Italy's Letta: UK 'is EU's big risk'

When Italian Prime Minister Enrico Letta visits London later today his words will be analysed closely. He is, at 46, a relatively young Italian leader.

He is open, a fluent English-speaker and pragmatic. He is precisely the kind of European leader that David Cameron will have to get on side if he is to have any chance of successfully renegotiating Britain's relationship with the EU.

Mr Letta describes himself as "very pro-European" and an optimist. He seizes on Croatia joining the EU and Latvia's intention to join the euro as evidence of the European success story.

He even brands the euro a success - and then he throws in a caveat. The European Union, he says, is close to a big risk. That risk, in his view, is Britain.

The exit of the United Kingdom, Mr Letta told me, "would be a disaster for Europe and it would be a very negative step also for the UK and for our common future".

He says the role Britain is playing in the European Union "is a very positive one".

He cites London's support for expanding the single market, for liberalising trade, for security and defence and for pushing for a big trade deal with the United States.

'More flexible Europe'

When I asked him whether Britain could win back significant powers he said: "It can be possible and it could be useful for us too."

He does not indicate what kind of powers Britain might be able to repatriate, but what he does say is that "we need a more flexible Europe".

"We can have a new treaty negotiation," he said, "for the UK to have a different link, but remaining on board and for Italy or other countries in the euro to have a more integrated eurozone".

It is a vision David Cameron will want to explore. To sell continued membership of the EU to the British public he will need to convince other leaders of the need for a more flexible Europe.

Mr Cameron has spoken at length to German Chancellor Angela Merkel. She says there could be room for some powers to be returned to the nation states from Brussels, as long as that included all 28 EU members. There could not be just opt-outs for Britain.

The Dutch, too, are exploring a looser relationship. In June the Dutch government produced a report on "subsidiarity"- on what powers can best be kept at national level.

"The Netherlands is convinced that the time of an 'ever-closer union' in every possible policy area is behind us," the report concluded.

In all this there is an opening to negotiate and that is why a leader like Enrico Letta will be listened to so attentively in London.

Italy's struggle

The priority, of course, for Mr Letta is the Italian economy, mired in recession. He is adamant that Italy will not need a bailout. Italy is one of the very few European countries with a deficit below 3% and has a primary surplus.

That doesn't disguise the depth of the Italian recession - the worst in 20 years - nor a debt-to-GDP ratio heading towards 130%.

Businesses are struggling to find credit and many are still owed thousands of euros by the Italian government. Youth unemployment is at 40%.

Enrico Letta agrees there is a risk that an entire generation might conclude that Europe cannot deliver. He describes youth unemployment as the "nightmare of my job". He says it risks creating an "exodus generation" which opts out.

He says he has adopted a plan of cutting labour taxes for employing young people, but he knows that everything depends on growth returning.

In the midst of the economic storm there are questions over how long his coalition will survive.

He is a centre-left leader in coalition with Silvio Berlusconi's party from the centre-right. At the end of the month the Italian Supreme Court will hear the final appeal of Mr Berlusconi against corruption charges.

If his appeal is rejected he risks being barred from holding public office. He and some of his closest supporters maintain he is the victim of a political conspiracy. They have described the magistrates as being "in a secret association whose members are not known".

Some of Mr Berlusconi's allies have threatened to bring down the coalition - although how that will influence the court is unclear. But Enrico Letta felt it necessary to warn that for foreign investors Italy had to demonstrate a complete separation between political and judicial power.

He is optimistic his coalition can survive, but he is also making it clear there will be no influencing of the legal process just to save his coalition partner.

Even with its deficit under control Italy is a reminder that the crisis in the eurozone is not over.