Mon November 7, 2011
Big Problems For The Big Italian Economy
Originally published on Mon November 7, 2011 12:22 pm
NEAL CONAN, host: Over the weekend, Greece fended off the immediate crisis with the formation of a coalition government that supports the recent agreement on European debt. And now, many eyes turn west, to Italy, which has a much bigger economy and, some say, a bigger problem. Prime Minister Silvio Berlusconi continues to survive no-confidence vote, but his government clings to power and faces a series of hard choices. If you have questions about Italy's role in the Eurozone crisis, give us a call. Our email address is email@example.com. You can also join the conversation at our website. Go to npr.org, and click on TALK OF THE NATION.
The next no-confidence vote scheduled in Italy comes as soon as tomorrow. Beppe Severgnini joins us now from the studios of the BBC here in Washington. He's a columnist for the Italian newspaper Corriere della Sera. His book is "Mama Mia! Berlusconi's Italy Explained for Posterity and Friends Abroad." And nice to have you with us today.
BEPPE SEVERGNINI: Well, thank you. I think "Mama Mia!" is a good summary of the situation, isn't it?
CONAN: Well, Prime Minister Berlusconi has seemingly defied political gravity before. Can he continue to hold on?
SEVERGNINI: Well, he's a bit of an escape artist, I have to say. But there is - so there comes a time when, you know, the dramatic moment when the escape artist is, you know, you realize that you will not wriggle free of his chains and he's at the bottom of the pool. And we don't want to be there with you. And so with - let me get out of this metaphor. And I think...
(SOUNDBITE OF LAUGHTER)
SEVERGNINI: ...if he wants to help Italy, he really has to go. I mean, the Financial Times put it bluntly the other day, quoting Cromwell, you know, in the name of God, of Europe, of Italy, go. It's a bit dramatic, a bit Italian, I may say, but operatic also. But the message is correct. I think he really has to go soon.
CONAN: Soon. If not tomorrow, then soon. Nevertheless, some say that the fall of the government, no matter who heads it, is going to lead to a long period of uncertainty, and that's not going to help Italy's financial situation any.
SEVERGNINI: I disagree for two reasons. The main one is political and social and psychological. I know my country well and my countrymen well. I think Berlusconi has been - that's what my book is about. He's been - he build on complicity with us, but complicity became embarrassment. Embarrassment became shame. Shame is becoming anger. So that's over. And I think the Italians know very well that we cannot afford the pension system we have. We cannot afford all the privileges of, you know, we have 75,000 official cars, just to quote, you know, come up with something to give you an idea.
So there is so much you can cut, but politics has to start first. And I think Italians are prepared. They know we have to do something. Berlusconi is in no position to ask us for sacrifice. I mean, he cannot do it. He's not credible, to quote Lagarde here in - Christine Lagarde of the IMF here in Washington. She put it right. You know, he's not credible. There is a problem of credibility. So, that's it. I mean, but someone else can.
If Mario Monti, the former European commissioner, or someone else will come with a broad government, I think they can afford to be unpopular for a few months or even for a year or a year or a year and a half, saying, look, folks, that's what we have to do. They can ask us. Berlusconi cannot.
CONAN: Yet when it seemed that the German Chancellor Angela Merkel and French President Nicolas Sarkozy were snickering at Mr. Berlusconi, much of Italy rose up in his defense.
SEVERGNINI: Much of Italy. The people who write to my blog, they, you know, those people who's - most people, including me, I think, probably thought that they were sort of laughing, which is not nice. Maybe they should have avoided that but they were kind of smiling and putting a face about Berlusconi. So they - it was between them and Berlusconi, not between them and the Italian nation, in a way. And there are sort of people that decided. Berlusconi is very - is a Populist 2.0. He's really good on building on things like that, to create this sort of fake patriotism around him. But I think we're now smart enough to know the way - the sort of game he likes play. I don't think many people really are angry with Merkel or Sarkozy for that.
CONAN: Our guest is Beppe Severgnini of the Corriere della Sera. We're talking about Silvio Berlusconi, the prime minister of Italy, and Italy's role in the eurozone crisis. If you have questions, give us a call, 800-989-8255. Email us: firstname.lastname@example.org. And going from the political situation to the financial situation, many analysts say Italy's economy is, well, it's got some trouble of its own. But the real problem is the amount of Greek debt that's held by Italian banks.
SEVERGNINI: Well, I think that's a problem for French banks and German banks too. What I do know is that it is true that we have a big debt that we cannot afford. We're talking about two trillion euros. But it is true that the collective wealth of the Italian families, 8.6 trillion. Berlusconi always quotes these, but he doesn't really makes sense because, I mean, you imply that the wealth should go from the families to this - to buying public debt, and that won't happen. But there is one crucial element and I sort of worked on this to absolutely certain, that the Italian public debt is structured in a way that its treasury has been pretty smart, that it's spread over a long time. So we don't have like a deadline every few months like the Greeks. So we can - we had a few - if we sort of put our house in order, we have, let's say, a few months to sort it out. It's not desperate.
CONAN: Yet some elements within the ruling coalition, and that includes the Northern League, are saying much of these sacrifices are unwarranted.
SEVERGNINI: No, the Northern League is a populist party, and I think they're going to play probably, you know, their last card and saying the euro was a bad idea, something that Mr. Berlusconi also said, unwisely, when he came back from Brussels a few days ago. But I think, no. I think the politics switch side. We have a thousand MPs. OK, cut them in half. We have provinces in Italy between town halls and regions, abolish them. We have representative abroad, the, you know, the Italian tourist board. You know, all their money goes into salaries. Cut that.
I mean, they should, from the top, show - OK, we'll start sacrifices. And I - believe me, I said that before. The Italian public is now ready to make sacrifices across the board. There is no one who - anybody - there is no one who can think, you know, we can do without and someone else will do it. It's late for that.
CONAN: Yet some have described avoiding taxes as Italy's national sport. Is that likely to end?
SEVERGNINI: Not really. But I think if we bring the percentage of people who do not pay tax properly from - I don't know, it's, you know, off the top of my head like 40 percent, or the gray economy, which has been estimated sort of between 17 and 20 percent, we have those figures, I think we're on the right track. But again, the - have you ever heard Mr. Berlusconi saying do pay your taxes? You know, he said, and I quote him in my book, then he denied it but it's there, he said that, when - it's on YouTube and Google, it's easy to check. He said if the taxes are over, above a certain set of measure, I am morally entitled not to pay them. I mean, if you have a prime minister who say things like that, you know, how you do you expect people to behave?
CONAN: We're talking about the role of Italy in the eurozone crisis, and we'd like your questions. 800-989-8255. We'll start with Dan, Dan with us from Iowa City.
DAN: I - you mentioned earlier that one of the problems with Italy's economic problems are that you can't afford your pension. That seems to be the first thing out of people's mouths, is that we can't afford our old people, and I say that we can. With all the excesses of the economic policies, we can afford to have our old people. They are not the liability that everybody talks about, and I'll listen to you on the radio.
CONAN: OK. Beppe Servergnini, how are pensions going to be cut if they're going to be cut?
SEVERGNINI: First of all, in Italy we - Italy is the - is a country with the - the oldest country in Europe, together with Spain. So it's very old, the percentage of over 65 is huge, I mean, compare to other countries, including the United States, of course, number one. Second, a real problem is that we have one young man or woman out of three out of a job. So there must be a sort of new social pact. We cannot afford to pay that kind of pension or to have the health system that we have in Italy, which is pretty good, I have to say, with the current situation.
I mean, you really have to cut waste and pay more taxes. Otherwise, there is no way we can - we cannot afford to live the way we live. I mean, now we have people - you have people retiring in their 50s. We cannot afford that anymore because they going to live, thanks God, much longer. And the state cannot, you know, keep up with that and pay them pension for 30 or 40 years. So 67 is a decent age to retire, and I think we're going to get that pretty, you'll see. But again, Mr. Berlusconi is in opposition to us. His successor probably will.
CONAN: Beppe Servergnini, a columnist for the newspaper Corriere della Sera. 800-989-8255. Email: email@example.com. Stay with us. You're listening to TALK OF THE NATION from NPR News.
And let's go next to Anna, Anna with us from Houston.
ANNA: Hi. My question was, what does the author think would have happened if they hadn't use the euro (unintelligible) European Union – do you think that could have saved the debt crisis?
CONAN: Should we go back to the lira or should we had never had left the lira?
SEVERGNINI: Well, I think it's too late for that, first of all. Italians know that there is no way back. If - Italy simply cannot default, cannot leave the euro, it's going to be a disaster. And the ripple effect of this disaster, you'll feel them, you know, even in Houston, believe me, in a matter of hours. So it cannot happen. There's no way. And I think in Italy the euro have many good effect. For instance, the inflation is very low, and Italian - Italy is still the second powerhouse, industrial powerhouse in Germany after - sorry, in Europe after Germany. So it's not that we cannot compete because we had the euro instead of the lira.
I mean, someone will play that kind of game, probably the Northern League. But I think Italians are now old enough, smart enough, you know? We don't want to be - we believed Berlusconi when he said many things. I think it's far too late now.
CONAN: How would the effect be felt in Houston in a matter of hours?
SEVERGNINI: You're talking to me?
SEVERGNINI: Well, I think it's pretty easy because the world economy is all linked and it's pretty obvious that what happen in America with your subprime crisis, immediately we felt the effect all over Europe, first in Britain and then elsewhere, and then this happened. Can you imagine Italy defaulting, the euro collapsing and bank closing and all that? Do you think America, with your current financial situation, public debt, an election coming up, you'll be out of all that? Not at all.
CONAN: And the new European fund designed to back up default might be enough to prop up Portugal, Ireland, maybe Greece, but not Italy.
SEVERGNINI: But not Italy. Absolutely. That's why the IMF stepped in. Of course, it was Sarkozy and Merkel and the European Union wants the IMF to step in. I think they can do a good job in it, to be honest, provided they know exactly and they tell publicly what they want to do once they're there, because Mr. Berlusconi, who's very good at minimizing, he's already said, well, you know, just - they'll come here to monitor the situation, and if we don't like what they're doing, you know, we'll send them back. That's not the way it works.
It's very unusual for a big industrial country such as Italy, part of the G8 and the G-20, probably the seventh largest economy in the world, to have that kind of attention and monitoring by the IMF. It's really, really - I think it's the first time.
CONAN: Let's go next to Richard, Richard with us from Vermillion in South Dakota.
RICHARD: Hi. Good afternoon. Buon giorno to your guest. My question's sort of preempted by the answer that was just given, but I was confused as to how the current situation – of course Greece, now we're hearing about Italy, all these wildfires financially, how did they relate to our 2007 events here, 2008, or did they? Are we still seeing dominoes falling? And I'll take my answer off the air. Thank you very much.
CONAN: All right. Thank you, Richard.
SEVERGNINI: I think they are related because I'm not a financial expert. I'm more political commentator. But my feeling is that, for instance, banks tried to, you know, they took losses and then they tried to do something else, like buying high interest bonds where they could find them, and they - that's why in the beginning, at least, like Greek bonds were so attractive and then they realized that probably was not a good idea. That's one of the reasons.
And I think is the economy - or the world is slowed down, and that's another thing. We don't talk about growth enough anymore. And Italy is - basically there was no growth in Italy for the last 12 years, 10 years, and my prime minister, Mr. Berlusconi, has been in power for eight of those 10 years - actually, seven of those 10 years. Only one country grew less than Italy in the year 2000, and that's Zimbabwe. I mean, can you imagine that? And of course, Italy was - is an example of - the most extraordinary example of no growth or slow growth, but you have other countries.
So 2007, 2008, when all the money goes into sort of bailing out banks and all that, I mean, it cost, you know, what happened, it cost everybody a lot of money, and you can see the result. Now the country slowed down, and I think only a few countries around the world, like China and Brazil, are going well, and we share some of the same problem. We are - America, I know you always consider yourself part of the new world. In many ways, you still are because you all have this great attitude towards the future, which I envy. But in many ways, in terms of financial and economic and social structure and production, you're part of the old world together with us. I mean, because the way in France, Italy, Germany or Spain or United States are not that different, you know? We have great unions. We have rules. We have regulation. We have certain way of doing things. So we'll - I'm afraid we share or we're going to share all this. No doubt.
CONAN: Beppe Severgnini is a columnist for the Italian newspaper Corriere della Sera. His latest book, "Mamma Mia! Berlusconi's Italy Explained for Posterity and Friends Abroad." With us today from the studios at the BBC here in Washington. Thanks very much.
SEVERGNINI: Thank you. Bye-bye.
CONAN: Tomorrow, photographer Annie Leibovitz joins us. We hope you join us for that. This is TALK OF THE NATION, from NPR News. I'm Neal Conan in Washington. Transcript provided by NPR, Copyright NPR.