Sandro Gozi, Italy's Under-Secretary for European Affairs HARDtalk

Welcome to HARDtalk. I'm Sarah Montague.

The EU seems in greater trouble than ever before and not just

Even founding members of the club - countries like Italy -

are unhappy about the direction that it is headed in its 60th year.

The Italian economy has always struggled within the confines

Additionally, it wants its fellow members to help share the burden

of the half a million migrants who have arrived on its shores over

How does the EU need to change if it is to win over the next

My guest here at the Italian embassy in London is Italy's Europe

Minister, Sandro Gozi. He is a passionate European. Allevi think

the EU should change if it to survive and win over the next

generation of Europeans. -- how does he think the EU should change.

Sandro Gozi, welcome to HARDtalk. You have said that the beginning of

European disintegration has started with Brexit. If the EU

disintegrating? If it remains the status quo, certainly. It must get

out of the status quo. Must show there is a political reaction. There

are a series of crisis that has hit the EU. The major one is the Brexit

decision but there was a financial crisis and migrate three crisis so

we need to show that the EU is ready to react and after all, the

declaration we adopted in Rome in March this year is already the first

political reaction of the 27 leaders after Brexit. But by now, we must

implement the political commitment. Part of that reaction, is it showing

that leaving the EU does not pay? I.e., some punitive punishment to

the UK. I don't think we need to further punish the Brits. I think

already the decision which is going to be very risky for UK. We don't

have to approach the negotiation with any punitive intention.

Certainly, the negotiation is going to be very complicated and

certainly, there is less talk about leaving the EU after Brexit. The

paradox, on the contrary, we were afraid that it would have a domino

effect after Brexit decision. Next Francis and Italy, so on. In public

opinion, there is a stronger uncertainty. What is next? What

shall the Britons do now? It was clear after the 23rd of June last

year, it is helping to make people better think twice about leaving the

union. Now, the tide is not leaving the union. What about all the people

planning to vote for Marine Le Pen who is likely to get through to the

run-off of the second round of the French elections coming up? Another

very difficult question. I hope, I strongly hope that Marine Le Pen

will lose. You said if she wins, it's the end of the European Union.

I did say that. It is the attitude and programme of Marine Le Pen, to

get out of the eurozone and to get out of the European Union. To get

out of Nato. If I understand well what she said. This certainly would

be a major disaster. I cannot -- imagine the EU without France. So we

can survive without the UK but not France. Yes. What about Italy? Of

course, Italy, most polls would suggest that Italians are happy with

the European Union but they are not happy with the euro. Think they are

still satisfied with the European joints. I think this is more

rational than emotional in the sense that people are aware that the

European choice is still a good choice for Italy. People are not

satisfied with the function of the eurozone that this is not a problem

with public opinion. We, as the Italian government, feel that the

austerity approach, the economic approach, the existing rules that

are implemented in the eurozone, are not the best rule to tackle the

current economic challenge we have in Europe and Italy. We need a new

investment policy. We need to post internal and domestic demand --

boost. Winnie to boost growth and we need to shift from a set of obsolete

rules -- but we need. To a new policy mix in terms of economic

investment. This is what we want to do. Before we look at what you are

proposing as the solution, in terms of the scale of the problem, we talk

about Brexit and France, the Economy said, quoting officials in Brussels,

if you ask them what keeps them up at night, the answer is always the

same, Italy. Well, honestly, I wouldn't waste my night thinking

about Italy. Italy is a country that finally has come back to recovery

after years of recession. When debt government took office, -- when the

government, today we got a growth of plus 1%. It's not enough. Are

projected to be the slowest of this year, barely grown in three years.

The reason why is that Italy has wasted time in not addressing

reforms. There is still work to be done. The second is that the country

that suffers the most in public and private investment is Italy. This is

why we do believe that it is not enough. We want to keep our public

debt under control. And we expect public debt is a high percentage. We

had an irresponsible Italian government. I was there, I remember.

We have reduced the deficit but we cannot reduced the deficit. There

has been very little growth in that Italian economy. You have a huge

problem, yes, of public debt, and of your banks which are in serious

trouble. 290 billion pounds of bad loans, a fifth of the loans that

Italian banks hold are bad and that works out to about a third of bad

loans in the EU. Part of the reason that everybody else is looking to

Italy, thinking, there is a very big problem with the Italian banks.

Watch you said confirmed one things and brings me to emphasise and

other. It confirmed that if there is a problem of bad loans in Italy

because in other banking systems around Europe, you still have a

problem. In Italy, you don't have a problem with their vets, you have a

problem with bad loans. Why? Because the growth has been too low. But

also because you didn't deal, Italy didn't deal with the problems in the

banks when other countries did and now that or has close. Jelena that

is totally correct. I think that was a very serious mistake -- that is

very correct. It was a serious mistake by previous governments to

not do what other governments have done, to inject fresh money... So

what needs to be done now question mark the longer you leave it, the

bigger the problem becomes. The reason it is a systemic problem...

There is no systemic problem... We are talking about six banks of which

one is national. The other are very local, territorial, banks. I rule

out the existence of a systemic problem with the Italian banks.

Certainly, there are some specific issues... So no need for the EU to

modify its rules because you all know that Matteo Renzi, your party

leader and former Prime Minister, he asked the EU to suspend state aid

rules to allow a recapitalisation and Angela Merkel basically said no.

Well, she wasn't supposed to say yes or no because it is not the German

government who decides this. She made the point, we wrote the rules

for the credit system, we can't change them after two years. We

should evaluate and as I say, it is whether there are rules on this

banking recovery, have been really implemented in the rest of the

union. If you look, the only case where there have been really fully

implemented has been in the case of Cyprus. In the other cases, there

hasn't been a full implementation of this rule. If everybody is trying to

adapt, to add just, common rules to the specific situation, probably it

is because the common rules are not so efficient. So what are you

saying? Are you saying to ignore the rules? I am saying is we are playing

by the rules on public debt... But nobody else is playing by the rules.

Well, on public debt and deficit, front and Germany didn't play by the

rules. We are. We are saying that as long as the rules are there, we must

respect them but that doesn't prevent us to raise a problem with

the existing rules and there is a problem with existing rules on the

fiscal economy but in some rules in the banking sector, there are

problems. Those rules are not fit any more for the needs of the

eurozone economy and banks. I want to stay with a particular problem

that Italy presents to the EU at the moment because the Financial Times

European economic economist says, "If Italy wants to stay in the euro,

it needs to send a clear warning to Germany and the other northern

European countries that the eurozone is set on a part -- path of self

destruction unless there is a change of parameters". He makes the point

that you could be in a situation that Italy's withdrawal from the

euro would make the biggest default of history because of its eyes of

the Italian economy. I hardly can imagine a eurozone without Italy. --

because of the size of the Italian economy. With that, I share with

what Angela Merkel wrote but I think it is clear that the eurozone must

be completed, it is the words of the European Union. We have several

times in the last month, lastly with do roam speculation on the 25th of

March -- Rome. We say yes, we must completed and better shape it. There

has to be an election in Italy before the end of early 2018 and who

is topping the polls? Topping the polls at the moment is the five Star

Movement who want a referendum on Italy's membership of the euro.

Well, it is folly. Can you imagine a month of a referendum campaign on

whether Italy should remain or get out of the eurozone? This means that

they are totally unfit to rule the country and it showing they are

totally unfit to rule from the capital of Italy, Rome, where the

disaster of the 5-star campaign is totally wrong. It is clear that this

must be avoided. It depends on us. It depends on how effective we are

with our government and how convincing and persuasive we would

be in the general election. I wouldn't look at the opinion polls.

At the moment, it's too soon. Instead of bringing the debate to

this, I mean, in a way it is better to open a debate to strengthen the

eurozone. It is not only the Italian problem. The fact that the eurozone

rules are not adequate to tackle today's challenge is a something...

The difficulty with those rules as they have worked with everybody

else. The situation with Italy is a recent one and it isn't an ancient

one. Since Italy joined the euro in 1989, real income per head has gone

down, it is lower than it was then. I am not sure it didn't work for

everybody. I think that they have been... I have worked well for one

country, one big country at the centre of Europe. For all the other

countries, they haven't been proved to be effective. Otherwise you

wouldn't have a problem of unemployment. You wouldn't have the

rise of populism. You wouldn't have an issue of economic problems in

Europe. So the rules of today have only worked for Germany? They have

been very favourable to Germany. Now they are changing. We must push,

further push this change, because it is clear that we need to have a more

balanced approach. Why haven't they changed until now, if it is only in

the interests of one country? Probably because nobody has the

courage and the strength to run this issue. We thought that it was high

time. Also for the reason you mentioned, to open a debate on how

the eurozone functions, and how the eurozone should function, and we

think that there are many reforms to introduce. And what you said about

the... I mean, the difficulties is Italy since 1999, I agree. And this

has been the golden thread of our action since 2013. We have said we

have wasted too much time, and we must carry out reforms not because

we are a member of the European Union, not because we are a member

of the eurozone. We must carry out reform because it is an eye on

national interest. Because it is in the interest of the Italian people.

And even if tomorrow we decided to trigger Article 50, and to get out

of the union, we would, however, need to implement these reforms.

Well, let's turn to something else where I know that Italy feels that

it has carried an unfair share of the burden, which is the number of

people arriving on Europe's shores. There have been 500,000 over the

last three years, and there has been an increasing number in 2016. And

some have suggested, a senior EU official has suggested, that

actually it is the very mission to pick people out of the water that

has led to more coming over. Do you think that is true? I think that

Italy has been alone in saving the European dignity for too much time

in the Mediterranean. Because until 2016, Italy was the only one that

was searching and rescuing human beings in the Mediterranean. And I

think that we should put the life of women, children, families who flee

from the Islamic State, Isis, before, first and foremost. Now,

finally the Mediterranean has become an issue of common interest, and it

has been thanks to our action. Now finally we consider Libya not an

ancient legacy of Italian history, but a common problem. A European

international problem. And it is clear that we must do more together.

As the European Union, and in the future I hope it will be OK to

tackle the root causes of the migratory flows, to work with the

country of origin, to stabilise Libya. Because it is clear that the

central route through the Mediterranean is a problem for all

of us, and we should be much more effective and more united in

managing this problem. But I have to say, that if I have to compare the

situation of mid April 2015, when 700 people died in the

Mediterranean, and they had to convene the first extraordinary

European summit on migration, and the European summit on the third of

February this year, a lot of things have improved. But there are still

many things to be done together. Notably in working in a new

partnership relation with the country of origin. Because you want

more countries to take some of those that Italy is taking in. It has not

yet granted asylum, because you have actually grown asylum to a tiny

number. We have to work more together in relation to Europe. We

have to share the burden, because in the union, and in the continent, and

in the Schengen area, we have something which is extraordinary. We

have freedom. We have freedom to move, freedom to circulate. We don't

have internal frontiers in the Schengen area. If we want to keep

this, into something which is the biggest outcome of the European

Union for our citizens, we certainly must work on the external border,

and we must revise rules on asylum, which were conceived during the

Balkan war. How can we imagine the truths which were conceived two

decades ago, in another century, for another crisis, it can be effective

when the reason you state, going around the war, which is composed of

50 million asylum seekers, are called on the UN statistics. Your

government is now building detention centres, something that under Renzi

it refused to do on humanitarian grounds. No, it never refuse to do

on humanitarian grounds. They have built 16. Yes, because we also say

that we must work and be more effective as Italians and Europeans,

also on return policies. And we have said it is not only... We have been

negotiating for months with the European Commission on the so-called

hotspot, it identified the potential asylum seekers, but we have also

said this is only a part of the issue. The other side of the

problem... A representative of the northern league, the right-wing

northern league, were the league and I are not made out to be racists

inventing fears when we were calling for these centres, and suddenly, as

he says, I thought everything was under control and there was a change

of policy. If it was right then, why has it changed? He pretends to

understand, he understands perfectly but he pretends not to understand.

We need to do much more on the return policy. So it was a mistake

not to do it? We must be more effective on the return policy,

because we want the policy to become an EU issue. You coined the phrase

the Erasmus generation, which was the idea of politicians like

yourself who were pro-European, outward looking. It is a past tense

that use it towards me. Which brings me to my question. Because many

people will say it was your generation that benefited from

arguably the best of the EU. Now you look at the polls, you look at the

generation who are supporting Le Pen, for example, who are very

young, it is the youth who are unemployed, who feel betrayed by

much of what the EU has done. Is that a picture that you recognise? I

think that when I was 20 years old I got a lot from Europe. Now that I am

in a governmental position I feel the duty to give back something to

Europe of what Europe has given to me. And this is why I am so

committed in tribute into a better European Union. We should never

forget that in a little bit more than 40 years the continent has

shifted from the Auschwitz generation to the Erasmus

generation. This is what Europe has meant for Europeans. This democratic

revolution that was mentioned. Why today are so many young generation,

many youngsters, who are against the European Union? Because they didn't

find the union where they expected to find the union. They didn't find

the union promoting... Because they don't have jobs. Exactly, they

didn't find a union developing new social policies to create jobs. Your

argument to them as more integration, more union? Might

answer is a better economic policy, to boost growth, to create jobs, and

I don't believe that going back to the national borders, going back to

nationalism, can be a solution for these young people who do not have a

job, and they are probably much more qualified than we used to be when we

were 20 years old. And those policies have been devised in the

institutions of the EU, in Brussels, are they? Well, it is clear that we

need to shake the Brussels institutions. I owe a lot of respect

to the European Commission, are you work in the European Commission, I

work in European Parliament, but they have lost touch with reality.

In the last eight years, they lost touch with the increasing social

inequalities. And if you want to tackle this, national policies,

local policies, are not enough. We must do more and better also as the

European Union. Otherwise we will have lost the battle. Because if you

have lost the battle of the young generation, you will lose the

battle. Because Europe was always meant to be a project for the young

generations. Is the EU losing the battle at the moment? We must

prevent it from losing. Until 2013, it took a very bad direction. Now we

must correct and redress the direction it has taken. We must save

Europe from those who want to destroy Europe. But we must save

Europe also from the mistakes Europe made. And there are many mistakes,

and they need to be corrected. Sandro Gozi, thank you for coming on