“The cut in the outlook decided today by Moody's for Telecom Italia does not question the effectiveness of our strategies but underlines the growing risks deriving from the negative effects of an economic stagnation exacerbated by austerity measures. Despite this, Telecom Italia fully reconfirms all its medium and long-term targets. Unfortunately we pay too high a price for country risk. Franco Bernabè, president of Telecom Italia and for twenty years one of the most popular Italian managers, is not at all surprised by the Moody's verdict but is bitter because he is even more convinced than before of the validity of the strategies and objectives of the first Italian group of telecommunications. And he has clear ideas about the country's economic and political scenarios. Here's the interview he gave a little while ago to FIRSTonline.
FIRSTONLINE – Chairman, Moody's has just cut Telecom Italia's outlook. Did you expect it and how do you judge the verdict?
BERNABE' – The rating agency's judgment is largely the result of the deterioration of the country's political and economic framework. Unfortunately, even Telecom Italia pays a high price for the poor sense of responsibility of the political class which was fully manifested in the economic manoeuvre, made even heavier for us by the onerousness of the frequency auction.
FIRSTONLINE – Will the latest news of the maneuver and the auction force Telecom to review your deleverage targets and objectives?
BERNABE' - Absolutely not. Indeed, I take this opportunity to fully confirm all our objectives and in particular those of medium-term debt reduction (without the cost of the auction) and the long-term ones which include the cost of the frequency auction.
FIRSTONLINE – But how does an important group like Telecom manage to live with such a profound economic-financial and political crisis as the one Italy is experiencing? Does it downsize its activities, concentrate them on foreign markets or does it continue on its own path anyway?
BERNABE' – Above all, we try not to import uncertainties and deviations from the external context and to give sure reference points to all our activities. All our programs and all our targets are confirmed and we continue to work with great intensity and determination to achieve the objectives we have set ourselves. I am sure that a group like Telecom Italia will come out of the crisis stronger.
FIRSTONLINE – Just Moody's judgment obliges us to make some political reasoning. After the wavering of the Berlusconi government on the maneuver, we hear of the possibility of turning the page with a technical-institutional government: what do you think?
BERNABE' – I think we need to move on but the idea of turning to managers, bankers or entrepreneurs to set up a government that responds to the country's problems is profoundly mistaken: we are facing an epochal crisis and governing means above all choosing who should do the greatest sacrifices. It's not technical stuff, it's an entirely political task.
FIRSTONLINE – But in other bends in the history of our country there have been technical-institutional governments that have done very well, such as the one led by Carlo Azeglio Ciampi: why don't you appreciate the idea now?
BERNABE' – Because today's crisis is much heavier than yesterday's and to restore the country, heavy sacrifices are needed which will weigh on the entire population, but in parts and in inevitably unequal measures. That's why I think that only a politician, who has been elected and who has the consent of the people, can decide who has to make the sacrifices and to what extent. Governing a country is not like running a company. What is needed today is a strong political leader who has a clear and long-term vision of where to take Italy.
FIRSTONLINE – Today, however, there is also a problem of credibility: do those who govern have it?
BERNABE' – It's not up to me to write report cards, I'll limit myself to paraphrasing yesterday's Financial Times: if the maneuver is changed every week, it means that there isn't a clear vision of the general interests that the Government wants to represent.
FIRSTONLINE – You are against governments led by personalities outside politics, but Berlusconi too, when he entered politics, was an outsider and an entrepreneur: why yes then and now no?
BERNABE' – Not only because he submitted to the popular vote but because Berlusconi was not only an entrepreneur but represented, in his own way, a political vision, the sentiment of a world of small and medium-sized enterprises that expressed the desire to do things and demanded dynamism.
FIRSTONLINE – In truth, the fruits have never been seen and today we are at the most complete bankruptcy of Berlusconi.
BERNABE' – This is another matter. The facts have not followed the intentions and over time the driving force has failed. But this does not mean that we should seek technical solutions to the current political stasis.
FIRSTONLINE – Alessandro Profumo recently said he was willing to get involved in politics if anyone asked him: what do you think?
BERNABE' – Any citizen who wants to commit himself to the good of the community and intends to submit to popular judgment, and even more so whoever has demonstrated competence must be judged positively. On the other hand, my opposition to technical governments does not in any way exclude the calling together, much more than what has been done so far, of competent and qualified people so that they can give their professional contribution within the ambit of a political government, level of individual ministries.
FIRSTONLINE What if they called you?
BERNABE' – Politics is not my job and I still have a lot to do in Telecom.
FIRSTONLINE – In addition to being a manager, you are also an economist: can you honestly get out of a coma in a country that hasn't grown for over 10 years and has one of the highest public debts in the world?
BERNABE' – Look that in Italy as in all of the West the problems are very clear and the path to follow is also very clear. We have lived beyond our means for too long and this has generated an excess of public debt. The task, eminently political, is to decide how long we want to repay that debt and who pays. Do we want a gradual but slow recovery or a quick but traumatic operation?
FIRSTONLINE – Which one would you recommend?
BERNABE' – It is not up to me to give advice because, I repeat, it is an entirely political choice. I limit myself to accounting for the costs and benefits of the two options.
FIRSTONLINE – Is that to say?
BERNABE' – Gradual recovery is obviously the softest from a social point of view, but the risk is that growth will slow down too much and that the economy will spiral into a spiral with no real way out, as in Japan. In the second case, of a sudden but traumatic recovery, the sacrifices would be very heavy and unequal but with very rapid effects on both debt and growth. What matters is that the country becomes aware of the fact that an important share of the financial wealth of families has come about thanks to a progressive impoverishment of the state. This is no longer sustainable and therefore a different balance must be found.
FIRSTONLINE – From your words, it seems to understand that the second way would be the best: a sharp blow to the debt and growth starts, even at the cost of resorting to the hated capital?
BERNABE' – Capital is acceptable only if it is one of the components of the recovery and revitalization process and requires a review of the role of the state and sound and virtuous management of the public budget. The basic idea is that it is better to anticipate and play an active role rather than passively undergoing the downsizing of assets that the markets inevitably make with the fall in the prices of financial and real estate assets.
FIRSTONLINE – In what sense would any recourse to property tax be only part of the recovery and revitalization of the country?
BERNABE' – The balance sheet can be useful for rapidly reducing public debt, but it is not the magic wand. It is a measure that must be placed within a clear plan for the recovery and revitalization of the economy and society, of which the objectives but also the times and methods of implementation are explicit. Sacrifices can be asked of the people, but one must be able to demonstrate that they are useful for development.
FIRSTONLINE – You have experienced other crises in our country up close: is today's one more or less serious than that of '92?
BERNABE' – It is more serious and different. Back then there was more room for intervention and more resources. In the early 90s there was still the lira and there was the possibility of resorting to devaluation and there were also more public resources available. Today everything is more difficult. But woe to be seduced by misleading suggestions.
FIRSTONLINE - What are you talking about?
BERNABE' – To the illusion that is sometimes felt in those who think that it was better off without the euro. Anyone who thinks like this forgets that the main cause of the explosion of our public debt was inflation and the very high interest rates that inflation entailed and that the stability and containment of interest rates that the euro guaranteed is a huge plus for public budgets. Let us not forget that our public debt is denominated in euros and that, if we unfortunately return to the lira, repaying it would become practically impossible. No one will take the sacrifices away from us, but the way forward to get out of the crisis is another: the euro and structural reforms of the economy that require farsighted political leadership.
