Italian ambassador: EU budget has to do ‘better with less’

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As EU leaders prepare for long negotiations on the EU budget this week, Italian Ambassador Nelli Feroci says Italy is working towards a "balanced and equitable" deal, where funds earmarked for agriculture and regional cohesion – traditionally the big components of the budget – are geared to maximise growth and jobs, and achieve a sustainable European economic recovery.

Ambassador Ferdinando Nelli Feroci is the permanent representative of Italy to the European Union.

He spoke to EURACTIV Editor-in-Chief Daniela Vincenti.

With the eurocrisis in full swing, 2012 was the year of firefighting. So what do you say would be your scenario for 2013?

My scenario is based on the assumption that the overall situation of financial markets in 2013 will be more stable than in 2012.

However, as forecasts show, many European economies will continue to be seriously affected by the effects of the crisis.

Of course, the situation will differ from country to country, but on average we will still be in a situation of slow gradual recovery.

My assumption is that while we’ll need to maintain our commitments on fiscal consolidation, tight control of national budgets and sustainability of public finances, in 2013 special attention will have to be devoted to economic growth: in many countries, including my own, the situation is of serious and immediate concern for the excessive level of unemployment, especially amongst the youth.

EU leaders have adopted a “Growth Compact” last June, but we have the feeling that it has remained lettre morte. Still the agenda is very much driven by austerity-led actions … 

The reason is relatively simple. Even leaving aside the question of whether austerity policies are correct or not, my opinion is that their adoption was necessary in the most acute phase of the sovereign debt crisis to regain the confidence of international markets.

On the other hand, while it is relatively easy to adopt measures of budgetary constraint, it’s much more difficult for governments and for public authorities -including at EU level – to develop an effective strategy to stimulate growth and employment, especially if there are no margins to boost investments through the use of public finances.

In these times of budgetary constraints, the European Union has therefore focused its action on alternative measures to stimulate growth: strengthening and deepening the internal market, streamlining regulations, simplifying and reducing administrative burdens, working on research and innovation.

These measures, however, are not likely to produce immediate effects in the short run. This is the dilemma Europe has found itself in during last year. Let us hope to be able to bridge this gap in 2013.

In the very short term, EU leaders are going to discuss once again the EU long-term budget which is supposed to give added value to European economies by injecting precisely the investments we are talking about. Unfortunately, at the November summit, some innovations like the Connecting Europe Facility, Horizon 2020 have been sacrificed for cohesion and agriculture. Isn’t that business as usual?

If you look at the original proposal of the Commission for the next Multi-annual Financial Framework, the envisaged increase of EU funds to support such items as research, infrastructure, industrial competitiveness was quite important.

Indeed, the Commission made a strong effort to “reorient” the budget to support innovation.

Other member states have been strongly defending their allocations for agriculture and cohesion, fearing that reduced financial support [from the EU] might hamper recovery from the current economic crisis.

Both arguments have their merits. 

Final agreement will  require further negotiating efforts. President Van Rompuy’s new proposal will be presented directly to the heads of state and government as they convene next Thursday [the interview was carried out on 1 February] in Brussels. 

I am not here to predict the results of the summit. What I can recall are the fundamental principles of Italy's position. 

First, the EU budget is a collective investment of EU countries for their own future: we want an ambitious budget for Europe.

Second, focus should be quality of spending: “traditional” components of EU budget should not be seen as opposed to “innovative” components. All policies, including agriculture and cohesion, must be  geared to maximise growth and employment. The real challenge we face in these times of financial constraints is to do better with less.

Third, the allocation of resources in the next MFF must be equitable. In contributing to the budget, no member state should bear a disproportionate burden in relation to its national prosperity. 

Against this background,  Italy is willing to play a constructive role at the forthcoming European Council for a balanced and equitable deal.

Coming to national interests, the recent position of the UK has roughed a few feathers …

To a certain extent, there is nothing new. If you look back to the history of UK’s participation into the EU, you’ll see that it’s marked by a long series of “opt-outs”, negotiated or renegotiated on different occasions.

The famous Fountainebleau agreement on the British “rebate” [in June 1984] is a very telling story.

Since its accession to the Union, the UK has consistently refused to be involved into the most challenging projects of European integration: the Schengen agreements, the monetary union, the fiscal compact.

On this background, I’m not particularly surprised by the recent move of the British government. Clearly, London is looking with growing concern to the potential impact of ongoing reforms of eurozone governance (starting from the banking union) on the functioning of the single market, and of the EU in general.

As the eurozone members decide to pursue a project of greater integration and further transfers of sovereignty, it may appear reasonable that London asks for a review of the 'terms and conditions' of its participation to the Union.

Indeed, managing the relationship between a more integrated (and, ultimately, more extended) eurozone and the countries which are not (and will choose not to become) members of the euro will represent a major challenge in the years to come: Cameron’s speech has the merit to have highlighted  the challenge.

On the other hand, a scenario in which London tries to “impose” an agenda for reform to the other 26 member states, is clearly unrealistic, and would prove unacceptable to most of them.

So far, however, the Prime Minister has only listed a set of general principles which should inspire the reform of the Union from an UK standpoint. It remains to be seen how the UK will concretely move on from here, and which specific proposals it will address to its European partners.

On its part, Italy wants the UK to remain an active, and constructively engaged member of the European Union. Its contribution to the deepening of the single market has been crucial and will remain crucial in the years to come; the global outreach of the UK is a great asset too, as the EU has to step up its engagement outside its boundaries, develop its capabilities in foreign policy and defence, and assert its status as a global player.

But the lessons drawn by the recent financial and economic crisis are clear to everybody: in all fields, the future will be – will need to be – more Europe, not less Europe.

Two major elections might disrupt the work of the EU: Italy in February, Germany in September. How much these elections and results can affect the working of the EU?

In an ideal world, the best solution would be to have a kind of “harmonised” electoral cycle among all European countries, with national elections being held all at the same time! That wouldn’t “slow down” the European machine every time there is an election somewhere, but this is very much a dream…

Now, coming to my country, I’m not to make a prediction on the results of the elections; but my own firm belief is that whoever will be governing Italy after February, will maintain Italy firmly anchored to Europe, honour the commitments that have been taken by previous governments, and fulfil the expectation, shared both by our citizens and the citizens of Europe, that Italy should continue to be a powerful engine for European integration.

I’m not worried about any “risk of discontinuity” when it comes to the future commitment of Italy to the major choices that we have collectively made in Europe in the last two years. There may be new sensitivities that could slightly change priorities. We have seen this, for example, in France. We may see this in Italy too.

This is part of the democratic lives of our countries, and part of the democratic processes in Europe as well. We shouldn’t be worried about this…

The case of elections in Germany could be seen from a different angle. There is indeed a possibility that some steps that are expected to be taken collectively at the European level might be postponed in view of the German elections.

What do you think could be postponed?

Crucial agreements were reached last June and September, were reconfirmed and developed last October, while in December we witnessed a certain lack of political will, with the overall reform of the economic and monetary union seeming to lose some speed.

Indeed, there has been very important and positive progress on banking union. But on other key proposals to deepen our economic and monetary union, we’re more on a “wait and see” sort-of-mood.

We understand it’s difficult for any government to make decisions on very sensitive issues before elections. But we must keep the sense of direction, and go ahead with the commitments we have taken to improve the governance of the eurozone.

Let’s go back to Italy for a minute. Do you think there is some anxiety among your colleagues in Council on the Italian elections? Do you find yourself playing a convincing game to reassure them?

Since Mario Monti and his government came into office in November 2011, the perception of our country by our European partners has dramatically improved. Italy has undoubtedly been successful in maintaining its commitments on fiscal consolidation, regain an active role on the European stage and contributing to the collective efforts to find solutions to the crisis.

Now, despite the physiological degree of uncertainty surrounding an electoral campaign, I’m not detecting any special preoccupation for what will happen in Italy.

Only… an understandable curiosity, because Italy has been and will continue to be an extraordinary political laboratory.

When we talk about growth, one of the priorities of the Irish presidency is finalise international trade deals – India, Canada. Start negotiations with the US. Is there a sense of urgency in order to open markets and boost growth?

In general terms, we are very much in favour of trade liberalisation. But we are not in favour of  liberalising trade for the sake of liberalisation.

We need to carefully balance the offensive and defensive interests of European industries, and secure a fair distribution of burdens among member states of the European Union.

Indeed, when a free trade agreement comes into force, some European countries might be more affected than others by the unhindered access of foreign liberalised goods (and this is specially true for countries like Italy with a large manufacturing sector).

On individual free trade agreements, the case of Japan is the most delicate for us. We have very much insisted with the Commission that in preparing a free trade agreement with Japan we had to be 100% clear with our Japanese friends that they have to dismantle their non-tariff barriers, as this is currently the main obstacle faced by European manufactures when trying to penetrate the Japanese market.

So we gave the green light to the approval of the negotiating mandate only when we had sufficient assurances by the Commission that this problem would be adequately taken care of.

On the other hand, we are hopefully in the final stage of negotiations with Canada and India. We hope that the relative text will be agreed soon.

The agreement with the US is a big undertaking, with a great potential to boost growth. We are very supportive of the idea of a free trade agreement with the US. At the same time, we’re well aware of all the critical elements that have to be addressed. I am referring in particular to the regulatory components of the free trade agreement, as regulatory frameworks for several products in Europe and in the states still differ considerably.

Do you foresee that within the Irish presidency we are going to see the launch of the negotiations between the EU and the US and a free trade agreement with India?

I would assume that a free trade agreement with India and Canada could be ready by the end of the semester. Conditions are there. I don’t see major obstacles.

As far as the US is concerned, we would certainly push a lot in that direction. Whether we would be able to launch negotiations by June or not, it’s difficult to say. If it’s not June, it could maybe be autumn this year.

France and Germany celebrated the Elysée treaty recently. Would you say that the German-French leadership of the Union has gone through tremendous change since then. How would you view the EU power balance in the next 20 years?    

This is a complex subject, that would require a very long answer…

First of all, Franco-German reconciliation is at the heart of the European project. Without the Franco-German reconciliation, there wouldn’t be a united Europe today.

But this “special relationship” has changed a lot in recent years, partly as a result of the economic and financial crisis.

As the crisis unfolded, we have perceived on a few occasions tensions and differences between Berlin and Paris.

In many cases, they have been able to reconcile their views before crucial EU summits.

However, in the last period of the Merkel-Sarkozy partnership, other European partners probably got the impression that the two leaders were coming to Brussels with some sort of pre-cooked solutions, an maybe resented that this partnership had become a little too “exclusive”.

As President Hollande came into office, the situation has further evolved. The Franco-German relationship is still crucial, but a more articulate dynamic has emerged around and beyond this axis.

New spaces have opened. Italy, for instance, has visibly come into play. President Monti has indeed been a key player during European summits last year. He never antagonised Germany, but was very assertive when necessary. With President Hollande, in the wake of renewed affinity between Italy and France, he stressed the need for growth measures to be rapidly adopted in Europe alongside austerity.

Thanks to his personal credibility and competence, Monti was able to maintain a fruitful channel of dialogue both with France and Germany, while “reaching out” to the rest of the 27. This contributed to a richer and more fruitful relationship among the EU family, and gave a decisive push, on several occasions, to forging agreements on innovative tools to deal with the crisis.

In conclusion, a healthy Franco-German relationship will remain key for Europe in the decades to come.

But Italy, the third largest economy of the eurozone and one of the most assertive supporters of European integration, is an equally decisive asset for Europe’s future.

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