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- [00:06]
A
Prime Minister. Your Excellencies, ladies and gentlemen. I cannot express the pleasure that it gives to me to introduce my old friend Mario Monti to you today. We've had an overwhelming response in terms of the number of applicants to be here with us today. And those of us who believe in Europe can say with some certainty that in the pantheon of European heroes, Mario Monti will certainly figure as one of them, and there aren't too many around. His commitment to his country and to Europe has been evidenced clearly by the position which he has taken, and even more obviously by the courageous steps that have taken place since he took up his position. His long period as a commissioner was distinguished by his integrity, by the force of his character, by the intelligence of his application, and by his clear understanding of the institutional development of the European Union in which he believes so strongly. And to have Italy playing a role of leadership in Europe from the point of view of integration, is something that is greatly welcomed by all of us. But time is short. Much though I would like to speak at far greater length about our guest today. I'm going to ask him to come to the lectern to speak to you. And then we will take Q and A from the audience, not from the press today, because there have been press conferences, and we hope that we will have a good discussion. But I conclude where I began, this is an enormous pleasure. It's also a great privilege to welcome my old friend Mario Monti.
- [02:38]
B
It's rare to feel uncontainable emotion, but I do. The emotion of being at the lse, of being in this theater, not entirely empty, to be introduced by my old friend Peter Sutherland, and to be introduced through those words. And as many of you will know, and I want each of you to know, Peter has been my role model when I was Commissioner of the European Union, and in particular, competition commissioner, a function that he brought to unparalleled levels of influence in Europe and elsewhere. And I am really full of emotion in taking the floor here after his introductory remarks. I am also very aware of the fact that maybe one or two among you are Italians and maybe are following with interest, if not passion, the developments in Italy. And I want to assure you all that I feel that the talented Italians that are studying or teaching at universities, particularly such a prominent university as the lsc, I never considered brains that were drawn out of Italy. I. I hope that we will, to some extent, through my government's action, facilitate the circulation of best brains in and out. But I really am emotion. I really would like to work. This will be a long task. We can only do the beginning. In our time, limited efforts work for young Italians and brilliant Italians and motivated Italians to feel Italian and also to feel part of a system of which we have to be proud wherever we work. So, and I'm delighted and I apologize for those of you who are not Italian for this a bit provincial accent, but I love European and worldwide integration precisely because it can allow us some forms of provincialism without becoming dangerous. The topic that I intended to touch upon was EU in a Global Economy A Challenge for Growth. I hope to say a few things not entirely unrelated with this topic, but please don't expect from me the attempt of being even remotely systematic, as I would have felt compelled to be had I been a professor. The European Union in a global Economy I think the European Union is at a juncture where it has the greatest potential it ever had to be beneficial to the world and influential in the world. Whilst probably is at a very weak point in terms of the capacity to exercise that influence, the potential is, I think, unparalleled in the past for two reasons. At least after the financial crisis, should I say after the beginning of the financial crisis, or I hope that we soon will be able to say after the financial crisis. The European Union, in my view, has seen at least two of its features more appreciated by others in the world than it was the case before the financial crisis. One is an internal feature, that is the attention paid in Europe in different ways with various national variations to the social aspects of the social market economy, so to the interconnection between economy and society. And I think that few institutions could embody that relationship as well as the London School of Economics and Political Science does. And whereas the social attentions given by Europe to these aspects were a bit taken with smiles in the US say, or China, before the financial crisis, we have seen with and after the financial and then economic and then social crisis, a much higher degree of respect both from the US and China, to take just two hugely important countries towards the social aspects of the European economic models, I should speak in the plural. And of course we are aware, and we should be more and more aware of the fact that if we want to be able to sustainably bring ahead those attentions to the social, we need to put our economic much more straight and to vastly improve it in order to be sufficiently competitive as to afford a continuity in a reformed spirit through reformed institutions of our social attentions. And the other aspect, which is to me even more important, is that the financial crisis has generated a demand for global governance has given more concreteness rather to such a demand, has shown the urgency of it. And the proof of that is the new impetus on the G something processes, and including the G20, of course, in particular. And it was in the UK that after the financial crisis, the G20 got its first big momentum. But is this not a belated, partial and unsystematic recognition of the need of a multilateral governance of integration processes, just as Jean Monet had seen clearly many, many decades before? Because what did it take in order to put in place a very successful globalization, albeit confined to the limits of the European space, as the European Union has been for 50 or 60 years? Well, it took two things associated with each other, a destruction and a creation. The destruction, not in the sense of Schumpeter in this case, but the destruction of barriers, of restrictions, of borderlines. So the creation of integrated markets, if you want, but at the same time the creation of at least a minimum of public policy coordination, if not in certain areas, a fully fledged common policy, as has been the case for two subjects since the very beginning in the European Union, trade and competition. And our host this evening was eminent in both, and is eminent in the advocacy still of both. And then much, much later, monetary policy, the third single policy of the European Union, and I think the efforts done with variable degree within the G20 context of pushing forward elements of a global governance are a remote copy of what the European Union was able to put in place. Is it not a pity, then, that the potential provider of the widest supply of expertise of this kind of exercise, which is the European Union, risks being undermined in its effective ability to display this, to bring this to the rest of the world because of internal inadequacies of governance? I think it's a great pity for the projection of European ideals across the world, and also for the gradual contraction of the economic impact of the European Union through insufficient competitiveness? But this is just to say that we should be proud, I believe, of being those of us who are members of the European Union, and we have a duty vis a vis the rest of us in order to cooperate with our experience without any presumption. We have so many elements of weakness towards global governance. The inadequacies of governance within the European Union, which risk undermining the operation of exporting our model successfully across the world when it is demanded, have to do in part with the governance of the EU as a whole, in part in a more accentuated manner in recent times, with inadequacies in the governance of The Eurozone more specifically. And it is interesting to see how much the second sort of weaknesses, those concerning the governance of the European Union, occupy the minds also of those persons and institutions and governments which are not part of the Eurozone. Much of my discussion today with Prime Minister Cameron was indeed on what needs to be done urgently in order to enhance the quality of governance of the Eurozone. This is not a topic to which the UK is insensitive, of course. I think that we are almost there in putting in place what I believe is the definitive, definitive not in the sense that then it can be shelved, but in the sense that then it has to be implemented consistently. The definitive step in, in the area of fiscal discipline through the constitutionalization of the so called fiscal compact, which we hope will be the object of a political agreement on 30 January in the European Council to be then formally signed by the heads of states and governments on 1 March at another European Council. I think it will be important for that final piece of the puzzle of discipline to be in place so that we would all simply have to respect it rather than being over concerned about the future possibility that somebody might not respect it, thus enhancing month after month, year after year, the proofs to be given for the purity of a disciplined mind by a Member State. I think we will have that in place that will be necessary to be observed. And I think that peace in place will allow all the concerned parties to be more relaxed in the handling of their respective policy responsibilities from the ecb, the European Central bank, around which I remember with pleasure the agreement that Chancellor Merkel, President Sarkozy and I made at the first in recent times trilateral meeting we had in Strasbourg in November, as soon as I was in office. That is to surround the ECB of a respectful and symmetrical silence with each government respecting the need of not asking the ECB to do something and not asking the ECB not to do something. This is creative of the most appropriate policy environment for unconstrained, independent and I'm sure wise decisions. And equally all the other institutions I think will feel more relaxed in putting on the agenda finally issues that are not less important than fiscal discipline. If we want to have our beloved social market economy in Europe characterized by growth, by job creation, by welfare in our societies and this brings us to growth policies. I will not develop the topic in any depth, but let me just say that I believe that here in particular, the UK and the Eurozone have hugely common interests from this point of view. I, as an Italian I, as a representative of the Italian government, would like to see the UK as deeply immersed in the inner core of decision making in Europe, because I happen to believe that the values of an open economy, an open market competition, respect for the law which is unevenly distributed across Europe and other features that the UK normally brings with it are powerful ingredients for construction of more growth oriented policies in Europe. It is for this reason that I had very much hoped in the days before 8 December, in talks with the British Prime Minister, that he could be persuaded to, yes, extract a compensation from an acceptance of a new treaty on fiscal discipline so that he could be fully on board, but a compensation that would be progressive in terms of bringing European integration forward, not regressive in putting a brake on further European integration. I know all the complexities of the domestic political landscape in this country. Each of us has a domestic political landscape. I'm even trying to understand our own domestic political landscape because if one is a non political entity, is nevertheless not allowed to neglect the complexities of the landscape from which the approval or lack of approval of measures in the Parliament ultimately depends. But I think it would have been great to have the UK fully on board, insisting, for example, on having in the Fiscal Compact agreement, yes, measures to strengthen the enforcement of fiscal discipline, but also in parallel, equally binding measures in order to increase the enforcement of single market rules, which are often the Cinderella in the enforcement of rules by the European Commission. Because in the area of the single market, the Commission lacks the very effective and prompt powers that it has in the area that was ours of competition policy. So the opportunity of being all together in that treaty is gone, I'm afraid. But I think it would be very important to use the next European Council or councils to come to some concrete, operational, enforceable solution to give more impetus to the single market as a factor for growth. Also because, as Peter Sutherland and I had many opportunities to discuss in recent years, if there is not a much greater commitment to, to bring economic integration further in Europe, the forces are there that could bring us backwards because in many of our countries there are nationalistic trends, there are factors of disintegration. The case for those advocating the market and competition has become more difficult after the financial crisis. And we see how, for example, a formerly integrated EU banking system is disintegrating when in the management of the crisis, the different national supervisory authorities follow a national logic. Now I think, Mr. Chairman, I will stop here. I have not given you for sure any original thought, but maybe some elements for reflection on the fact that the challenges for growth of the EU in the global economy. I see now the title of what I should have been saying to you is really in our Hands. And to conclude with a note on Italy, as I did at the beginning, I think it's a crucial commitment on the part of Italy now and specifically of my government, and we have several ministers here with me today, that Italy quickly be removed from the list entitled sources of problems in the Eurozone and shifted into the list of the proactive contributors to the solutions. Thank you very much for your attention.
- [24:34]
A
Thank you so much, Prime Minister. And now we are going to open for questions. I would like to make two points. First of all, anybody who wishes to ask a question, raise their hand and when we come to you, please state your name and affiliation. Secondly, as I said at the outset, this will be left to members of the audience. The Prime Minister has already had press conferences and we want to engage as many as possible of the small group who have been able to get in out of the huge number that tried to get in. So could I first of all ask people who wish to speak, not all at the same time, to raise their hands? And I have three here, all eminent. May I have this gentleman here? Mr. Grant? I would ask everybody, and this isn't directed at you, ask everybody to keep their questions as short as possible.
- [25:32]
C
Charles Grant from the Centre for European Reform. Mario, you didn't say very much about Germany, but you've had a lot of meetings with German leaders recently, and many of us believe that your own excellent efforts in Italy are not likely to succeed in the long run without more flexibility on policy from the Germans. From your meetings with the Germans, do you think they are realizing that their existing policies and proposals that you are not solving the problems? Are they becoming more flexible? Are there rays of hope in Berlin and indeed in Frankfurt?
- [26:05]
A
Anthony.
- [26:08]
B
Tony Giddens, previous director of the lse, I'd like to welcome you back. And I remember many occasions when we met here before. My question is short. What is the relationship, in your view.
- [26:19]
C
Between austerity and growth?
- [26:23]
A
Short question. Whether the answer will be short even with Mario, is the next question. Yes, this gentleman here, please. Good evening, Prime Minister Andrea Mandel Mantello Roman, not Italian, but investor in Italy through Advicor plc, which I'm a chief executive of, and also founding member of Italian Angels for Growth, the first angel investor group in Italy. To grow, a country needs new companies, new enterprise. To do so, you need to create the conditions for that to happen. What measures do you intend to take to encourage entrepreneurs to invest in Italy and to create new companies or new employment. Could I ask you, Mario, to take those three questions? We move on then from here.
- [27:19]
B
From here, yeah. To Charles Grant. Yes, we are having a close relationship with the German government and with the Chancellor. The. Well, I think I made the point rather explicit that the sustainability of efforts, of deep efforts by Italy and concentrated in time for us to get a solid budgetary consolidation and growth through the removal of structural constraints to growth is going to be very difficult in its sustainability through the months and in the delivery of the expected results, unless there is not. Unless there is. Sorry, unless there is some return. This. I'm glad of your question, Charles, so that I can clarify that we never imagined or imagine now that the return should be money from any particular member state, nor any exemption or exception to the framework of discipline. Nothing at all, no concessions at all. We don't want, and we don't need concessions. What we need, just as I think all members of the Eurozone do, and of course the need is the higher the inherited stock of debt of a country relative to. To its gdp. What we need is a sufficiently effective governance system of the Eurozone that is able to eliminate the particular risk that now markets associate with the Eurozone. In terms of the much observed spread between the Italy's treasury bonds and the German Bund, we, for example, saw that a peak was reached, I'm sure by coincidence, the day I was called by the President of the Republic to go to Rome, November 9, actually he picked me in Berlin. Isn't this symbolic? I was there for a conference.
- [30:28]
A
And.
- [30:31]
B
Afterwards, until the seventh, I think, of December, the spread came down nicely and everybody was encouraged in Italy then, more or less, at the time we put out our first bunch of measures in those days, the spread came up again. Obviously, looking at the comments on the measures, not because they were not considered good measures, but because then came the result, the disappointing result of the European Council of 8 December. And so this is, I think, the living proof of the fact that if one does its homework, which was badly needed, is far from finished and will have to continue. That is not sufficient in this, in the present policy environment, for a country to be able to reap the benefit, not the transfers from anybody else, in terms of lower interest rates. Of course this has hugely negative economic and political implications because politically many people said, okay, here we have a technical government made up of very decent people, widely respected in Europe. What has changed in terms of the spread? Once it went down a bit, but Then came up again. So this obviously presents the country with a problem of comprehension, but also in terms of economic effects, it's not really conducive to growth if a treasury, at the present interest rates, real interest or nominal interest rates, sorry, at the present rate of growth, has to pay 7% on 10 years bond. But all this, in my view, requires a better governance of the Eurozone. And of course Germany is one of the key interlocutors, if not the most key interlocutor for this. But this should not be confused in any way with a transfer union, for example. But I'm rather optimistic now I see different pieces coming together which lead me to believe that we will have some silent quiet, I hope quiet coming together of different pieces without much triumphalistic declarations which might allow us even to breathe a bit. Anthony Giddens Austerity and growth the answer is of course very short. I gave already a part of it mentioning how growth has to come up for austerity to be sustainable, in a sense. But even I think what is interesting, and here in London you can measure that better than anybody else, that more and more the assessment of the markets and of the rating agencies on countries is related, yes, to good public finance and good public finance, but also to growth, because our societies demand more growth now that it isn't there. And also because to make the improvements in the budgetary situation for any country sustainable in the long term, well, it doesn't harm if the denominator moves up, moves up a bit, that is gdp, that is growth, of course, coming the question about austerity and growth from the professor from which it came, I should refer to many of his works and political models derived from them. Italian Angels for Growth well, I would invite and pray Italian angels to take a very active look at the country which gives them the name in. In these days, not only for growth, but more generally, we need many angels overseeing our activities. And I'm sure that if you are there, growth will come. But we help the activities of angels by, for example, introducing, I believe it will be Article 1 of Decree Law. Today is the 18th Decree Law, 20 January 2012 that we will adopt on Friday. Article 1 will deal with the huge simplification and reduction of cost. Where is the angel? Yes, and the reduction of, of course, in setting up a new company, plus many other simplification methods. But you will tell us if we do enough, please do.
- [36:31]
A
Now I chose the wrong people because they asked two good questions. Has anybody got a bad question? A short question? Yes, Here, please. And then I'll move up there.
- [36:46]
C
Thank you. Andrew Kahn. I was a member of Lord Cofield's cabinet that helped to create the single market and subsequently Neil Kinnick Scheffer Cabinet and you were Prime Minister Hero not only to your fellow commissioners but to many officials also in the commission. My question is this. When the chairman of the Chinese sovereign wealth fund was asked would he invest in Europe, his reply was why would I want to invest in a series of welfare states which have two generous entitlements and where the workers don't work. Now that's a rather aggressive line. But I wonder whether how you see the European Union's relationship with China, the competitive threat of China and how we change the Chinese Sovereign Wealth Fund's view of our. Of our economies.
- [37:42]
A
You will not be surprised that that question was raised by an eminent member of Lord Caulfield's cabinet. But we'll say no more about that. Can we have this?
- [37:52]
B
Yes.
- [37:52]
A
Mr. Palmer. John Palmer.
- [37:55]
B
John Palmer, Prime Minister, you referred in the past to a future happy rendezvous when the governance of the union is satisfactorily structured and a number of new initiatives might become possible. And I think in that context you referred to the possibility of the deployment of Eurobonds. My question is, do you see an advantage to the deployment of Eurobonds to support an investment led recovery in Europe as opposed to assisting sovereign debt?
- [38:32]
A
This person in the first front row over here.
- [38:39]
B
Hi.
- [38:39]
D
Nicola Mastorrocco, Ph.D. student here and Italian citizen also. It's an honor to be here standing in front of you. I'm here. Okay. My question is still related to European governance and it's related to the recent standard and poor downgrades. So you commented in that relation. They pointed out that one of the main reason for the downgrade was the poor economic governance and mismanagement of the crisis. And you commented in a sort of mood of understanding the question, saying that it's true we need more effort in place and. But yet I see this effort because there are. The table is open for bargaining. You're meeting Prime Minister of every other countries on a monthly basis. So my question is, and yet we've been downgraded. So how much do you think the private sector rating agency insisting for a better governance in this way are actually obtaining the opposite so harming the possibility of achieving this.
- [39:57]
A
Would you like to take. Thanks, that's fine. Would you like to answer those?
- [40:02]
B
Yes. I feel the moral compulsion to begin from the downgrading and therefore from the rating agency. It's not Good to be in the B class. And I was nevertheless relieved in seeing that much of the downgrading, at least as a moral consolation, that much of the downgrading of Italy was due to the negative evaluation on the eurozone governance. Plus of course, Italian factors that can be changed only in the longer run. I see your point. By downgrading eurozone member states because of poor eurozone governance, the rating agencies make the improvement of that euro governance even more difficult. Difficult? Probably the total derivative of the quality of euro governance relative to the. Rating agencies evaluation of it is the sum of two partial derivatives. One is the objective making the situation more difficult, and that is with A plus. But I think there is also a partly offsetting factor because the precipitation, especially in the case of this. I hadn't thought that we could in fact speak of how is it breed behavior also by the rating agencies and also concerning the countries affected now several of them. This does create a feeling among I think the governments that something needs to be done urgently. My attitude on the rating agencies is obviously very cautious. I think, as Mario Dragic said in the European Parliament, I thought, I think it was yesterday, that one thing to look at very carefully is the state of competition in the market of ratings. And it may be the case, but this is a reminiscence of past readings that particularly in the US some aspects of public regulation helped keep very low the number of rating agencies. This would not be the first case when public regulation has unintended side effects which are negative for competition. But I think there is something to be done there. I think they do a terribly difficult job. It's easier to criticize them than to propose alternatives. The markets have a demand for them. So as you can see, I'm not vindicative in any sense. Sorry, but that was only then. There is also the marginal aspect of China. And their competitive position. Well, maybe that gentleman does not invest in Europe. Many others do. I hope that becomes more. More and more a minority view, including in the Chinese perception of Italy, by the way, if possible. But I see some elements. Well, some elements seem to me to be a caricature of what Europe is. But there are some elements of truth. And we don't want to be like the Chinese in many respects. I think we have a challenge of finding a market space for Europe's products that allows us, with all the necessary transformations to keep some features of our society. And I am at any rate very skeptical about indefinite extrapolations over time. We all remember, at least a portion of us, the 80s when having the Japanese brought the Rockefeller center, they were going to buy all of us, all the oil money after 73 or 79. So I wish good luck to China. I think their good luck is important for us all. But there may be inherent economic and social problems in, in a society of that size that may make an extrapolation into the future, as we tend to do, rather meaningless. But there are many aspects of China which we should try to emulate. John Palmer the Eurobonds I think the Eurobond is a very equivocal terminology. Some Eurobonds of course already exist and I think the first one was created in 1961 to serve the financial needs of autostrade in Italy, something like that. So we are always there, especially on the debtor side, as it turns out. But project bonds are already in, in several forms in place. New forms of project bonds are being proposed by the Commission. So I entirely share Mr. Palmer's view that Euro bonds in various natures could serve a very helpful purpose in the context of an investment led recovery. As to the possible use of Eurobonds in the context of sovereign debt, I think there will be a place for them structurally in the slightly longer term, because I don't see why, having studied somewhat the single market, I don't see why there should be one segment of the single market market, the market for government bonds, which should be permanently precluded from reaping the benefits of a massive scale through a single market by removing, by finding ways to share the risk, ultimately through greater liquidity and transparency, ultimately also to the benefit of those which today are the best graded issuers of Eurobonds. But I'm afraid this would bring us too far away.
- [47:51]
A
Well, I know I'm going to disappoint a lot of people by saying what I'm going to say. Now, unfortunately, the time schedule of the Prime Minister is extremely tight. So I'm going to say two things to you and then do one thing and I would ask you all to remain seated during this. First of all, the two things that I want to say. First of all, I've already made the point that you should remain seated. Secondly, I want to. Secondly, secondly, I want to thank Mario Monti for being with us and for saying what he has said. There is no point in my repeating the various encomiums which I started this lecture with. The APCO series, of which this is one is a series which in particular I think has a relevance to the European perspectives which Mario has presented to us. Now the one thing that I have to do, and I hope that this doesn't wound your dignity, is I have to present to you a certificate. And secondly, I have to ask you to wear a cap. Now, others have done it before, including Nelson Mandela and just about everybody, just about everybody of the distinguished previous speakers here. So I'm going to pass you this, which is your certificate, and then I'm going to ask you to take the cap. And if you want to wear it, I'm not going to object.
- [49:15]
B
Well, thank you very much. This is a dignity enhancing cap and I hope it is also symbolic of a soon to come cap on interest rate.