Sannino: Italy will turn the perfect storm into the perfect rainbow

Stefano Sannino, Italian ambassador to the EU

After the eurozone’s perfect storm, Europe can regain competitiveness and growth through an aggressive investment plan. The Italian presidency starting next week will do its utmost to push partners to adopt  measures  for the ‘perfect rainbow’ of sustainable recovery, said Italy’s ambassador to the EU, Stefano Sannino, in an exclusive interview with EURACTIV.

Stefano Sannino has been Italy’s permanent representative to the European Union since July 2013. Ambassador Sannino served for a long time at the European Commission, most recently as Director-General for Enlargement.

He spoke to EURACTIV’s Editor-in-chief Daniela Vincenti.

The Italian presidency of the EU will start on July 1st.  The political context is extremely challenging with the institutional transition, a new Parliament and a new EU executive. How are you preparing to ensure that these changes do not derail constructive progress on certain policy dossiers?

When there is a challenge, there is always an opportunity. You could see this as a simple transitional period, or as the beginning of the new five years of the legislative framework of the EU.  Our ambitions, and those of the Italian prime minister, are to determine and to steer the course of EU policy towards growth and more employment, in order to provide an answer to the questions that European citizens have put to the their politicians during the EU elections. You could call it a pragmatic ambition.

Fair enough, but the recovery is weak, and Europe needs to take other measures to boost growth and employment. At the same time, Prime Minister Matteo Renzi called  for greater flexibility to meet the bloc’s deficit targets, especially if it is committed  to reform. So, how do we reconcile the two?

It is not either or. The point that the initiatives for growth are like an alternative to fiscal consolidation and reforms is too stereotypical. The point is not to spend less. It is to re-orient your resources. This is true also for the EU budget. We must find how to re-orient it in a way that is more effective, and to reply to what the citizens are looking for.

We need to continue the work that has been done in fiscal consolidation and structural reforms. However, what was missing, or should be more pressing now, is a specific policy line to underpin investments in growth in the EU. I believe it is the additional element.

Yet Renzi and Chancellor Merkel have a different view on how to feature that in the budget, over whether investments, which are by nature long-term, have to be taken off the calculation of the deficit. Don’t they?

I will not speak about the calculation for the growth and stability pact. They are a chapter alone. An initiative for investment is not something that should be perceived as just additional money that is printed and spent.

The goal is to pull together money that exists, from the EIB, the EU budget – specific money from programmes that can be oriented alongside loans from the EIB, and private capital.

We must not underestimate the fact that with negative interest rates, money could become available again for productive investments in specific areas.

If you look at the needs of the EU in certain areas, especially energy security, energy efficiency and broadband, you have a number of areas where money could be invested. This does not necessarily mean that it should be done through public investment and increasing the level of debt of EU member states.

So you would do it by channelling private money? What kind of incentives?

There are a number of ideas on the table. The Italian Finance Minister, Pier Carlo Padoan, has visited numerous European capitals in order to discuss with his colleagues, and he will present the priorities of the President to the July ECOFIN council.

What kind of ideas?

We have had some attempts in the past to support initiatives for growth (capitalisation, the combined use of EIB loans with funds…). These are elements along which one could work to come up with a substantial availability of money to underpin it.

How much?

I cannot tell how much. What is important for me at this stage is that the idea of having a significant programme on investment at a European level in key areas is something that is not dividing member states.

You will see that they are all in agreement for having something. For me, this is win-win, because once you have sufficient growth and a normal inflation rate, then you are already creating the conditions for the stability and growth pact to be implemented naturally and without changing the rules of the game.

Then comes the story about possible elements of flexibility, or how you calculate certain things at certain moments. That comes once you have all the other elements in place. The main responsibility of the EU is how to ensure that the fundamentals of the Stability and Growth Pact can be put in place again. Growth and employment are key for this.

Do you think we need to have some kind of flexibility now to lift us out of this weak recovery?

We must put everything in the correct order, otherwise there is a risk of confusion. We must give people more employment. There is an extremely high rate of unemployment and even higher youth unemployment.

In order to this, we need sufficient growth, and to create jobs. You cannot create jobs if you do not have growth. You can have policies that are facilitating, but if there are no expectations that the economy will grow, you will not have jobs. Growth becomes the key element in this process.

But growth is also key in order to implement the stability and growth pact, because without it, you do not have the necessary precondition for this to happen.

If you add this to a policy that fights inflation like the one that the ECB is currently putting in place, and if you continue the reform process that Prime Minister Renzi has been advocating very strongly for Italy, then you have the elements in place for having the opposite of a perfect storm, perhaps a perfect “rainbow”.

 You will have a situation where you can come out from the difficult divisions and go on a constructive and positive path for the European Union.

We have been trying to push for growth for the past years, but it seems that we are not getting there. Do we need flexibility now in order to ensure that we have the correct conditions for growth to pick up?

It is true that over the past few years, the focus of our attention has been much more about rescuing the euro. The house was on fire and the first thing we had to do was extinguish the fire. Without the euro, all our economies would have collapsed. It took time for everyone to realise this. It was not just about being nice to the banking sector. Without it, there would be no blood going into the vascular system of the EU.

That being solved, through the banking union, we hope that we have created the conditions to prevent another crisis.

Now we need to look at what needs to be done in order to support growth. This is an area where we need to do more. The EU managed policies said that if you had your budget in order, a sound fiscal policy, and the right reforms, then growth would come naturally. In the absence of these elements, it is difficult to have economic growth. However, it is also true that at this stage you need a booster and programmes. Investment projects become essential.

If we go into the ideological debate about flexibility, then we are lost. We get lost in debates on the economy, migration and data protection. If we start having an ideological defense of one specific point, then we are not helping the agenda move forward.

Europe is complex and we have different sensitivities, starting points and situations. We need to reconcile this. This is one of the reasons why I think we need to be able to look more at the result we want to achieve, rather than the starting positions of the process we are following.

The most important thing for our citizens is what they see at the end of the process. They do not care too much for a number of institutional facts, but only that the EU does what they think it should do. For them, it is not a question of the Council, the Parliament, the Commission or any other institutions. This is more the way we work.

On the presidency website, Prime Minister Renzi promoted a vivid image of the United States of Europe, which he also did during the European elections campaign. Having a pro-European agenda made him win a substantial number of voters. In this framework, it seems he has a lot to teach other leaders. The presidency will have to broker a deal on the new executive. Do you think Renzi will push for a more pro-European Commission to balance off a more Eurosceptic Parliament?

Yes. First of all, Renzi has said for some time: “Change Italy to change Europe.” I think that is a good way of putting it, because first you need to give the sense that you want to do a number of things at home and then you can preach to others about what they need to do from their perspective. 

He won the EU elections because he was pushing a reform agenda. Not just selling the story of “business as usual”, but rather a new way of doing things, starting in Italy and then applying the idea to Europe.

He also said that he does not want to speak about names, but about policies. Here again, he had a winning argument, because the debate must be about policies. For the first time, in this difficult moment of Euroscepticism, it is important to speak about Europe and the policies to reform and implement, in order to reply to the needs of the people.

To quote Renzi, “Europe is the answer, not the problem.” In order to be the answer, then it needs to provide the right answer to the needs of the people. It is not just a rhetorical exercise; it is really how he sees the dissection of priorities.

It is also evident that in order to implement policies, you need the right people. But you need the programme and priorities. It would be interesting if, at the end of the day, we emerge from the European Council not only with the name of the future president of the EU Commission, but also some strategic guidelines for what the next Commission should do over the next five years.

This is the goal we have had since the beginning, when we said it will be a difficult transition period.

Who will lead this from the 28 member states?

I prefer not to say that it will be this person rather than that one.

We have spoken a lot about how to finance the economy, investments and so on, but there is also another important part which is how to enhance the competitiveness of Europe and the EU in specific key sectors of the economy.

This includes the energy sector, digital sector, R&D and industrial policy. Europe is an industrial continent.

Maybe not all the countries have the same industrial base, but there are large European countries that have large industrial bases. That needs to be looked after more, and better than in the past. We will try and build on a number of initiatives and communications that the Commission has made in the past few months, in order to foster a competitiveness agenda. The same thing goes for the free trade agreements, which will be an important element of this process.

Merkel has pushed for a South America trade deal, not just TTIP, as a way to boost growth.

We must not be automatic. We may have moments when we can push for regional agreements, others when we should choose more bilateral agreements, or multilateral agreements hoping that others will join. There are many possible configurations.

There is opposition building up to TTIP, and some are claiming that we are moving towards a new ACTA. How do we avoid the growing momentum against it?

For me, the way forward is ensuring that the trade agreement remains what it is: a trade agreement.

We are trying to find the balance between defensive and offensive interests, what we can achieve and what we have to give. If you manage to stay along those lines and do not burden talks with elements that have nothing to do with a free trade agreement, then I think we can find a solution. The US is talking about ACTA, data protection, or other elements. Financial services and public procurement are part of the agreement. It is not only good, that is clear. It is not only about tariff barriers.

There are a lot of non-tariff barriers and other elements that need to be taken into account, but it cannot turn into a battle between the political model of Europe and that of the US. You cannot make the agreement more than what is it.

When it comes to an agreement with the US, the implications in terms of setting standards for the whole world are such that people are more interested in disagreement than agreements. If we can manage to remove the emotional point of view and put the agreement on a sort of irreversible track, then we have done a significant amount of work. That is our mission.

I do not think we can finish negotiations during our presidency. But we can push things to a point where it is easier to complete the process rather than abandon it.

On energy security, will it be possible to have real progress on agreements with third countries during your presidency?

If we do not have an ideological debate about energy it will be easier to find a compromise. We need to enhance energy security and efficiency, to find a better balance between different kinds of energy, and to move into a more decarbonised economy.

Do you think there is a role for shale gas?

I am not saying no. I think some countries in the EU want to move in that direction and others do not. Each country will need to continue to be able to determine the best energy-mix that they can find.

It is important that there is a certain basis of renewable energy and an effort to decarbonise the economy. We must increase efficiency, diversify our resources, and avoid becoming dependent on just one source or specific country, so that the EU can face different challenges in a different way.

Looking at Ukraine in the east, and at the Arab Spring in the south: Do we need to revisit our priorities for  the neighbourhood policy?

Again, we need to diversify and not to be dependent on oil. The continent needs energy, and we need to import it. We can try and increase our production capacity, but it will take some time.

I am not sure that we will manage to become completely independent, because for that, you have to make choices that not all countries are prepared to make, for example on shale gas and nuclear energy.

It is a question of making a decision on the energy mix and diversifying your sources of energy. In that case, I do not want it to become ideological. Reducing independence does not mean cutting the links with all our partners, east, south, north or whatever.

Last but not least, Italy will surely push for a new migration policy …

Europe has abolished borders internally and now must manage its external border.

It is true that countries on the external border have special responsibilities for this, but managing it is in the interest of everybody.

Migration will always exist. The situation will always be there. If not economic migrants, we will have people trying to escape difficult situations, be it in Africa, Syria or Iraq. People will be attracted by Europe. We need to be ready for that.

Strengthening Frontex?

We need to strengthen and reinforce a proper mechanism like Frontex in terms of human resources, financial resources and expenses. We need to work more in developing forms of cooperation with third countries. Here again, it can be done with specific countries, institutions, or UN agencies. The EU has to work as one. Then we need to work with third countries when we have a presence, like with Morocco and Tunisia. If not then, we need to work with regional organisations.

If you look at the situation in Libya, it is not easy to know who to talk to in order to have better control over the situation. That is why we need to work with the African Union, IOM and the UNHCR. We need to work in order to avoid having people facing difficult and dangerous journeys to try their luck.

The EU working on the ground?

It would be better to process asylum requests in the countries of transit if we can manage to reach agreements (this is not relative to asylum seekers).

Or we could have forms of cooperation, like migration partnerships, or the general approach of migration mobility. This could help secure migration, have people coming to Europe, getting an experience, and being able to go back.

We can help migrants return to their country of origin through specific projects. I do not think that all people want to leave their country. They want better living conditions. If we can help achieve that, then maybe we can have an impact on migration.

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