The former Prime Minister and former leader of the Italian center-left and current dean of IE University in Madrid, Enrico Letta, (Pisa, 1966) presented a report on the economies of Italy and Spain prepared by The European House Ambrosetti Group and Amazon (Teha) on Thursday. He doesn't mind being called naive, but he is clear that the future of both countries lies in having a single voice in the EU, despite the very distant relationship between Pedro Sánchez and Giorgia Meloni.
What are the problems that prevent Spain and Italy from having more weight in the EU?
The main problem for both countries is that next year European funds will come to an end, and I believe they have been key to the success of Southern Europe during this period. This is a time when it has been reversed that Germany and France are doing better. In recent times, the economy of Southern Europe has evolved very well, with Spain performing better than Italy. Now, the big risk is that the funds will end next year without an agreement among European leaders and without a clear idea of how to continue. This is a red alert for Spain and Italy.
Why?
Because without European funds for investments, this leaves only fiscal budgetary margin for countries with no debt like Germany and Northern countries. Spain, Italy, and France will not have that margin as they are heavily indebted.
Another problem is that European funds are injections of temporary money that have not been used to transform the economies of Spain and Italy, don't you think? Is it a missed opportunity?
Yes, it is a missed opportunity for two reasons. Firstly, European funds have been designed as public funds without links to the private sector and without co-financing. The philosophy of these funds at the European level was too public, and in my opinion, public funds should mobilize private funds. My entire report on the European single market aims to mobilize private funds as well. Secondly, the design has been too national. It is true that it was after the Covid period, and each country needed national tools, but it was a mistake - understandable, but a mistake - because the scale needs to be raised. The European problem is a problem of dimension. The Americans, the Chinese, the Indians are too large. Therefore, the limitation of these European funds has had little impact on transforming our economies because they were too national. The great success of the US in the last 15 years is not because they have public funds, they do have them. The Americans are succeeding because they have multiplied private investments in innovation fourfold.
What is the main message of the report on Spain and Italy?
That both countries need more European integration and need to work together more.
Do you see this as possible with Sánchez calling for a cordon sanitaire against Meloni, and she being politically opposed to the Spanish Prime Minister?
There are ministers from both governments who work well, and sectors that collaborate very well in many areas. For me, energy, defense, the financial sector, agriculture, security... are areas of great integration and common work. The business associations CEOE and Confindustria also collaborate. I call for action and for both countries to work together because we need to lead Europe together, especially with France facing enormous difficulties. There is a lack of leadership in Europe, or it is a timid leadership like that of the Germans, but Spain and Italy have a lot at stake.
Why?
Because now Europe is focused on the threat from Russia, and either Spain and Italy work together to rebalance, or all investments will go to the border with Russia, losing the Mediterranean perspective. What is happening is a huge mistake because security is not about preventing tanks from crossing the border, as today we are all borders in wars executed with drones or cyber-attacks. Spain and Italy must work together to prevent all investments from going to Eastern countries and the border with Russia. We are not in 1940; technologies are very different now.
Should they reach the level of collaboration seen in the Scandinavian countries?
Yes, that's why I argue that Spain and Italy can be the Scandinavia of the South.
Do you see this as a credible challenge?
Yes, for a very simple reason. In almost all EU matters, Italy and Spain have the same position. I always remember from my time as Prime Minister the image of the Scandinavian and Baltic leaders meeting before each European Council, and one of them speaks as the spokesperson for the others. This makes them a powerful voice because they represent seven or eight countries. Italy and Spain could jointly defend the same positions. For example, the EU's foreign policy is currently heavily influenced by the Eastern and Central European bloc. The Russian threat is significant, I do not question that, but Italy and Spain need to rebalance with the Mediterranean. The true heart of all instabilities is ultimately the Mediterranean. European policy needs to be "Mediterraneanized," if I may use the term.
Do you not feel naive? Do you not see it as utopian for Pedro Sánchez to allow Meloni to represent him or vice versa, like the Scandinavians?
I know I may seem naive, but the two countries are more integrated than we think, and we need to push for it. The issue is not the European Council. In Europe, the real decisions are made in councils like Ecofin, Defense, or Agriculture.
Polarization dominates both countries...
Yes, both countries are highly polarized, and the internal problem in each of them is that polarization rises to the highest level. That is the point. I do not like polarized politics. I am a man of consensus. I always try to be reasonable, seek agreements, especially given what we are experiencing in Europe. I find it disastrous what is happening in France. If Le Pen's party or Bardella's party wins the Presidency. The issue of France is very delicate for the future and very dangerous. Everything would change in Europe. But there are also positive counterpoints.
Such as?
Von der Leyen has taken from my report, for example, the need to set a date, 2028, to advance in the single market. It is a great mission, and I believe Italy and Spain need to work together to push this single market integration until 2028. I find positive the initiative of Carlos Cuerpo with his colleagues from France, Germany, Italy, and Luxembourg for a European savings product with tax advantages for savers. I support the Spanish Minister of Economy in what he is doing.
Can Italy and Spain also collaborate in trade action?
Absolutely. They need to push together in Mercosur, Mexico, India, and Indonesia. India is, for me, a key new player and has an interest in the Mediterranean. But it is ridiculous for Spain to go alone to India or for Italy to do the same; they need to work together.
In the Teha report, it is noted that Spain and Italy have grown much less than Eastern economies over a long period. Why?
Because the 2008 financial crisis and the 2020 Covid crisis were particularly harsh blows for Spain and Italy. But there is something about Spain that I greatly admire: its incredible ability to integrate Latin American immigrants. This, for me, is a very important reason for Spain's current success. This ability to attract talent and capital, which has been a strategy of Spain for many years, is very important and positive. In contrast, Italy has not been sufficiently smart and open to this immigration aspect.
Is it a competitive advantage for the Spanish economy to have immigrants who speak the same language?
It is true that it is easier immigration for Spain because they speak Spanish, but Spain also receives many investments from Brazil. This demonstrates that Spain was more open, and Italy was more closed. It has been one of Italy's major mistakes in recent years because Italy has a dramatic demographic problem and does not integrate immigration like Spain.
Conversely, is it an advantage for Italy to have a unified market compared to the fragmented Spanish market?
That's right. Spain outperforms Italy in all economic data, but in this aspect, Italy has a less polarized and less conflictive situation between regions and the center. In Spain, it is a very complex problem, and its fragmentation hinders investments. It is always the case in a fragmented market.
Another advantage Spain has over Italy has been the cost of energy, but what impact does the blackout have?
The solution is a truly European electricity grid? Today we have 27 electricity grid systems, and the fundamental issue is interconnections. Building a European electricity grid and completing energy union by 2028 is crucial. It is encouraging that Teresa Ribera and Raffaele Fitto are working well together in Brussels.
Can Spain afford to give up nuclear energy?
It is a decision made by each country, but nuclear energy exists in Europe, and everyone can use it if there are interconnections. My approach to nuclear energy is secular and pragmatic, not ideological.