On his way home from the Denver "Summit of the Eight," Italian Prime Minister Romano Prodi met with BUSINESS WEEK editors in New York. As he discussed his hopes of steering Italy into a future European Monetary Union, the Milan Stock Exchange was hitting a 10-year high on reports that inflation had fallen to its lowest level since the 1960s. Excerpts from the interview follow:
Q: Is Europe changing quickly enough? The transformation seems slow, especially compared with the U.S.
A: Here in the U.S., the change is deep. But even in Europe, the change has started. If you take all the big companies in Europe, all of them have lost people. And the privatization has been remarkable. Many of the big companies have started a revolution. The big difference between the U.S. and Europe is mobility. In the U.S., everybody moves. In Europe, we migrate only when we are starving or at the top of our careers.
Q: Shouldn't Europe take more lessons from the U.S.?
A: It's not so simple. I say you must change almost everything in Europe, but you can't apply the American way of change. Well, you can in Britain, but the rest of Europe is another story. In continental Europe, you can't make a decision without the commitment of the people. This is our tradition. You can make changes without abandoning the sense of caring [for the people]. This is what I am trying to do in Italy--step by step, to get out of the problem.
Q: Doesn't this mean that you will remain burdened by high costs?
A: We don't start from disaster, you know. Half of German industry is in quite good health. And you know the tradition of small and medium-size Italian companies. They are vastly competitive. We don't need to make a revolution, but half a revolution.
Q: You are now launching talks to reform the pension system. Isn't that politically explosive?
A: I have not exploded yet. If you want to succeed, you must do it by consensus. I spent this year preparing for the big confrontation. I think that the start of talks [between the government, the unions, and employers] on pension reform is a big achievement. The confrontation will be difficult, but now, we are all at the table.
Q: What about the banking system?
A: We have started privatization. But we have to accompany privatization with a deep process of change. The financial market is opening, but [so far] involving big deals, not everyday life. In everyday life, the cost of credit is unbelievably high. Generally, competition in Italian industry is good, but in services it is bad.
Q: You have argued for EMU membership in the first round. Given the French elections, is that more likely?
A: My opinion was that chances were 100% before the French elections. So how can it be more? Being out of the EMU would be terrible. We would have a devaluation, the return of inflation. Don't forget that inflation is down to 1.4%. I am proud of that. The country has made a lot of sacrifices. All throughout Europe, there is no inflation, so you can do monetary union. You can do it.