Prodi: mafia and bureaucracy are Italy's worst problems
By Lisbeth Kirk
This weekend (24 and 25 February) Italians will have their first general elections in almost five years.
The last time they went to the polls to choose politicians for the upper and lower houses of parliament was when Romano Prodi left office as prime minister in 2008.
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Five years on and a financial crisis later, a lot has changed.
Italy still has the eighth largest economy in the world and the third largest in the eurozone. But volatility on bond markets drove it close to bankruptcy last year, while youth unemployment, according to the European Commission, has hit 37 percent.
Meanwhile, in the run-up to voting, Italy's largest investment bank, Mediobanca, has warned that if Silvio Berlusconi, its populist former leader, wins it could trigger a shock on financial markets that would force Rome to seek a bailout.
Speaking to EUobserver, Prodi highlighted two reasons for Italy's economic misery.
"I give a lot of responsibility [for the crisis] to criminality, to the mafia," he said.
"In Italy you have very efficient companies and you have a lot of acquisitions by foreign countries, but no greenfield investment and no research-based investment. Italy is not being chosen for such new initiatives. What do I mean? I mean that foreign companies are willing to buy market share in Italy, but they don't want to take further risks because of this problem [organised crime] we have in Italy, even if it is limited to certain regions and even if there is an ongoing fight against it," he added.
He said the second reason is the slow pace of Italian bureaucracy.
"The difference between now and 20 years ago is that these days people make decisions so quickly. You see how companies move from one day to the next from the United States to Asia. So if you have a public administration that takes years to give permission to build a new factory, this is not compatible with the modern world. These are the two problems: Italian public administration and corruption," Prodi noted.
"The traditional behaviour, the culture of this country has to change even more than it did after it entered the euro," he added.
The 73-year-old centre-left politician and economist is also worried about apathy among young Italians.
"They don't react. There is no reaction [to the crisis]. It is quite dramatic," he said.
"I have been teaching in universities for many years and I still have some seminars, but students never said to me before: 'Look, professor, I am sure I will be unemployed' or 'I am sure I will only find temporary work, if I am lucky'," he noted.
He said the crisis has created abnormalities in the Italian labour market.
"We have a new phenomenon in Italy - immigration of low-skilled manpower for jobs that Italians don't want to do even if there is unemployment, and increasing emigration of the most talented young people. Italians with PhDs work more and more abroad. My nephews are among them … We cannot go on this way," he noted.
Prodi is less unhappy because young Italians are emigrating to other European countries instead of the US.
But he said the EU needs more stimulus and less austerity in order to save the prospects of the current generation.
"Honestly, I don't understand why Europe does not now choose a different economic policy. Look - even Germany is not growing. Europe is becoming a black spot in the world … Germany has a fantastic surplus in its balance of trade. Why don't they put some fuel in the locomotive?" he said.
"I hope that in the future, Italy again becomes a country of innovation, of new initiatives," he noted.
"If you look at the balance sheets of medium-sized, family-run Italian companies, they are fantastic, and this year we increased exports more than Germany in relative terms," he added.
Banks dominate debate
Turning to the weekend's elections, Prodi said that even as EU politicians and market analysts look to Italy, Italian voters are showing little interest in Europe.
One reason is there is little difference between the candidates in terms of EU policies.
"The basic European doctrine is shared by all the people in the coalition. The democratic centre-left group is pro-European. [Caretaker PM and former commissioner Mario] Monti is by definition pro-European. Even Berlusconi is basically pro-European. Out of the new groups, like [that of satirist Beppe] Grillo, they are more anarchic, but [Europe] is not really part of the debate. It is strange, but this is life," he said.
Instead, political campaigns are devoting attention to banks.
Italy was last month shocked by news that Banca Monte dei Paschi di Siena, the world's oldest still-running bank and Italy's third biggest lender, has over €700 million of losses on its books due to dodgy trades.
The Italian city of Siena is the bank’s largest shareholder, linking the scandal to local politicians.
Prodi said that in the old days local elites could effectively oversee bank activity. But today, their involvement has no benefit due to the speed and complexity of bank transactions.
He noted there should be a "wall" between banks and politicians in all of Europe.
"This is a problem not only for Italy. Landesbanken are the main political problem in Germany, Civic banks in Spain … In all cases, the mixture of local political life and management of the banks is too strong," he said.
From next year, the European Central Bank will directly supervise 150 big banks.
But oversight of the rest of Europe's 6,000-or-so smaller lenders will stay in the hands of national supervisors.
"I am not happy that European Central Bank control has been limited," Prodi noted.
"In a world where all the banks, big or small, can go to the international markets and create huge quantities of debt, how can a local-level structure make decisions about that?" he said.
The first part of EUobserver's interview with Prodi was published on 2 February, looking at his current role as UN special envoy to the Sahel region. The second part, published 18 February, looked at EU affairs and his time as European Commission President