CNBC EXCLUSIVE: CNBC EXCERPTS: CNBC’S MARIA BARTIROMO SITS DOWN WITH ITALIAN PRIME MINISTER MARIO MONTI

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MONTI: to say that Italy because it has been a proponent there is a lot of difference. Under the current circumstances I believe that what Italy is doing in terms of domestic policies both budgetary, I mean fiscal discipline, and structural reforms should be enough to reassure the markets

 

 

BARTIROMO: So it sounds like you will not be accessing this right away. Is there a threshold you would look to that you would utilise it?

 

MONTI: No I think it would be important in the first place to see how concrete the operational instrument is being worked out and then I think we would be able not to use that. It would not be any particular stigma because by definition this possibility of intervention is constructed for those countries in Europe that are complying with the recommendations of the EU, it’s not a sort of bailing out instrument.

 

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BARTIROMO: Let me ask you, there was a recent survey in Italy on whether country will default on the public debt. Can you categorically say Italy won’t default?

 

MONTI: First of all, I will say that I have not seen that survey. It’s probably a serious survey. But it has not been brought to my attention. And I don’t see any objective basis for this, honestly. Actually, Italy will be one of the first EU countries to achieve the objective of the structure of the balanced budget. True we have a high debt-to-GDP ratio inherited from the past and we will gradually bring that down. But it’s clear that once markets see that a country has really changed behavior – in annual budgetary behavior – and it is on a course of discipline, even a high stock of inherited debt is coped with better by the markets.

 

BARTIROMO: Where will the growth come from…how will this growth happen over the longer term

 

MONTI: Well I see this growth happening first of all and this is not so much longer term, I hope it is short and medium term, through a decline in interest rates. Because these unduly high interest rates on Italian government securities not yet reflecting the new and better fundamentals of Italian economy and public finance. Of course penalise both the government, which has to pay high interest rates on its debt, and companies, high cost of credit. As interest rates, as they have started do, come down this will create more space for investment and growth.

 

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BARTIROMO: Let me ask you, It seems to the world that Germany holds the cards, that it fears it’s going to be on the hook for the rest of the euro zone. Is that a justified fear of the Bundesbank?

 

MONTI: No. I fully respect the concerns of the German public opinion as regards the need for fiscal discipline to be widespread and observed in Europe. this is one of the most fundamental rules of the game of single currency and I am only in favour of fiscal discipline enforced properly by the European.

 

 

 

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BARTIROMO: So do you have any expectations in terms of the German report ruling on the constitutionality of the ESM?

 

MONTI: No I have no expectation, on the 12th September we will know and of course I have a hope but not an expectation

 

 

 

BARTIROMO: What are your thoughts on the banking sector right now…how can you characterise the capitalisation of the banks right now? Do they need to raise more capital?

 

MONTI: I’m not following this topic very much in depth for the whole of the European banking system I think we have a good set up of monitoring systems through the European banking authority, the ECB, through the national banks and national centre banks and supervisors. What I believe is most important here is what the EU has just set out to do mainly to put up a more satisfactory architecture for banking supervisions in such an integrated financial market as the euro zone now has. Hence the proposal that the European commission will present on the 12th September on banking supervision will be of the greatest importance.

 

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BARTIROMO: How do you get your arms around getting people to follow the rules, paying taxes? The argument is so many people don’t pay taxes? Can you come up with a programme that polices this so that you know everyone is following the same law of the land?

 

MONTI: This is not very glamorous as a policy objective but it is absolutely fundamental and I’m happy that you raised it. This is at the basis not only of a sound economic policy but also society, trust among individuals, between individuals and public powers. Over the years I don’t claim this is the government that has deployed energies on the fight against the tax evasion over the years but particularly I must say as we started our activity a number of instruments have been put in place like the increased transparency now involving all transactions throughout the banks and other modalities companies perform so the fiscal authorities have the full image of that.

 

MONTI: And there have been protests in Italy, including in sector of parliament because it appeared this fight, this war, although I like understatements but here war is needed against tax evasion. Even if sometimes it is aid it becomes too visible, it is not good for example for tourism to see the financial police does raids in shops to check whether they issue the receipts. I think this is of vital importance that this be done.

 

 

 

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BARTIROMO: Mr. Prime Minister, despite scandals and allegations your predecessor Silvio Berlusconi is thinking now that he might want to make a run for his old job back. What is your reaction to that?

 

MONTI: I don’t have to have, let alone express, reactions on anybody’s candidature if he decides to do so it would be fairly normal. He is the president of a party. If a president of a party decides to run well this would not be a new thing for him at any rate.

 

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BARTIROMO: Have you spoken to President Obama about the fiscal situation in Italy?

 

MONTI: Yes I met with the President several times either bilaterally or at other gatherings like the G8 or G20. I have discussed with him domestic reforms in Italy and also I would say much more what we have all been doing in the European context to tackle the euro zone crisis. And he’s been always very interested and very inspiring. He likes to follow these issues very closely, also with telephone calls, he likes to be kept up to date. And of course I also like to be kept up to date about the progress about tackling fiscal imbalances in the US.

 

BARTIROMO: Because we are all dealing with the same issues. Do you think that America is in decline? This is the new speculation given the weakened position of our economy in the US?

 

MONTI: I cannot really believe such a country can be in decline. But it also has huge responsibilities in keeping the global economy in good order and therefore the topic of fiscal balances is not delinked from this.

 

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BARTIROMO: So do you think dollar will remain global standard currency?

 

MONTI: Yes as a former competition European commissioner I don’t like monopolies and I wouldn’t see a problem while the dollar stays as a fundamental currency for the world. The euro goes up as a share of euro denominated assets in portfolios of the central banks or financial institutions or economic agents in general as is the case.

 

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BARTIROMO: I realize interest rates have backed down and you’ve been able to stabilise the situation but isn’t this really dictated by markets? Isn’t this market related that rates can spike at any time…do you think this programme can actually contain the situation?

 

MONTI: I think this programme under the political blessing of European leaders and the independent and highly competent handling of Mario Draghi will be able to calm down the markets. Now I’ve always believed in the market economy I’ve never taken the position taken by some that markets are always right nor the position taken by others that markets are the devil.

 

MONTI: Now what financial market would one ideally want: at least I would like to see in the euro zone and more generally a financial market that does signal the good or bad qualities of the policies conducted by a specific country but just that.

 

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BARTIROMO: “Your term ending …”

 

 

 

MONTI: “No doubt about it.”

CNBC EXCLUSIVE: CNBC EXCERPTS: CNBC’S MARIA BARTIROMO SITS DOWN WITH ITALIAN PRIME MINISTER MARIO MONTI