Italy’s Premier Mario Monti: Time to Focus on Growth in Europe
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MARGARET WARNER: Mr. Prime Minister. Thank you for having us.
PRIME MINISTER MARIO MONTI: Great pleasure.
MARGARET WARNER: As we sit here, Greece is undergoing yet another 24-hour strike. The financing situation hasn’t been resolved. What are the consequences for Italy if Greece should default on its debt?
Mario Monti: The consequences would have been extremely serious for Italy, had a default of Greece happened a few months ago. Now – in fact — of course, I hope that there is not a default for Greece, but I’m really confident that even in that case Italy is seen by the markets and by the E.U. institutions and by the global community as a country which, since a few months, has really taken some tough structural measures, both as regards the budgetary consolidation and as regards structural reforms for growth.
So I’m confident that we would be much less exposed to a Greek default risk than we would have been a few months ago.
MARGARET WARNER: Do you think Greece helps prove the point you’ve been making to European leaders, though, that austerity without growth can be a recipe for disaster?
Mario Monti: Yes, but Greece is really the extreme case, because of the excesses of deficit, of public deficit in the case of Greece had been over many years so high, so extreme that it would have been hard — let’s face realities — to have a soft landing from those excesses of deficit without a recession.
But in more general terms, I think there is a valid point if we say that Europe needed to be put under a safe place as regards the public finances of each member state. Thanks to German and other pressures, we could say that most of us are there or nearly there. And now, without going back to fiscal indiscipline, that the time has come to focus more energies on how collectively we can achieve more growth in Europe.
MARGARET WARNER: Do you think that in fact there’s a real danger of a backlash here in Italy against what they may see as E.U. imposed changes to their way of life that are very, very painful. What are you seeing?
MARIO MONTI: There was — there was such a risk of backlash, and it is there more generally — well, let me say a word about Italy.
I try to avoid that backlash by always presenting the necessary sacrifices that Italians have to go through not as an imposition from Brussels or Germany or the European Central Bank, but rather as a necessary step that Italians have to undertaking — to undertake also at the suggestion of Europe, but basically for their own interests, for the interests of ourselves and of future generations of Italians. This is precisely meant to avoid backlashes.
Having said that, in a wider perspective, the euro zone crisis has indeed brought about quite a bit of misunderstandings and the re-emergence of old phantoms about prejudices between the North, the South of Europe, and a lot of mutual resentment.
And it is very, very important that we all take this with great attention in order to avoid that something that was meant to be the culminating point of the European construction — namely, the single currency — turns out to be, through psychological negative effects, a factor of disintegration of Europe.
MARGARET WARNER: The German government is arguing, however, that if the pressure is relieved too soon on the really indebted countries, the pressure of the interest rates in the market, that they won’t even do the necessary reforms. Do they have a point about that?
MARIO MONTI: That point was certainly valid in the past, for the long years since the inception of the euro where the financial markets went to sleep, took a long siesta and did not exercise any market disciplining effect. Now, of course, after the recent financial crisis, markets woke up quite brutally and did exercise a lot of pressure for each of us to engage in a serious budgetary consolidation.
Now the role of the markets is there, but I don’t think we have to rely basically and mainly on high interest rates for governments to continue the path of sound budgetary and reform policies.
On the other hand, one could also make the case that those countries and those populations — like, since a few months, the Italians — who definitely are embarking on all the necessary measures of budgetary consolidation and structure reforms, may be disenchanted and not ready to continue on this path unless they do see some recognition of their efforts through, in particular, a decline of interest rates.
MARGARET WARNER: But you do want Germany to put up more money, do you not, to make this bailout fund, the firewall, bigger, as Treasury Secretary Tim Geithner’s been urging, as the IMF has been urging?
MARIO MONTI: Yes. That goes for Germany, but for all member states. And of course, Germany happens to be the largest one. But one can also make the point that the higher the overall amount of money put in the firewalls, the smaller the probability that it will ever have to be disbursed, because the markets will be impressed by the credibility of the — of the fire brigades.
MARGARET WARNER: What can President Obama do to help you?
MARIO MONTI: To help me, or to help the E.U.?
MARGARET WARNER: Both.
MARIO MONTI: I think he can help us all through a sound management of the U.S. economy, which he’s trying hard to achieve, just as we can help him by avoiding the explosion of tensions to the world economy out of the euro zone. And I think on both sides of the Atlantic, we are working well in the desired direction.
MARGARET WARNER: Back to what you’re trying to do here at home, do you think that by calling for more competition in the economy, as well as budget cuts, you are asking the Italian people to really change their central character or culture?
MARIO MONTI: To some extent, yes. I am fully aware of this, and basically our mission and my wish is to have the Italian people value more and more some strong qualities they have in their genes and traditions — that is, a strong entrepreneurial spirit and a sense of — and a sense of solidarity in society.
But I definitely think that Italy can become a more competitive place only if we introduce in our system much more meritocracy, which means much more competition and accountability in all decision points of corporate, as well as the public administration.
So you can say what you probably think, that this is a tall order for a government which, at most, will be in place until the spring of 2013. But we will be happy if we accompany Italy with a gentle pressure towards achieving at least the first mile of this long road.
MARGARET WARNER: Mr. Prime Minister, thank you so much.
MARIO MONTI: Thank you very much.