By ALESSANDRA GALLONI
Over his nine months in power, Mario Monti, the Italian Prime Minister, has introduced a slew of economic overhauls, fulfilling a promise Italy had made its European partners and the European Central Bank last year. Yet investor demand for Italy's bonds is drying up. Read selected excerpts from an interview with The Wall Street Journal last month. (See related article: Italian's Job: Premier Talks Tough in Bid to Save Euro)
The Wall Street Journal: Some analysts of Europe's unfolding debt crisis say the continent's leaders should consider abandoning the single currency if it isn't providing the prosperity it promised. How would you answer?
Italian Prime Minister Mario Monti: I have never considered the "M" of economic and monetary union simply as a currency. It is far more than a currency because of the way in which it was born, that is, Germany had a strong currency, and everyone else wanted their currency to resemble it. Germany said fine, but with commitments. Today, it's much harder to uphold those commitments, but they've been crucially important, because France, Italy and Spain would never have gotten close to balanced budgets without them. So the euro is a currency, yes, but it has also been a huge lever for political leaders of European countries that wanted to raise their game to German levels.
WSJ: Why did Italy not stick to the commitments it made when it joined the single currency?
Mr. Monti: Italy needed structural reforms to become more competitive. But the only things forcing us to do those reforms were the rather slender rules of the Lisbon Strategy. Other countries undertook structural reforms because of their own internal convictions. Italy can't give up on the euro, because it's not just a currency, it is policy and civic culture.
WSJ: Since you took office last November, you have introduced and shepherded parliamentary approval of pension, labor and public spending overhauls. Do you think it is enough to whip Italy into shape?
Mr. Monti: Of course it's not enough. These are just measures. We need these measures to take root in the behavior of Italians to such an extent that they can survive old-style governments. I hope that my government can help change Italian mentality. That's not to say that I want to substitute Italian mentality with the German one. But there are certain aspects of Italian behavior – such as solidarity pushed to the level of collusion -- that are at the root of things like tax evasion, which my government is fighting with unprecedented instruments and commitment.
WSJ: Talking of behavior that is dear to Italians, at one point you suggested suspending Italy's national sport of soccer. What point were you trying to make?
Mr. Monti: When I brought up soccer, I didn't actually have the slightest intention of suspending soccer games. What I meant was that the soccer world captures, in a reduced way, all the vices of Italians. I meant: let's take a snapshot of this phenomenon, because it's proof that this behavior of ours doesn't just exist in the political class.
WSJ: Your critics say that you have negotiated too much with Italy's political parties, leading to a dilution of some of your reform initiatives. How do you respond to those criticisms?
Mr. Monti: I know that speaking with parties, which I do, but not very often, is seen by many as a "contamination." But I think we learned our lesson. Look, inviting the heads of political parties to working dinner is something that [U.S. President Barack] Obama, for example, does all the time. And there are people who think that Italian parties are in such bad shape that they would never vote us down in parliament. But I'm not so sure about that, because the outcome of a parliamentary vote can, in certain circumstances, be unpredictable. So if measures were voted down, what would happen the next day? Would it be responsible of me to allow that? It would be like putting my own pride – of not speaking with political parties -- before the national interest.
WSJ: What about government negotiations with Italy's business lobby and unions – the so-called practice of "concertazione" that has influenced so much Italian policy-making over the years.
Mr. Monti: I have always considered that this practice has been followed too extensively in the past. Concertazione is like toothpaste. If you don't put the lid on, it all flows out."
WSJ: You are a technocrat, short-term government. How has that affected your aspirations and policy-making?
Mr. Monti: My aspiration is not to be loved. It is that my government be respected and credible. My job was to transform my popularity, which started out at about 72% and is now around 40%, into unpopularity by way of necessary measures. Some say we did less on liberalizations because I didn't want to be hated by pharmacists; that's not true. I just had to calculate what minimum consensus I needed among Italy's political parties to get laws passed.
WSJ: Why, despite your measures, have Italy's borrowing costs remained so high?
Mr. Monti: Spreads are still high because our debt is objectively very high, and markets have started realizing in a dramatic way that euro-zone governance is weak. France has done much less reform than we have and yet its spreads are lower. I think the reason is that people believe Germany will never let France go. I think that if the previous government were still in power, Italy's spreads would now be at 1200 or something.
WSJ: What has been your greatest point of disagreement with German Chancellor Angela Merkel in finding solutions to the debt crisis?
Mr. Monti: Germany says that if the market is forcing you to pay high borrowing rates, it means by definition that you haven't done enough to fix your local economy. This view neglects that fact that high spreads also reflect market fears of a breakdown of the euro.
What we ask is that European authorities certify Italy's good conduct by translating that into interventions to keep spreads within reasonable limits. I have often told Merkel that, if this isn't done, she risks finding herself before an Italian parliament that repudiates Europe, monetary stability and the euro and is not friendly toward Germany.
WSJ: The debt crisis is now three years old. Do you think that European leaders have taken enough credible moves to stem it?
Mr. Monti: Many Europeans would say: Europe has not done enough. In particular, there is one aspect of Europe that is structurally wrong. Nowhere else will you find a currency without the backing of a state and therefore we need to change the mandate of the ECB. I am not in favor of a change in the mandate of the ECB, not because I don't think that Europe needs a more vigorous policy for growth, but because I think it should come from other aspects of economic policies. My fear is that if the mandate of the ECB were to include growth – like for the Federal Reserve – this would be an alibi for us, the politicians of Europe, not to do the things we should. But the ECB should be left to be really independent in its decision-making. Therefore, it is essential that governments not interfere.
WSJ: How would you describe the importance of the June 28/29 European Union summit?
Mr. Monti: Without calling into question its freedom, the ECB can do many things. I think the statement of the June 28/29th summit is very important. If I were [ECB President Mario] Draghi, I would feel morally and politically protected in taking bold steps at the right moment if the heads of European governments said in their statement: 'we affirm our strong commitment to do what is necessary to ensure the financial stability of the euro area, in particular by using the existing EFSF/ESM instruments in a flexible and efficient manner in order to stabilize markets.' Stabilizing markets is a concept that is extraneous to state monetary policy, and it's dangerously Keynesian.
WSJ: The statement also mentions the ECB as the agent of the EFSF/ESM.
Mr. Monti: I have no doubt that the night before the disintegration of the euro, the ECB would do whatever it takes to save the euro. The point is do we need to get to the night before or slightly before then. I am sure that the short-term measures [agreed to on June 28/29] will be approved before the catastrophe. And maybe they will be enough to avoid the catastrophe.
WSJ: Europe's response to the debt crisis has generally been crafted at euro-zone negotiating tables. What is the role of the broader European Union?
Mr. Monti: My ideal would be a Europe that embraces the respect of future generations that goes hand in hand with German-style budget discipline; the sense of the market openness that is best found in Britain, the Nordic countries or Poland and the sense of institution that has historically been the contribution of France. It is fine to work within the euro-zone – and Italy's role at this table has been increasingly recognized. But cooperation among big players in the euro-zone (including Franco-German cooperation, which is necessary, but not sufficient) has to be conducted in a way that brings results and good sense to the overall European Union table.
WSJ: How does Italy's difficult position in the market affect your resolve in pushing ahead?
Mr. Monti: In my moments of doubt, I think: I know that we are not recognized as saviors of the country. But I am convinced that we did salvage the situation and that we're speaking with Merkel, Obama and Hollande about how to go forward, instead of being here in Rome hosting the troika.
Alessandra Galloni
Bureau Chief, Southern Europe
Wall Street Journal
Alessandra Galloni has been Southern Europe Bureau Chief for The Wall Street Journal since 2006. She is responsible for the Journal's coverage of France, Italy, Spain and Portugal and the European aerospace, technology and luxury goods industries. She joined the Journal in 2001 and has worked in London as a European advertising and media reporter and in Rome as Italy correspondent. Subsequently, she has been a European luxury goods writer. She previously worked as a correspondent for the Associated Press and Reuters News Agency. Galloni graduated from Harvard University in 1995 and received a Master’s degree from the London School of Economics in 2002. She was the recipient of an Overseas Press Club award in 2004 and a British Journalism of the Year Award in 2005.
