MODERATOR: Good morning, and buon giorno. We are honored and privileged to have with us the prime minister of Italy, Signor Enrico Letta. This program will be on the record. And you will be free to turn your cellphones on after the meeting has concluded.
I would also welcome CFR members around the country and the world who are participating in this meeting through live stream and via teleconference from Washington. We hope to hear from them, as well as from you, in the Q&A.
Our next meeting is President Moncef Marzouki of Tunisia tomorrow, September 25th, from 12:30 to 2:00. Our program this morning that we plan is that the prime minister will speak for approximately 10 minutes, after which he and I will have a conversation for about 15 minutes. I will then throw it open to questions from the audience, and our meeting will conclude at about 8:50. It's a little early, but the prime minister has to get across town, and you know how difficult that is.
When the Council first approached me about moderating this meeting, my first thought was, why me? And then I realized that the prime minister is a lawyer, as am I, so we have that in common. And the other thing we have in common is I recently returned from Pisa. The prime minister was born in Pisa, and the only thing I learned in Pisa was that the prime minister is a Pisano, not a Paisano.
You all have his biography in your programs. And suffice it to say, he has been prime minister since April, less than five months, having assumed office last April, after the resignation of his predecessor, Mr. Bersani, amid weeks of political deadlock and turmoil consequent to the inconclusive 2013 general election.
He is a member of the center-left Democratic Party. He forged a grand, but uneasy coalition, along with Signor Berlusconi's right-wing People of Freedom and the centrists Civic Choice to form a new government. And he's been a legislator and cabinet member with close ties to the European Union, particularly on economic matters, in which he seeks to adjust hiring policies to promote unemployment and growth, vexing issues for his country, as they are for ours.
The prime minister comes from a family of academics, politicians, archeologists, and writers, so he is particularly well equipped to lead Italy at a time of unprecedented political and economic turmoil.
Prime Minister, you're most welcome. We're honored to have you with us.
LETTA: Thank you very much. I'm very glad to be here. And I will try to address about a very general Italian foreign policy and recent developments in Mediterranean. Of course, it's a very general argument, very general topic, but I will try to focus this topic through two main issues.
The first one is how to discuss about foreign policy in the new area in which the information society revolution changed completely the way to do foreign policy, to develop foreign policy, and the second point, how Italy responds to this challenge and what -- and what are some of the main priorities of our action.
So I start with my first point. That will be, of course, the point about the changes in doing foreign policy. It's a crucial one. I remember, I was here at the U.N. General Assembly 20 years ago. I was very young. I was the assistant of the minister of foreign affairs at that time, and foreign policy was so different at that time than now it is. We are discussing today about the big difference, and I would say we are from Homo sapiens to (inaudible) connected. Public opinion today is now dynamic, global, living an online life, and to interact with this public opinion, we have to adapt our means and our message.
I actually believe institutions and policymaking are not only the best, but also the only way to provide a democratic answer to the questions: What matters for our community? What is crucial to us?
I said the words democratic. As in recent spans of the global debate, the focus seems to be on accessing information, no matter how on that (ph) which costs. In particular, parliaments today are at the center of our discussion. Parliaments have found a renewed prominence as the institutional embodiment of a debate which cannot limit itself to the blogosphere. Parliaments are the only truly democratic Twitter (inaudible)
Think about the parliament -- how the parliaments have influenced the policy debate on the line to take on Syria recently. The way parliaments can be back at the center of the democratic debate tells us a lot about the difference between institutional authority and being authoritative.
This is why I would like to stress the point, how to work from foreign policy to global policy. There is one area of policy that is specifically equipped for addressing these new challenges. That is, of course, foreign policy. I believe that we can only respond effectively to the new paradigm of global issues that affect us with a shift from foreign to global policy. We're struggling to address today's most pressing global issues and changes, from financial instability to transnational terrorism, from climate and energy to food issues. In response to these challenges, we need to try and adapt our actions.
Italy in globalized word, I stress the point on '97. '97 was, in my idea, the turning point of the Italian foreign policy. Why '97? Because '97 was for -- for my country, for Italy, the first step of an assumption of global responsibility. At that time, we promoted and we took the leadership of the multinational force Alba, active in Albania. That was the first time that Italy had the leadership. Many other international peacekeeping engagements followed, from Lebanon to Kosovo and to Afghanistan.
We realized we could play a global role in multilateral framework, armed force, set an example for our public administration. An example of modernization, meritocracy, and this was all due to international collaboration. They had to meet the global challenges to innovate, to compete for effectiveness.
Together with regional engagement, the three traditional priorities of Italian foreign policy in light of this transition to global policy I have (ph) to develop. The first one, of course, is European integration. The second one is NATO and the transnational bonds. And, third, United Nations and the multilateral framework.
About the European Union. The E.U. needs an updated governance, not just in names, but in ideas. It is time to go back to thinking about the future of the European Union. The union needs to combine legitimacy and the ability to deliver rapidly, timely, not waiting for 30 -- I repeat, 30 -- summits before the crucial statement of Mario Draghi -- of Mario Draghi, whatever it takes, 30 summits. That means four years, a waste of money. It was really the way to create problems to Europe and to the world.
In the second semester, on 2014, Italy will hold the presidency of the European Union. I want this to be a connecting point, a time during which we conclude the adoption of important measures we launched in 2013, from the single market to the banking union to the GTAP (ph). GTAP (ph), that is one of our crucial priorities, of course. We have to fight against protectionism and reaching a good, effective GTAP (ph) will be a very important achievement. And after the German elections, there are no more alibis. We need to put growth at the center of our common European action.
On NATO, Italy remains deeply committed to building a stronger NATO, able to respond to the new realities and challenges. NATO for us particularly means our strategic partnership with the U.S. We showed it recently in the (inaudible) G-20, where we were among those making an effort to bridge the E.U. position with the U.S. on Syria, which resulted in the signing of a common declaration by 11 heads of state and government, followed the day after by the German signature.
I had no doubt in my mind that we had a duty to share responsibility with our allies. The alliance is successful developing unconventional assets, such as cyber defense and counterpiracy, reacting to new and evolving threats.
On the U.N., tomorrow I will have a great opportunity to address the General Assembly. And Italy supports a more balanced, effective and accountable system of international governance, grounded in a renewed U.N. system. We are firmly committed to multilateralism and the role of the U.N. in maintaining international peace and security and in promoting respect for human rights and fundamental freedoms for all.
We are looking at the new high-level political forum on sustainable development this afternoon. We will co-chair the meeting. And this is closely connected to our role as hosts, and we are proud of it, we are working for it, of Expo Milan 2015, Feeding the Planet, Energy for Life.
Italy has contributed of the -- of the -- over the years to the U.N. efforts to foster peace and stability worldwide, in particular by participating to a high number of U.N. peacekeeping operations. We are particularly proud of our contribution in Lebanon, where an Italian general, Paulo Cera (ph), is commanding the UNIFIL mission, to which we provide more than 1,000 troops.
My final point is about the Mediterranean. It's an essential part of our longstanding global commitments, as well as Italy's geographical, historical and cultural home. What is known as Arab Spring is raising today difficult questions. When we compare the expectations generated by the Arab Spring among the people living in the region with the current situation, we must acknowledge that the future would be completely different from what we could have hoped for. We simply were not able to read this correctly.
I now go back to my point about the need for institutions to play their role, through diplomacy and truly global policy, meeting the new challenges of an interconnected society. In the Arabic world, the opportunities and the potential for the future of democracy and prosperity still exists. People of these countries have expressed their rejection of operative regimes, and Italy is deeply involved in all this. We are in a constant and close dialogue with our partners on the southern shore, and we intend to provide as much support as possible to ensure a positive outcome from the difficult political, social, and economic crisis.
What we see is the legitimate request of Arab peoples to be masters of their own destiny. This is a claim for human, political and economic rights, but primarily it is a claim for dignity. We follow the new government policies in Egypt for a full Egyptian ownership, while at the same time calling for a balanced approach vis-a-vis all the actors. Political attitudes such as restraint, rejection of violence, and a disposition to reach compromises in the national democratic dialogue should be a matter of concern for all parties in Egypt.
In Libya, we are strongly committed to providing the authorities in Tripoli with all the assistance needed in their institution-building efforts. Italy is the biggest donor there, with a special emphasis on board control. This is directly connected with our national interest, the broad framework of stability in the region, with large potential impact on an energy security, migration flows, criminal activity, and more.
In Syria, Italy has worked for a diplomatic solution of the chemical weapons crisis, condemning in the most resolute way the chemical attack of August 21st in Damascus, calling for a central role of the United Nations Security Council, and Italy remains committed to the Geneva II process leading to a democratic transition. To show that these are not only words, the government will commit this Friday, when I will come back to Italy, $50 million in assistance to the Syrian people and to the refugees.
My conclusion. On all these problematic fronts, I see, really, a common line for my country, for Europe, the need for effective, timely, adaptive (ph) global governance. From Italy's perspective, this means in particular -- and this is our own specific responsibility -- improved European governance. This is our first priority, our first responsibility, and next year, with the presidency of the European Union, we will show that it was not by chance that European Union was born in '57 exactly in Rome.
MODERATOR: Thank you for that, Prime Minister. And it was certainly very illuminating.
Of course, Italy has been a long-term ally and friend of the United States. You supported us in Afghanistan and in Iraq, and also you spoke of your contributions to the U.N. peacekeeping forces, not only in Lebanon, but also in Kosovo.
But as we have learned from Richard Haass, foreign policy begins at home. And I wanted to ask you about certain domestic issues that have been reported quite prominently.
First, in the economic sphere, you have been plagued by certainly debt that's staggering, that's 100 -- said to be 131 percent of GDP, by unemployment and negligible negative growth. And I wondered what structural reforms you've contemplated and what your program is for economic reform. I know you've instituted Destination Italia to encourage foreign direct investment, but -- and the E.U. is pressing you for more austerity, spending cuts and raising taxes. But where do you stand on these issues?
LETTA: Thank you very much. Of course, we are -- we lived in five years of deep crisis in Europe. This crisis was very difficult, of course, for all of us. Today, we are at the European level, I would say, out of the deepest point of the crisis, thanks to the whatever it takes -- that was the most important decision at the European level we took.
Of course, the problem was the time we wasted before this decision. But today, it's so crucial -- and I would say, for Italy, so important -- because for us, the level of the interest rate is the crucial point. If we have high interest rates, around 6 percent, 7 percent, 8 percent, as it was two years ago, for Italy, it would be, I would say, quite a disaster.
If we reach the 4 percent, as I think at the end of the year we can reach, or 3 percent, as I hope next year we can reach, that will be for us the possibility to have sustainable debt. I would say our debt is an enormous one, yes, but it raised less than the others in Europe during the crisis. It remains at the same level of it was five years ago. The main problem in comparison with the others, I would say.
The main crucial achievement for us is that we reached an important fiscal consolidation for what is linked to the deficit. We have today a deficit at 3 percent, today at 3.1 percent. I hope in the next days we will have a 3 percent -- 3 percent is a strategic and a sort of mantra, 3 percent, but we are among the virtuous countries in Europe, because all the others main countries, except Germany, they have a deficit that is more than 3 percent.
So we are in a fiscal consolidation with important results. Of course, the main consequence of this fiscal consolidation was recession and lack of growth. But today, I think we are able to present a stability law that I will present to the parliament by the 15th of October in which we can propose a big plan, a fiscal plan, a plan for cutting labor taxes -- that is the crucial problem for Italy -- having a balanced and effective plan of privatizations, and I will say I'm optimistic for the future of growth in Italy because of three main achievements we had in the last three months will create, will have consequences -- positive consequences.
The first one is a very important, very -- a big boost we gave to the -- to the fight against youth unemployment that is in Italy the nightmare. We have youth unemployment raised in these five years. Today we -- the fight against youth unemployment for us means 1 billion tough (ph) investment in cutting labor taxes for youth, jobs for youth. And I hope this decision was taken some weeks ago, and I'm sure that the consequence -- positive consequences for the economic development and for decreasing the youth unemployment will arrive soon.
The second one is the extraordinary period of incentives for what is linked to real estate activities for building, for the anti-earthquake remodeling houses, for what is linked to a lot of incentives in the real estate field in which we had the collapse five years ago.
And the third one is the fact that public administration is paying all the debts public administration had in this five years, with an extraordinary push for paying this debt. That is this three months period. And I'm sure that this extraordinary push for paying this debt, what I mean is around 50 billion euros, so it's an extraordinary push for growth. That will -- with all the -- the two other important incentives we created, in my view, that will give an important boost for growth. And I'm sure that, at the end of the year, not in 10 years, but at the end of the year, we will be with the plus, with -- with growth. And next year will be the first year with the positive growth after a long, long period.
So, of course, it depends on political stability. You mentioned in the presentation some names and some crucial issues of my country. I'm trying to do all my best to arrive to positive solutions. It's not easy, of course. To manage a grand coalition is not easy, and I think it -- it will be not easy, also, for other countries in Europe that are today trying to manage their grand coalition. But...
MODERATOR: If I may interrupt you, let's talk about politics for a moment. The elephant in the room in Italian politics continues to be Signor Berlusconi. And as I understand it, a special commission is going to determine -- perhaps next month, this month -- whether he should be expelled from the Senate. And there have been threats from members of his party that, if he is expelled from the Senate, that it will dissolve the coalition. How do you see that as playing out?
LETTA: I would say I was expected to speak about Arab Spring, so I don't know how to combine the two...
MODERATOR: If you want to address...
LETTA: ... the two topics.
MODERATOR: If you want to address it in the context of the Arab Spring, that's all right.
LETTA: But I'm -- you know, I know that in the -- in the global media, communication is one of the favorite items and issues. And I know it's the game. And I play the game. But I must say, I'm sure that we will find solutions and respecting laws, and I'm sure that the stability will prevail.
MODERATOR: So you anticipate a political stability? Now, just going back to economics for a moment, there are, of course, German pressures that you raise taxes and also demands for a crackdown on tax evasion, which has been quite a problem in Italy. Do you propose any programs in this area? I mean, Paul Krugman says austerity is a mistake for you now, you shouldn't raise taxes during a depression or a recession. How do you react to that?
LETTA: I think it's really one of the crucial problems. I must say that I am prime minister since the month of May, and I participated in four important international meetings, two European council of ministers -- of prime ministers, the G-8 and the G-20. In three of these four, the crucial issue was the fight against fiscal havens, the fight against fiscal evasion at global level and at national level.
We had in European Council 22 of May, the G-8, under the Cameron leadership in Lough Erne, and the G-20, under the Russian presidency in St. Petersburg. We reached, in my view, important, crucial and unprecedented agreements on the automatic exchange of informations, five against fiscal havens, and the fact is that -- an era is over. For us, it's very important, and it will be very important to reach immediate results from this new framework and this new mood.
Of course, it's -- it will be very important to have agreement at international level, but also we have to -- and this is my responsibility -- to apply this agreement at national level. This is why in the stability law that we will pass by the 15th of October, we will have an important chapter linked to the -- to the fiscal reform, fiscal -- the fight against fiscal evasion, and I am quite optimistic on that, because it's -- the mood has changed radically. And for us, it's very important, because the problem of fiscal evasion at global level and national level was, in my view, one of the worst assets and worst problems for Italy.
MODERATOR: And on the area of reform, perhaps you can address briefly judicial reform. There's the observation that cases take years to come to judgment from the time they begin, and certainly Signor Berlusconi has charged that your judicial system has become politicized. Do you anticipate any reforms in that area?
LETTA: We already achieved an important reform on that, because some weeks ago, parliament passed a law we presented for crucial reform on civil justice, because the problem in Italy is that we discuss and -- all the political fight is against penal justice, but the main problem for entrepreneurs, for investments is the -- is how civil justice is law.
So this reform is an important one. We approved this reform, introducing auxiliary judges, the mediacion obligatoria (ph), so a lot of important assets and changes in our civil justice procedure that will bring, in my view and for what is our expectation, a big result to have fast justice and not as today a slow justice. That is one of the main issues.
When I talk with some entrepreneurs coming from abroad and thinking to invest to Italy, the main problem they raise is exactly the -- I would say the weak rule of law for what is linked to justice, to red tape, and so on. And I know very well that is our crucial job, our crucial mission. This is why this first reform is adopted. Now we have to -- of course, to apply this reform. And we will continue.
For instance, one of the main achievements in the stability law and this plan, Destination Italia (ph), you mentioned is linked to the goal to arrive to have three courts in Italy dedicated to foreign direct investments, because, of course, the problem of the fragmentation of the courts and the inability to be -- to be able to respond to -- to the -- all the expectations of foreign direct investors is one of the main issues.
And in Destination Italia (ph), there are a lot of important rules for helping foreign direct investments for having a fair approach with the fiscal Italian institutions and so on. So I hope -- and I'm sure that the stability law will be an important asset for attracting investments and, of course, for creating and for presenting the structural reforms that Italy needs.
And I will say, of course, it is important, but as I mentioned before, without a new European approach, it will be useless, because if Europe is only taxes, austerity, recession, and no light at the end of the tunnel, it will be impossible to convince people to -- to work, to invest, to make sacrifices. When you ask for sacrifices, you have to indicate the promised land. If not, it will be impossible.
MODERATOR: And it certainly would be interesting new -- an important to foreign -- and contemplate foreign investment, the state of your penal system, because you have the specter of multiple prosecutions and lengthy prosecutions, where cases are brought to trial years after the events. And do you contemplate reforms in the penal system, as well?
LETTA: Well, of course, it is necessary to do that, but I would say, if -- to do that, it's necessary to have a separation between the issue, as I -- as you mentioned before, and the reforms. Reforms on justice, penal justice and so on, are needed, but not as a response to what happened to Mr. Berlusconi. They are needed because they are needed...
MODERATOR: I fear...
LETTA: ... not because of...
MODERATOR: I fear, Prime Minister, I've monopolized the questioning, so let's throw it open to the floor. I know there are members who have questions. Rita Hauser?
QUESTION: Good morning. To get back to the Arab Spring...
MODERATOR: Please wait for the microphone and identify yourself.
QUESTION: Thank you. Get back to the Arab Spring.
LETTA: Thank you very much.
QUESTION: The head of the ICRC the other day described the humanitarian crisis in Syria as its greatest challenge since World War II. Now, should there be some kind of Geneva II settlement, which we all hope for, there will be an unprecedented need to absorb refugees. And we know from history that a lot of them will not go back. What will Italy, but more broadly, what will Europe do? And particularly this will fall, I think, on your plate, hopefully that there be a settlement, but it'll fall next year when you're heading up the E.U. Will Europe take in a sizable number?
LETTA: You raised the point I would say, because today we discussed about Syria without the real knowledge -- about 2 million, maybe?
LETTA: More? More than 2 million, around the four neighboring countries without any organization, help and so on. So I'm sure that this is the crucial issue. And I'm sure that -- and tomorrow I will raise the issue in my speech at the U.N.
Of course, this crucial issue was at the center of the St. Petersburg debate, and that was, in my view, very important. We had a meeting -- a donors meeting with Ban Ki-moon there. I met the U.N. leaders of the U.N. agencies based in Rome. In Rome, we have the agencies linked to food. And we had with them a meeting to organize and to try to organize a response.
Of course, for us, it's crucial also for the consequence with the migrations trend, because, of course, the -- the consequence on our border will be one of the -- of the crucial issues. This is why we organized this meeting in St. Petersburg. This is why Italy decided in a not-easy period for our budget, of course, to spend money, and we participated with this $50 million today in helping on refugees. And, of course, we asked for a European Union approach, because this is one of the issues -- and you're completely right -- in which European Union has to be there as union. If not, it would be impossible to have a reaction -- an adequate reaction.
That is why we ask for a more integrated union. This is one of the examples, and I think that this crucial example will be one of the -- I'm hope -- I hope that the response will be at the level of the expectations and you can be sure that Italy will push and will do all what we can.
MODERATOR: Yes, sir?
QUESTION: Jeff Laurenti (ph). Mr. Prime Minister, in your remarks, you had spoken both of the urgency of convening the Geneva II conference to wrap up the war in Syria and of the centrality of the U.N. Security Council, where unanimity has been elusive because of the Russian objection to applying coercion to the Assad government.
To what extent does the Italian government see the insistence that Assad must go as either a precondition or an outcome of the conference as realistic -- does it support it -- and, secondly, if by some miracle a settlement is reached, would Italy be prepared to lead a possible U.N. peacekeeping force presence in Syria during the interim period of the transition that follows?
LETTA: Of course, we will work strictly close with our allies on that. In the G-8, we had a very good discussion on Syria. The problem was the fact that the discussion and the final statement of the G-8 wasn't applied. But the discussion and the agreement -- I would say the agreement between Putin and Obama there was a good one. And European Union played -- European Union -- the Europeans, I would say, played a role there, an important role to arrive to this agreement.
The problem was the application, of course. And we have to be proactive, to have an application of this agreement, not to be just spectators, because, if not, it will be impossible to apply the agreements.
And on your second point, you can be sure that Italy, of course, in the framework of the U.N., will be always ready to be present. Of course, we are a country with priorities. Today, our priority is, of course, to complete the Afghanistan mission that will be at the end of '14 completed, and to be in Lebanon and in the Balkans, three priorities, very (OFF-MIKE). Next Friday, I will propose to the government and to the parliament to spend $180 million -- euros -- for -- for Afghanistan.
And of course (inaudible) of course, we -- we -- we will be able and we wait for a more stable situation there.
And we will be waiting to be present again. The issue I would like to raise is, of course, the energies issue. That is one of the crucial ones for us, because if you put together Egypt and Libya, the consequence for us is not an easy one.
This is why, for us, the (inaudible) of the Mediterranean is not only a problem of dignity or foreign policy. It's a crucial problem of energy. Energy means life for us. This is why we are working, and we work, and we will work for a diversification of our energy supply.
And I was in the (inaudible), some days ago, for finalization of the TAP, that is the trans-Adriatic Pipeline (ph) that is another way to diversify. And we will try to continue in this diversification because, of course, we need to be stable on the energy supply.
But of course you can be sure that we will work for the stabilization and the anewed stabilization of bilateral relationship with Egypt.
QUESTION: Thank you very much. Mario Placato (ph) with (inaudible).
Mr. Prime Minister, you mentioned that on Friday you're gonna have some proposals. And one of them, apparently, is going to be to raise some money through sale of real estate. And that -- the rumor that has been circulating in the press is that that should allow the country not to have an increase in the VAT, in the (inaudible).
Now, just a few days (inaudible), your minister of the treasury said that that was imperative. The question is, are we moving in the direction, and if we're going to have about a billion euro sales of real estate, the idea was that privatization was supposed to reduce the debt. Is this going to reduce the deficit? Thank you.
LETTA: Thank you. Your question will need I think a 20-minute answer. And only if I...
LETTA: Yes, but the issue was very large.
So really I can't answer. I would say that, of course, Friday we'll have an important council of ministers for addressing this issue, and I'm sure that we will overcome the obstacles because we need to do that, because we need to give solutions step by step, step by step.
And, of course, the stability law will be the plan for 2014. So until the stability law, it will be step by step.
I think it's normal. The stability law the 15th of October will be the plan for 2014, with all the missions, the achievements, the realization. And I'm quite convinced that it will be a convincing plan for 2014. And the parliament, a majority, public opinion, investors will be -- will be convinced.
MODERATOR: I think we have time for one more question. Right here.
LETTA: I can't miss the Ban Ki-moon...
MODERATOR: Can't miss Ban Ki-moon.
QUESTION: Mr. Prime Minister, thank you. I'm Richard Greco from Filangieri Capital Partners. And my question is what impact will the continuing weakness in public finances have on Italy's financial commitment to NATO, its bilateral military relationship with the United States, and perhaps an emerging common European defense?
I think that since France and (inaudible) are facing similar public sector weakness, we see potentially consolidating the defense industry (inaudible) you know, so in particular as the United States follows, we really understand, you know, the (inaudible).
LETTA: You have raised a crucial point. We will present a paper in December in the agenda (inaudible) defense industry at European level (inaudible) the crucial point. For us it's a very important issue. And of course, to try to combine a more integrated European defense activity. And, of course, at European level, with the (inaudible), we will try to bring all the others to think that there is no contradiction between the integration at the European level and the NATO activities.
The (inaudible) activities is to have a more effective defense (inaudible) without overlapping, without problems like we had in the past. So, I hope that European Council meeting in December will be very effective and important one.
MODERATOR: It's an interesting and thought-provoking presentation that you made. I know it's of great interest to our members (inaudible) engaging you in dialogue.
LETTA: Thank you very much.
MODERATOR: (inaudible) to have you with us.
LETTA: Thank you.