so different from ours.

L.W.: Does this mean you are going to get rid of some regulations and make life easier for businesses? If so, how?

E.L.: Yes, a big part of this budget law is cutting red tape. That is decisive for helping Italy create new jobs. The other main issue I mentioned is the cut of labor taxes. It will be lower to give an incentive to give jobs for youth.

L.W.: Is it impossible for a business to dismiss an employee?

E.L.: In a company with [fewer] than 15 workers, you can fire a worker without any justification.

L.W.: And otherwise it's impossible?

E.L.: Above 15 workers, it is different. You have to deal with trade unions on that. Coming back to the creation of jobs—it's very important that in the last five months, we had an important reform, cutting labor taxes for new jobs for youth, and that is creating opportunities for workers younger than 29.

L.W.: You have a huge problem with youth unemployment.

E.L.: We have around 38 percent youth unemployment. That is our nightmare.

L.W.: So do you want to cut some of the red tape and make Italy more market-friendly?

E.L.: We already did for some businesses, and we are passing other laws for other businesses.

L.W.: What did you think of former Prime Minister Mario Monti's austerity plan?

E.L.: Monti did a great job because it was necessary at that moment to cut the budget and to cut public spending. It was the only possibility to avoid Italian failure. Now it is my job to continue the necessary fiscal consolidation, which is why I'm cutting public spending, privatizing, and so on. But now it is necessary to push growth and youth jobs.

L.W.: Do you think you can attract outside investment?

E.L.: We wrote a plan named Destinazione Italia. This plan is a group of new rules with a fast track for foreign direct investors. ... We need foreign direct investment.

L.W.: Which means creating jobs and growth.

E.L.: Yes.

L.W.: I understand that in Italy hiring is based on connections, not on merit.

E.L.: Oh yes, of course, it's a very big problem. We need more meritocracy. Italy needs to cut informal links. It is one of the traditions of our country, it is a cultural problem. We need to change generations. ... Not only in the post of prime minister but also in the academies, in entrepreneurship, and in the trade unions. We have to leave the geriatric Italy. My big mission is to give a big opportunity to a new generation.

L.W.: You are so young. What are your dreams?

E.L.: My true dream is to allow my country to change and give the opportunities to the new generations. ... Italy was a country in which the politicians were old, the professors were old, and so on. We need to give opportunities to the youth. This is my mission.

L.W.: If you succeed, will this make Italy fit better into the global world? Italy has lost some of its competitive edge to China and other countries. It used to be a leader in manufacturing, and now it has a harder time competing.

E.L.: Exactly. Italy had good performance ... but in the '80s and the '90s we allowed the rise of the general debt. ... [Over time] Italy [became] the country with the biggest debt in Europe, and this is why we had such a crisis in the last years. And this is why today my job is to create again confidence in the markets.

L.W.: Do you think you can get that debt down?

E.L.: Yes, next year for the first time in five years, the debt will decrease.

L.W.: Can you get the debt down to a reasonable level?

E.L.: Of course. For cutting debt in the long term, we need growth.

L.W.: You either need growth or tax increases or spending cuts, but your coalition partner [the center-right People of Freedom Party of Silvio Berlusconi] won't let you raise taxes, correct?

E.L.: Yes, that is correct. But the crucial point is that without growth, it would be impossible to cut the general debt.

L.W.: The EU could lose Greece, but to lose Italy is almost unthinkable. Do you think Italy can stay in the eurozone? Do you want Italy to stay in the eurozone?

E.L.: Yes, there are no problems on that.

L.W.: Do you believe in a united Europe?

E.L.:  Yes, I completely believe. Next year Italy will be the president of the European Union in the second semester. My mission will be to try and have steps toward a more integrated European Union. I think the European Union needs Italy and needs Italy to be pro-European. I am pro-European.

L.W.: What do foreigners think of what is going on here in the U.S. with the government shutdown? Do you think it affects our credibility in Europe?

E.L.: No, because the American leadership is not linked to these internal discussions. But it is—or it was—a big problem because of the consequences of this instability on the European markets. We need stable markets. And in order to have stable markets, we can't have a situation like the situation here in the States with instability on the U.S. budget. This is why I am relieved by the news about the 

Lally Weymouth is a senior associate editor of the Washington Post.