EDITOR’S note:

Beginning in July, Italy will hold the rotating EU presidency for 6 months. As one of the five heavily indebted European economies, Italy is trying to lift itself out of the debt morass. What is its plan to cut public debt? Where will the growth come from? Can China, now a growth engine and a major market for Italian goods, help with its economic recovery? Stefano Beltrame, consul general of Italy in Shanghai, spoke to Shanghai Daily reporter Ni Tao about these issues.

Q: Your Prime Minister Matteo Renzi has rejected outsiders’ proposed bailout of the Italian economy. Does that signal a rising confidence?

A: There were countries which requested European help — Greece, Portugal, Ireland and Spain.

Italy never asked for help. On the contrary, we are among those giving help. The situation in Italy is sometimes oversimplified by newspapers.

Given the size of Italian public debt, which is 130 percent of our GDP, you need to refinance the debt, and the cost of refinancing this debt has been higher than the German debt.

Confidence in German bonds is higher, while it is lower for Italian bonds. To sell them, you have to pay more interest. The difference, commonly known as spread, is now 135 basis points, or 1.35 percentage points. So Italy pays the debts at 1.35 percent more than Germany, which is normally no problem if your economy is growing. But if your growth is slow, the debt pile goes up.

Two or three years ago, the spread was at some point more than 500 basis points. That was perceived as very dangerous. Now the world market pays only 1.35 percent difference between German and Italian bonds, which shows there is much higher confidence.

Q: Any idea how to close the gap, which is certainly not healthy?

A: In theory, the spread shouldn’t exist. And the fact that we have this cost in refinancing the debt puts us in a weak situation vis-a-vis other European countries, especially Germany. To absorb this debt, we should have our economy start growing again.

This is why growth is the No.1 priority for our European presidency. However, Germany is much concerned about the euro’s stability. They do not want active politics to compromise it. Italy is seeking more flexibility to support growth.

With the Maastricht criteria about common currency, you can only have 3 percent deficit spending in the state budget. Italy is seeking to go beyond the limit.

This reflects the different situations of countries. Germany, which is in surplus, has a tendency to have the currency appreciate. Other countries such as France and Italy are in deficit. They push to devaluate the currency.

So the euro is in this tension of adjusting the monetary policy.

We think the EU monetary policy should reflect more the situation of countries other than Germany. The currency’s stability should not come at the expense of growth. One way to do that is if you take European infrastructure out of the 3 percent spending calculations, then you have more room to maneuver to support growth.

Q: Is there some backlash against Italian support of other indebted nations when it itself is falling on hard times?

A: Yes, this is one of the major side effects. Because of the support we gave to other European countries, our ratio of debt to GDP went up.

According to European rules, you should reduce that ratio to 60 percent or at least efforts should be made to bring that ratio within 60 percent.

Because of our financial support to other countries, our debt burden went up much higher than it otherwise would have done.

There is also an argument in Italy that banks overexpose themselves to countries like Greece. Greece was given financial support to repay the debt. But in fact, it was French and German banks that lent the money to Greece.

So in saving Greece, you also save those banks. Some of those bailed-out banks are the very same banks that invested in Italy. How come we saved banks that bought us? There was some criticism of this.

Q: What are the steps taken by the new Italian government to cut debts?

A: This question comes at a very delicate point. The problem is that if the economy is growing, you have more taxes and issue fewer subsidies, and you will absorb the deficit.

What the government under ex-Prime Minister Mario Monti did was to make sure there was no wrongdoing. We should spend less, cut the budget and all possible expenses, so that in spite of the lack of economic growth, the public spending is under control.

And the government that succeeded Monti’s was more or less doing the same. Renzi, the new prime minister, decided that it was not enough. You cannot only cut debts, but have to stimulate growth.

Q: Where will that growth come from?

A: We are the second-largest manufacturer in Europe, so growth should come from manufacturing.

We would like to keep our manufacturing strength. One way is to be in close relationship with Germany and copy its model.

Germany is the only European country in surplus with China. It supplies machinery to fuel the Chinese economy. China is growing (about) 7 percent (per year). Italy, too, should be more involved in support of China. Like Germany, we can balance our trade with China and support our productions in Italy.

Q: What is Italy’s expectation for the Asia-Europe Meeting, set to open in October in Milan?

A: Very high. We expect Premier Li Keqiang to attend. It would be an honor for us to receive him. For us, we would also take the chance to host a bilateral meeting with China in Milan.

The Asia-Europe Meeting is important, because we can show to the world how Europe is integrated so far, and to have the top companies from the two groupings talking to each other.

Of course, when you have a lot of leaders and big companies, there are a lot of protocols. There are more protocols than business. But still I believe that business can come.

For us, the summit will also be a general trial of the Milan Expo next year. We will show the world our preparation for the Expo. People can assess the preparedness of the process.

Q: What are the main Italian exports to China?

A: Our No. 1 export to China is industrial machinery, including textile, automotive, chemical industries. Of Italy’s export mix, one third is machinery, one third fashion, furniture and lifestyle items, and the rest is foodstuffs.

In China, machinery is doing okay. But we are exporting less than average in the category of fashion and furniture. And we export much less foodstuff than what is normal.

Italy is the No. 1 producer of wine worldwide. But here in China we lag behind, at a distant No. 6 or No. 7. There is a lot of catching up to do.

We are not very competitive in foodstuffs for various reasons.

A lot of Italian products are specialty products. You need customs clearances and licenses. It’s complicated.

Then a lot of products are fresh material. You need to have a special cooling chain and good logistics.

I think we should do more in wine. China is a relatively new market in wine, and rapidly growing, but it has its ups and downs. Last year, overall wine consumption was coming down a bit due to the anti-corruption campaign in China. There are other reasons, like fake wine and anti-dumping investigations that hurt wine sales. But not for us; Italy was steadily growing. Of course we should do much more.