Ireland is an inspiration to Italians, PM Monti tells Taoiseach

Ireland is a source of inspiration for Italy in the way it is handling the crisis and returning to growth, Italian prime minister Mario Monti told Enda Kenny following a meeting in Rome.

The former European commissioner and economics professor is in a race against time to introduce a raft of reforms and ensure the eurozone’s third-largest economy does not come under attack from speculators, threatening the existence of the euro.

Mr Monti told a press conference yesterday that Ireland was “an inspiration for Italy and the Italians, which are also having to make sacrifices and accepting reforms... which are necessary, not because Europe says so, but in order to create more economic activity and jobs as well as to make the welfare system more sustainable in the future”.

He introduced a €30bn austerity programme last year but now the biggest challenge is to reform a heavily bureaucratic system to free up growth potential.

Mr Monti noted the “admirable turnaround of the Irish economy, which, after a slump of 7% in 2009, is growing again, despite an adverse economic environment in Europe”.

Ireland’s GDP is forecast to grow by 0.5% this year while Italy will be in recession.

Mr Monti and the Taoiseach discussed the reforms of their pension systems, although the demographics of both countries are different, with Ireland having the youngest population and Italy the oldest. However, both have a youth unemployment rate of about 30%.

While Ireland is raising the pension age to 68 by 2020, Italy has committed to a retirement age of 67 by 2018, but will also link it to life expectancy, so the longer the population tends to live, the longer people will have to work.

The budget situation is different. Italy is expected to deliver a balanced budget by 2013 while Ireland will struggle to have a budget deficit of 7.8% of GDP.

Mr Monti is trying to push through labour reforms with the co-operation of trade unions and has launched a massive campaign to fight rampant tax evasion. For example, about 600 people who own private jets claim to earn less than €50,000 a year.

Both Mr Monti and Mr Kenny share the belief that emphasis both nationally and at EU level must turn to boosting growth and creating jobs.

They were among the 12 prime ministers who signed a letter setting out the actions that need to be taken to pursue this course for discussion at next week’s summit in Brussels.

Mr Monti was impressed with the single-minded determination of the Irish Government in pursuing investment and jobs when Mr Kenny told him about the visits to the US focusing on potential investors and the China contacts.

They also agreed that the firepower of the EU’s bailout fund needs to be increased — a particularly important issue for Italy, who argue it should be so credible that it dissuades speculators from attempting to attack it. Mr Kenny also discussed these with German chancellor Angela Merkel in Berlin on Thursday night.

In the meantime, ahead of the German Bundestag vote on the Greek bailout, and the G20 meeting due to discuss the euro crisis, the finance ministry in Athens issued a formal invitation to investors to exchange their holdings of government debt for new securities as agreed with the Institute of International Finance.

Greece hopes for a sufficient take-up to cut their €200bn public sector debt by 53%.