Interview with Carlo Messina: 5 steps to cut Italy’s public debt
In an interview published today by the financial newspaper il Sole 24 Ore, Intesa Sanpaolo’s CEO Carlo Messina proposes a five-part plan to reduce Italy’s public debt and drive the post-COVID recovery.
“Italy needs to create Social Bond instruments, repatriate capital, capitalize on public real estate assets, invest in infrastructure and the green economy, and create incentives to invest employers’ TFR withholding tax-free in government bonds. Just providing liquidity so businesses stay afloat isn’t enough”, says Messina.
The CEO of Intesa Sanpaolo is encouraged by the Italian government’s efforts to address the Coronvirus health emergency, secure jobs and provide liquidity. “There’s no way around financing through public debt”, he says.
Messina would also like to see public grants that don’t increase the debt burden on companies “to keep alive those companies that have lost six months of turnover… this is decisive as they must play a game that goes beyond Europe, in global markets”.
Let’s get moving today. If we think about this in a year it will be too late
Carlo Messina, CEO of Intesa Sanpaolo
But Messina also warns against excessive increases in the ratio of public debt to GDP: “We must counteract the prospect of an unsustainable public debt. All of this would weigh on the next generation. Every child born today in Italy is already weighed down with significant public debt”, he notes.
“Let’s work towards a sustainable model for the entire country, based on our points of strength: our industries’ export capacity and the very high level of household savings… Let’s use this moment of extraordinary discontinuity to move beyond the unresolved obstacles in the system”, says Messina.
The priority is deploying every possible initiative to bring the public debt under control.
Intesa Sanpaolo’s CEO underlines that a minimal part of Italians’ private savings is invested in the country’s government bonds – around just 4%.
“Italy is a wealthy country, much more so than the Netherlands or even Germany. We are talking about €10 trillion in wealth, counting business assets and household savings”, says Messina.
“We need to create the conditions so that Italians are motivated to shift a part of their wealth into government-issued Social Bonds”.
Carlo Messina’s idea is to create a new financial instrument that enables the State to raise funds from private citizens to finance projects with high social impact. These Social Bonds would offer competitive returns, tax benefits and amnesty to those who bring offshore money back into Italy. Estimates place Italian holdings in offshore accounts between €100 billion and €200 billion.
“This way there would be a concrete path to increasing private savings invested in Italy’s public debt from 5% to 10-20%”.
The action plan to reduce Italy’s public debt and support the post-COVID recovery proposed by Intesa Sanpaolo’s CEO is built on five points:
- Issue Social Bonds
- Incentivize onshoring of companies that left Italy for tax reasons
- Enable a portion of the €26 billion set aside each year by employers as TFR for future severance packages to be invested tax-free in government bonds
- Issue bonds backed by public real estate assets to institutional and retail investors
- Unblock public investments, especially the €150 billion already budgeted for infrastructure
“The other thread to encourage are the €150 billion for the Green Economy… It would be a fabulous boost for the country”, says Messina.
Carlo Messina also repeated his appeal for social solidarity by those in a position to help.
“The vulnerable parts of society are being hit hardest by the crisis and we need to ensure that the emergency doesn’t worsen this… it could increase the number of people in severe difficulty towards 10 million”.
Today, Intesa Sanpaolo provides 3.5 million meals a year to those who find themselves in difficulty: “Well, let’s multiply that by five,” says Messina. “All of these initiatives need to be replicated on a larger sale, with the goal of reinforcing the social fabric of Italy”.
Solidarity initiatives need to be expanded to help the most vulnerable
Carlo Messina, CEO of Intesa Sanpaolo
Click here for more about Intesa Sanpaolo’s COVID-19 initiatives to help Italy’s families and businesses.
Last updated 25 April 2020 at 19:57:47
