MNI INTERVIEW: Italy Min: Boost Investment To Fight Populism

--Government's E39 billion Plan for the South To Boost Growth

--E3 Billion Fund Will Prevent Brain Drain, Capital Flight

--Anti-EU Feelings "Thrive" With Wide Growth Gaps

By Silvia Marchetti

     ROME (MNI) - Italy's government is increasing resources to boost

development in the country's poorer southern regions, looking to reduce

historical growth gap with the rest of the country that can be dangerously

exploited by populists and anti-Europeans, Claudio De Vincenti, Minister for

Territorial Cohesion told Market News in an exclusive interview

     "Populism and anti-democratic sentiments thrive in places left out from the

benefits of globalisation," De Vincenti warned.

     "We must counter these (threats) with every mean" to avoid giving populists

in Italy and across Europe additional propaganda weapons in their anti-EU fight,

he added.

     Italy's poorer southern regions, dubbed the 'Mezzogiorno', has always

lagged behind the rest of the country in terms of growth rates, but under the

governments of Matteo Renzi and now Paolo Gentiloni, things are finally

changing. 

     "For the first time growth rates in the south are higher than in the

north," said De Vincenti. 

     "We have recognised the need for a new policy focus on the 'Mezzogiorno' by

planning a joint program of public spending, mainly on infrastructure,

environment, cultural services and firm development," he said 

     "This entails about E39 billion for the so called 'Masterplan for the

Mezzogiorno'" aimed at boosting growth and creating employment, he explained.

     According to the minister, "the north of Italy can only be prosperous if

the south grows as well", arguing that "most of public expenditure for growth in

the south activates GDP in the north". 

     Talking of a two-speed Italy could be dangerous in times of rising populism

and requests for greater autonomy as Italy heads towards a general election next

year. The country's largest populist party, the Lega, recently won two referenda

for more legislative freedom in the north and polls suggest support for the

party is on the rise. 

     But national unity is sacred, according to the minister, and must be

protected by implementing long-term growth strategies in less developed

territories that may act as antidotes. 

     "Our history teaches us that prosperity came to different regional

communities  (in Italy) only with unification and the recognition of the common

interest," stressed De Vincenti. 

     To such ends, major resources have been devoted to big national programmes

in the southern regions. These include significant tax credits for industrial

investment, triggering a 300% increase in investment this year, alongside tax

exemptions for firms that hired 100,000 new workers on long term contracts in

the past 2 years, De Vincenti said. 

     Among other recent measures, the minister also noted the introduction of a

long term obligation for public administrations to devolve a proportional share

of capital expenditure to the south. He also pointed to a roughly E3 billion

public fund to support new southern entrepreneurs wanting to stay and invest at

home, with the ultimate goal of preventing a brain drain from the country. 

     The government has also set-up Special Economic Zones (ZES) in the south,

with simplified procedures and enhanced automatic tax advantages for large

investment in ports and new infrastructures for roughly E10 billion.

     "The target is to continue growing faster than the north, as in the last

two years, and, by 2019 recover to the employment levels of 2008," De Vincenti

said.

     According to the minister, the region lost 576,000 jobs between 2008 and

2014 but has so far recovered 301,000 and "with investments and tax cuts on new

employment, we aim to recover 275,000 more in 2019".    

     In De Vincenti's view, nobody in Italy can question that the principle of

national unity, where each citizen has a right to a certain level of public

services, and, he notes, "this entails some transfer of resources". 

     "The best way to do that is to ensure sufficient resources to fund

development in the Mezzogiorno rather than a pure 'welfare' transfer" from the

centre to the periphery, he said. That is why ensuring independent credit flows

by developing solid regional banks in the south remains a top priority. 

     "Banks are lending less than in the past in the south. This is in part due

to the absence of large banks with southern headquarter," said De Vincenti. 

     The picture however has slowly started to change. this, the minister says,

in partly thanks to Invitalia, the public agency that has acquired Banca del

Mezzogiorno, a second-tier bank, specialising in long term lending" to support

the region's growth needs.

     Banks in the south have also been involved in a new entrepreneur

initiative, dubbed 'I Stay In The South', aimed at blocking a brain drain and

capital flight. 

     "Our goal is to stimulate more credit, but keeping a high degree of market

discipline and selection," added De Vincenti.

     The minister believes the south has an enormous growth potential and can

play a major role in Italy's ongoing recovery. 

     "The south is already contributing with a higher growth rate than the rest

of the country. However it also contributes with its talents migrating to the

north. Our aim is to use those talents at home," he said.

     But more needs to be done. Despite having stimulated investment and

employment and outlined relevant infrastructure upgrades to be delivered by

2020, there are still several open issues and key challenges to deal with,

according to the minister.

     These span from reforming the speed of the justice system to boosting the

efficiency of the public administration, where the gap with the north remains

considerable. 

     But above all else, there is one area where De Vincenti sees the need for

increased investment.

     "The one key investment that must be upgraded in the future for sustaining

and increasing growth is in my opinion the one on human capital. Education is

the key to the future of the south," De Vincenti said.  

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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