Italian Deputy Minister Michele Geraci has told DW it makes little sense to compare the Italy of today with Greece when it faced an international bailout. He defended Rome’s budget plan, saying it would fuel growth.DW: There’s been some harsh rhetoric coming from Rome. There was talk of the EU ruining Italy. Is your country on the way to becoming the next Greece, and if so, is it really the EU’s fault?
Michele Geraci: Today’s situation between Greece and Italy is very different. You’ll see in the next few days that our proposed budget plan envisages quite some money to be spent on investment. I think most analysts so far have focused on our debt-to-GDP ratio, with the strong emphasis on debt levels. We want to focus more on the lower side of the equation, on growth in the economy.
This, I think, is the only credible way of turning a country in a sustainable partner long-term. I do believe that once these issues are clarified, analysts, investors and the whole EU will understand and appreciate the scope and the goal of our plan.”
You talked about growth. Your government has based its promises on new forecasts of 1.5 percent growth next year, with the European Commission expecting only 1.1 percent, others even less. What makes you so much more optimistic than the rest?
Some forecasts came out before our budget document was fully released. So they couldn’t factor in the details of our investment plan. Once the plan is fully read, it will lead to an upward revision of estimates.
It might take them some time to digest the long document, but the investment bit is actually what we have been working on over the last few months.
Your government made a lot of promises before the elections — welfare for the poor, an unpaid tax amnesty and pensions reform, and it looks that you can’t finance those measures. Are populist parties having a hard time adjusting to real-world economics?
I don’t think so. Our plan for universal income will lead to higher consumption. For each dollar or euro spent on universal income, tax cuts or pensions, more than one goes back into the economy eventually, with fiscal multipliers now being higher than one as most analysts say, closer to 1.5 or even 1.7., so the improvement is much more substantial.
Investors are already selling Italian debt. Borrowing is getting more expensive. Do you think your government is doing a good job there all in all?
“In the short term, it may be a bit turbulent in the markets which first need to digest the full scope of our reform plan, and that’s a long document. We’ve already seen an increase in Foreign Direct Investment (FDI), we saw Versace being bought and a few days ago we saw a traditional motorcycle company being bought. So, what we witness is a little bit of turbulence in financial markets, specifically in bond markets, but there’s been strong interest in the real economy, in M & A [Mergers and Acquisitions] — and that’s good news for people focusing on the GDP side of the equation.
The interview was conducted by DW business anchor Gerhard Elfers.
Michele Geraci was appointed deputy minister with special responsibility for international trade and investment in the Italian Ministry for Economic Development. He is a former investment banker and electronics engineer and an assistant professor in finance at Nottingham Business School China (NUBS China).