IL SECOLO XIX 16.07.

2011 THE INTERVIEW

Passera: Joint effort required to stimulate growth

by our reporter ALESSANDRO CASSINIS MILAN. On his desk lit by the neo-renaissance double lancet windows of the Ca de Sass building, the historic stronghold of Cariplo, now the headquarters of the Intesa Sanpaolo Group, Corrado Passera has a document which brings a wave of optimism following the long days of storms on the markets: the results of the stress test on European banks. The five Italian banks tested by the European Banking Authority (EBA) passed the test as expected. Intesa Sanpaolo passed with full marks. This is the second piece of good news of the day, following the definitive approval of the budgetary measure. A good sign of the understanding of the problem and of everyone taking responsibility, stated the Managing Director of Intesa Sanpaolo, who in this interview explains his idea for a plan for rigidity and growth which can be attained only by creating widespread consensus and alliances around an objective which is neither to the right nor the left. Is this a sigh of relief after days of market fluctuations? I think that the figures speak first. Under stress, Intesa Sanpaolo recorded a Core Tier 1 level, which is the highest quality portion of a banks capital, of about 9% compared with a required level of 5%. This is an additional confirmation of the validity of the choices made by Intesa Sanpaolo in the last few years, including the timing chosen for the share capital increase: balanced levels of debt, adequate risk profile, considerable attention to liquidity. A bank that never stopped lending and that avoided funding finance. Is the whirlwind of speculation over or just taking a break? My feeling is that so far the speculation on Italy has not significantly taken to the stage. In the last few weeks, there have been waves of sales on stock markets and the spreads on our government bonds have increased as a result of European authorities wavering approaches to the Greek crisis. Europe has to be more determined in dealing with the difficulties of small countries if we want to avoid extreme speculation coming into play in the next few weeks. The ineffective management of the small Greek crisis, added to the other two small crises in Portugal and Ireland, has unfortunately made it clear how fragile the European construct still is. 5% of the European GDP is running the risk of bringing down the remaining 95%. Everyone is taking action with no coordination: governments, supervisory authorities, central banks, accounting

IL SECOLO XIX 16.07.2011 regulators The European Commission should be doing more: management of the crisis cannot be left just at the intergovernmental level. Has the attack on Italy retreated? We will be safe when we have convinced the market that our debt is sustainable, now and in the medium term. Sustainability comes from the combination of rigidity and growth. One week ago in Genoa you asked for the measure to be approved in a few days. Are you satisfied? With a great deal more authority than myself, it was President Napolitano who requested this commitment. The speed of this legislative process was a good sign of the understanding of the dramatic nature of this time and of everyone taking responsibility. However, the Governor of the Bank of Italy, Draghi, has said that there havent been enough cuts. In reality, even the Governor has said that we have to ensure that a balanced budget can be attained by 2014, fortunately starting with the primary surpluses in 2011 and 2012 and that the cuts have to be accompanied by a strong commitment to raising the potential for growth of the economy. This is what I take from Draghis statements, and I completely agree with this. Will a minister in the bulls eye like Tremonti be able to implement this plan or would it be better to hope for a transitional government? I dont know how the situation will evolve in Parliament, and in any event, it will be Napolitano who assesses what is best for the country. Certainly, Italy must guarantee to Europe, to the world and to the markets that it will maintain its dual commitment to rigidity and growth. This is also true for the government which must complete the measure in the next legislature. Only when faced with a crashing stock market did politicians manage to find their sense of responsibility. You refer to a plan for rigidity and growth, but isnt a plan like this just wishful thinking in a divided country such as Italy? A strong plan for rigidity and growth can achieve its objectives only with extremely widespread consensus from everyone, from businesses to social forces, to culture, and with alliances that must involve everyone who believes in the future of Italy. The core of the budgetary measure is a box that still has to be filled. Do you have any suggestions? The measure contains many interventions both in terms of rigidity and in terms of growth. It leaves two large chapters open spending review and tax reform which must be courageously written over the next few months. To achieve sustained and

IL SECOLO XIX 16.07.2011 sustainable growth, all four growth drivers are required: business competitiveness, social cohesion, efficiency in the national economic system and overall dynamism. Almost everyone now agrees on what has to be done. The problem is that we are not doing it with enough determination. Two drivers business and cohesion are working despite everything, but we have to strengthen them. We definitely have to fix the other two economic system and dynamism. What are you asking for businesses? There are a lot of proposals on the table. For example, businesses that invest in innovation and internationalisation, entrepreneurs who plough capital into their companies, who have the courage to carry out acquisitions and mergers should be fiscally rewarded. We have to make it easier to create new companies and attract more foreign investment. Lending is a fundamental element for this. And to improve social cohesion? We are among the countries with the strongest systems for social protection; we were able to defuse the social security bomb; we must make the best use of the healthcare system which has strengths and weaknesses; we can do more for families and to aid people in re-entering the workforce. We have considerable strength in the non-profit sector and, specifically, in social enterprises, which we must support because they will increasingly cover the needs left unmet by the private and public sectors. Are the economic system and dynamism the drivers that are blocked? Yes, and we have to fix them quickly. The national economic system means, firstly, infrastructures, where accumulated delays now amount to over 200 billion. The Liguria region demonstrates the potential that we could trigger using ports integrated with railways the Terzo Valico railway capacity expansion as an example and logistics centres. Research and innovation complete the picture: in the last few days I saw the Erzelli Scientific Park in Genoa, in which we are shareholders, and I could physically touch the progress made in the works to create one of the leading centres of research in Italy and possibly in Europe. But the countrys productivity also derives from its education system, legal and security system and the correct operation of the public administration. These are all areas requiring considerable improvements. What do you mean by dynamism? Dynamism of a community derives from social mobility, meritocracy (for example, we have to eliminate all career paths based only on seniority) and the effectiveness of the decision-making process which is our real ball and chain. Well-realised federalism at European and national level could be a significant opportunity to unblock our country. How?

IL SECOLO XIX 16.07.2011 The issue is complex, but citizens expect us to intervene to reduce the levels in our institutions Regional and Municipal authorities are more than enough and clarify who is responsible for what in each decision-making area and in what time frames they have to guarantee individuals and businesses that decisions will be made. Because a democracy that makes no decisions is a democracy at risk. How can the bank contribute in this scenario of growth that must be accelerated? Banks of the real economy, such as Intesa Sanpaolo, really feel the responsibility to contribute to the countrys growth. We have asked our shareholders for a share capital increase of 5 billion, to be able to cover the 100 billion additional lending envisaged in our strategic plan. To date the amount of credit we have provided to the country amounts to almost 500 billion. To drive infrastructures we have created Banca BIIS. To favour social enterprises, Banca Prossima. To strengthen businesses on financial markets, Banca IMI has consolidated its strong leadership. To accompany businesses on international markets we now have over 30,000 professionals in over 40 countries. And we are trying to remain a territorial bank with Banca dei Territori in every part of Italy. In 1994, Silvio Berlusconi presented a plan which was not much different from some of the things that you are saying. Why was he unable to achieve it? In these last years several things have been achieved and others havent. Certainly, our country has undergone serious difficulties in the last few years, part of which were impossible to predict. However, if we want to identify several underlying reasons to explain why our country has grown less than others, we can identify a lack of an overall plan for growth, the inability to create widespread consensus around a common objective such as growth, which is neither to the right nor the left and in too many cases, everyone has shown a prevalence of a con approach instead of a pro approach. Today, even more so than fifteen years ago, businesses, trade unions and the public administration must work together to create growth. Only with growth can we face the most serious social emergency, employment. The statistically unemployed are only a component of the social difficulties that are being created. We have to add the never previously employed, who are the unemployed who have stopped looking for work, the underemployed, which includes many temporarily employed workers, and part-timers, those stuck at university, where the numbers of students who have failed to finish their course of study within the prescribed time has no equal in Europe, suspended workers, such as those to which state-assisted temporary unemployment is paid. If we have the courage to take a good look at

IL SECOLO XIX 16.07.2011 reality, the difficulties caused by a lack of employment are three times, if not four times the figures from unemployment statistics. An undefused bomb both in Italy and Europe. Who would you like to see as the new Governor of the Bank of Italy? Ill give you a description: he must be skilled, with a system-wide view, international credibility, independence and courage.