The Associated Press June 6, 2008

FIAT CEO SAYS HE IS LOOKING FOR WAYS TO MANUFACTURE THE ICONIC 500 IN THE UNITED STATES

VENICE, Italy: Fiat CEO Sergio Marchionne said Friday that he plans to launch the iconic Fiat 500 compact car in the United States and is looking for an industrial partner for the venture.

Fiat is riding the huge popularity of the redesigned 500, launched in Europe last July, to re-enter the United States for the first time since 1983, when it exited after a 20-year presence.

"I'd like to bring it out as fast as I can. We are examining ways and means to manufacture the cars in the United States," Marchionne said on the sidelines of a foreign policy forum in Venice. "I don't want to bring it over made. I want to manufacture in the NAFTA area."

He said that while "there is a certain charm about making the 500 in the United States," he would not do it if it proved too expensive.

Marchionne left open the possibility of entering the United States with the 500 during last July's launch, but the project has become more concrete with the continued success of the 500. The stylish compact car has already been key in relaunching Fiat's image and securing its turnaround, with more than 250,000 sold, proving its appeal beyond the nostalgia buyers.

Fiat left the U.S. market in 1983, but the brand was also hounded by its reputation for breakdowns. In a historical footnote, Fiat established a factory in Poughkeepsie, New York in 1906, which was closed at the outset of World War I.

Now, the weak dollar is making manufacturing in the United States more attractive, although Marchionne didn't address the exchange rate issue.

Marchionne said he would like to launch a full range of 500s in the United States — including a convertible and a larger estate version still in the works.

Small cars are also becoming more attractive in the U.S. market, and Fiat Group spokesman Gualberto Ranieri said they will be watching the success of the Smart car, which was launched this year, as they make their next move.

The Fiat 500's U.S. launch could be simultaneous to the introduction of Alfa Romeo in the United States, but that the production would likely be in different places, Marchionne said. He has said in the past that he would like to launch Alfa by 2011, and that at least one model must be produced locally, but he hasn't said which one.

Alfa was in the United States when Fiat bought the brand in 1986, but it abandoned the market in 1995.

Marchionne said he was in "very quiet" talks with possible industrial partners on both ventures, and that if possible there would be further announcements in 2008.

"That is why I am working so hard, and look so tired," he said.

June 6, 2008

FIAT TO RETURN TO THE U.S.

After a 25-year absence, the Italian automaker is looking for partners to make Alfas and the popular 500 subcompact in North America

by David Rocks

Italian automaker Fiat (FIA.MI) is looking for partners to manufacture its Alfa Romeo brand and its 500 subcompact in North America. Although the company hasn't finalized plans for its return to the U.S. market, an announcement could come later this year, Fiat Group CEO Sergio Marchionne said Friday. "The U.S. market is very large, and we're not looking to occupy a premier position," Marchionne said. "But I think we do have a couple of brands and products that we can sell successfully there."

Marchionne didn't lay out any precise schedule for the return to the U.S., though he said he expects to be producing one of the brands by 2010 at the latest. "We need to make sure that when we enter the U.S. we're able to produce what we need," he said in an interview at a meeting of the Council for the United States & Italy in Venice.

Partnering Up

Marchionne believes the only way to sell Fiats profitably in the U.S. is to build them in North America. He said he's "having discussions with everybody," though he also didn't rule out building a factory. While Fiat has an existing partnerships with Ford (F), another potential alliance partners is Mercedes-Benz (DAI), which is interested in building passenger cars in North America in addition to the SUVs it builds in Alabama. Nissan (NSANY) has excess plant capacity at its Mississippi plant, and seems interested in replacing some of the SUV capacity it has there with passenger cars. Fiat already shares engineering with Ford on the U.S. automaker's Ka minicar in Europe. Ford is expanding its small car manufacturing in Mexico to build the Ford Fiesta, and would also be a logical partner.

But it's not as though Fiat has to go begging for a partner. In fact, says David Cole, chairman of the Ann Arbor (Mich.)-based Center for Automotive Studies, with an established and successful small car platform in the 500, and U.S. automakers looking to increase their small car offerings as gas prices climb, "Fiat isn't having any problems getting a meeting." Cole says Chrysler and Ford are the most likely partners for Fiat among U.S. carmakers, since General Motors had a painful and expensive divorce from an alliance with Fiat a few years ago.

South America Stronghold

Fiat, though it left the U.S. market in 1983, has remained a powerful force in South America. In Brazil, the company has a leading 25% market share and last year produced 800,000 vehicles at one plant, making it the largest single auto plant in the world. (The plant receives 6,000 delivery trucks a day, and 240,000 loaves of bread every week for its cafeteria.)

But Marchionne said he'd be unlikely to export cars from there to the U.S., given the scale of the operation and the domestic demand in Brazil. "I have no space in Brazil, and I think it would be unwise to concentrate more production capacity on that site," he said. In any event, he said, the 500 and the Alfas will be built in different locations. Fiat also manufactures in Argentina, but it is focused on using those plants to build up its sales and market share in South America, Central America, Mexico, and the Caribbean to a combined 15%. Outside Brazil, it only has about 3% to 4% of those markets.

Europe's Import Challenge

One thing Fiat is unlikely to do is import its cars from Europe. Given the falling dollar, many European carmakers are seeing their margins squeezed on exports to the U.S. (BusinessWeek.com, 6/5/08) Volkswagen (VOWG) and Volvo (VOLVA) are losing money in the U.S. with no U.S. manufacturing. And BMW (BMWG), even with a plant in South Carolina that builds its SUVs and Z4s, is seeing profits evaporate in the U.S.

Marchionne said he doesn't want to find himself in a similar situation. "It's unwise to import from Europe," he said. "You could do it as an initial entry, but you can't do it long term."

The 500 has been a huge hit for Fiat in Europe. The car is a remake of the classic compact that Americans may recall from 1960s Italian movies such as Roman Holiday. For Italians, the car evokes a simpler era, and Fiat's revival was aimed at feeding that nostalgia. The company has sold nearly a quarter-million of the diminutive cars since its launch last July. Given the U.S. success of BMW's Mini Cooper—another car steeped in nostalgia—as well as the surge in small cars overall in the U.S., Fiat would like to get the 500 into the American market "as fast as possible," Marchionne said: "I think the 500 has the same charm as the Mini." He said he expects to sell several versions of the 500, including the current two-door coupe, a station wagon, and a convertible.

A Tough Sell

Alfa, meanwhile, offers a premium lineup of sporty sedans that go toe-to-toe with the likes of BMW and Acura. The company pulled the brand from the U.S. in 1995 after limping along with minimal sales for several years. The brand is slated for a partial return to the U.S. this summer, with a super-premium offering called the 8C Competizione, a 450-horsepower V8 coupe that will cost $200,000-plus. The company plans to make just 500 of the cars and export only 90 or so to the U.S.

When Fiat left the U.S. market 25 years ago, it had developed a reputation for fussy cars that needed frequent repair, a tough sell as companies such as Honda (HMC) and Toyota (TM) were establishing reputations for mostly worry-free cars. Fiat was pushed to achieve higher quality standards in Europe, especially after protectionist tariffs on imported cars were dropped and the Japanese could compete evenly there as well. Now, with profits and sales surging in Europe, as well as South America, Marchionne figures Fiat has unfinished business in America.

With David Kiley in Detroit

BBC WORLD SERVICE BUSINESS REPORT June 6, 2008

INTERVIEW OF SERGIO MARCHIONNE BY DAVID WILLEY AT THE COUNCIL VENICE WORKSHOP 2008

The Italian auto maker Fiat says it wants to put its successful new Cinquecento city car on the American market as soon as possible. In the past three years, Fiat's CEO Sergio Marchionne has managed to turn around the formerly unprofitable company, Italy's biggest private employer. Our correspondent David Willey spoke to Sergio Marchionne at a meeting of Italian and American business leaders in Venice. Mr. Marchionne was critical of the way in which 9/11 had affected international confidence in the United States as a leader of the world economy.

Marchionne: I fully understand the reaction of the US after 9/11, the fact that they felt there was a real live attempt to mortally wound a country and the fact that they sort of closed the shutters to the outside world in a very awkward manner - is an understandable first reaction to 9/11. I think what we were seeing from 2001 until now is a continuation of what I consider to be an isolationist policy, which has been triggered, initiated by them, and has with withdrawn the US from the sort of leading role which it has had historically, and I made reference to all the issues of fiscal intergrity which has been a hallmark of the management of US finances for a long period of time. They’ve been leading innovators and managers of the largest capital market in the world. All these functions are things that we don’t see anymore. And the latest financial crisis has even weakened this issue, because there are a lot of people around the world who look at the US as being the originator of the problem. I mean had this not happened in the US we would not be having the overspills that we are having elsewhere. And so I think the real challenge for the political generation that is coming on-stream in November and that will take office in January 2009, is to regain their credibility. I think that you know I “forwarded” Clinton when he spoke to the Labour congress at Blackpool, I think, you know that kind of international vision of the status and stature of a country are things which are desperately needed in an environment like this. We need to get some comfort and guidance from somebody. I’m not attributing to them the role of leader, but I think they have a significant influence on the shape of the mood, certainly of Western Europe, and on a large part of the country, and I don’t want them to miss it because I think its been incredibly beneficial when its worked. Willey: And you would like to go and manufacture in the States perhaps as well now? Marchionne: I do because I hink the US market is there and it’s a very large market, and I think that we’re not looking to occupy premium positions but I think we do have a couple of brands and a few products that I think we can sell successfully in the market. And I think we need to be there to make it. Willey: And why do you think you’ve been so successful in turning Fiat around? Marchionne: The only thing we do know is that we have a group of leaders in the house who were responsible for making that happen. I think I was lucky enough to find them, and choose them; I think we’ve we shared a set of objectives and we’ve continued to work diligently towards their achievement. Its that simple, there’s no magic, I think we just worked pretty hard.

The Associated Press June 6, 2008

SENATOR JOSEPH BIDEN ON ROLES IN THE NEXT ADMINISTRATION

MADRID, Spain: Former U.S. Senator John Edwards has ruled out being Barack Obama's running mate on the Democratic presidential ticket, saying he has already run for vice president once and does not want to repeat the experience.

"I already had the privilege of running for vice president in 2004, and I won't do it again," Edwards was quoted in Friday's El Mundo as saying.

The former North Carolina senator was even more blunt in comments during a business forum in Barcelona on Thursday, which were broadcast by Spain's TV3 television.

"I'm not interested in the job," he said, adding that he would do anything else to help Obama win in the fall.

Edwards, who ran for vice president under Senator John Kerry four years ago and was a presidential candidate in this year's U.S. Democratic primaries, had been named as a possible running mate for Obama, the presumptive Democratic nominee.

Edwards told the business forum that Obama should select someone who genuinely shares his goals and governing style.

"I would be looking for someone who shared my vision and I would want that vision to be strong, specific and bold, not just rhetoric and talk and not somebody who wants some modified version of what we have had in the past," he said. "I think you'd want something dramatic."

In the interview with El Mundo, Edwards was quoted as praising Obama as a "visionary."

"We don't live in a dream world and we have a lot of work to do," Edwards reportedly said, in comments the newspaper translated into Spanish. "But Obama's potential is unlimited."

Calls by The Associated Press to several Edwards aides went unanswered and independent confirmation of his comments to El Mundo was not immediately possible. He made was quoted as making similar comments to Spain's other leading daily, El Pais.

Another Democrat sometimes mentioned as a possible Obama running mate, Delaware Sen. Joe Biden, also said Friday that he had no interest in the position, though he did not rule out taking the No. 2 spot if asked.

"I'm not interested in being vice president," Biden told The Associated Press at a foreign affairs conference in Venice, Italy. "The truth of the matter is that if you get asked you have to say yes. But there are a lot of other people he should ask first."

Edwards was quoted in the El Mundo interview as having kind words for vanquished Democratic candidate Hillary Clinton, whose supporters have suggested she and Obama would make a "dream ticket" if the Illinois senator were to select her as his running mate. The paper quoted Edwards as saying only Obama could make such a choice.

"Hillary Clinton is a great force in the Democratic Party and in the United States, whether she aspires to the vice presidency or to another position," he was quoted as saying. "She is an extraordinary woman, and the role she will play depends only on her and Senator Obama."

While in Madrid, Edwards and his wife, Elizabeth, met for about 45 minutes with Socialist Prime Minister Jose Luis Rodriguez Zapatero. Edwards was meeting later in the day with other senior officials.

Edwards dropped out of the presidential race in late January after a spirited — if underfunded — populist campaign in which he pledged to stand up for the poor and powerless against corporate interests.

Both Obama and Clinton sought his endorsement, but he remained neutral until May, when he endorsed Obama.

Obama claimed he was assured of being the Democratic nominee on Tuesday after the final primaries in Montana and South Dakota. Clinton is expected to formally concede on Saturday.

Obama will run against another U.S. senator, John McCain of Arizona, in the November vote to determine who will succeed U.S. President George W. Bush.

_____________________________________________________________________________

Editor's Note: Associated Press reporter Colleen Barry in Venice, Italy contributed to this report.

Gruppo Editoriale L’Espresso 6 giugno 2008

FIAT: MARCHIONNE, BUON ANDAMENTO VENDITE AUTO A MAGGIO Fiat Auto ha registrato a maggio un "andamento buono" delle vendite e "manterra' la sua quota di mercato nonostante le difficolta'". Lo ha affermato l'amministratore delegato di Fiat, Sergio Marchionne intervenuto al Workshop 2008 del Consiglio delle relazioni tra Italia e Stati Uniti. "L'andamento di maggio e' buono e manteniamno la quota di mercato nonostante le difficolta' - ha affermato. Siamo riusciti a bilanciare la flessione del mercato italiano con aumenti in altri paesi". Marchionne ha anche confermato i risultati del secondo trimestre.

REPUBBLICA.IT

6 giugno 2008

ITALIA-USA: FRATTINI, SERVE SUMMIT EUROATLANTICO

"Il modo migliore per rilanciare e rafforzare la nostra alleanza" con gli Stati Uniti e' organizzare "un summit euroatlantico" all'inizio del 2009. Lo ha proposto dal workshop del Consiglio per le relazioni tra Italia e Usa il ministro degli Esteri, Franco Frattini. "Non importa dove si svolgera', se a Washington, a Bruxelles o altrove; l'importante e' che abbia luogo e che cio' avvenga all'inizio del nuovo anno. Si inviera' cosi' -ha sottolineato Frattini- un messaggio potente di unita' transatlantica. Il governo italiano, e per quanto mi riguarda io personalmente, lavoreremo perche' questo incontro si faccia".

Il Gazzettino S.p.A. 7 giugno 2008

CONVEGNO A VENEZIA

E SE LA CASA BIANCA DIVENTASSE NERA? IL "CASO BARACK" NEL PENSATOIO ITALIA-USA

Esiste un'interdipendenza sempre più stretta tra la politica internazionale e l'economia globale, tanto da far parlare di "global pol-economy". Il forte rialzo dei prezzi delle materie prime ad esempio - ed in particolare il boom dei costi dell'energia di origine fossile - ha riflessi importanti, che non possono essere trascurati nell'elaborazione delle strategie diplomatiche e di gestione dei conflitti.

È questo il senso del "workshop 2008" del Consiglio per le relazioni fra Italia e Stati Uniti - nell'isola-hotel di San Clemente in mezzo alla laguna di Venezia - che riunisce per due giorni economisti, banchieri, manager, politici, esperti di relazioni internazionali: dai due copresidenti dell'organismo, Marco Tronchetti Provera (Pirelli) e David Helekian (Morgan Stanley), a Sergio Marchionne (Fiat); da Lorenzo Bini Smaghi (Banca centrale europea) a Fan Gang (Banca del Popolo della Cina); da Paddy Ashdown (ex diplomatico e ora parlamentare britannico) a Iegor Gaidar (ex premier russo).

Barbara Contini, specialista di politica internazionale con all'attivo missioni in "zone calde" come il Darfur e l'Iraq, oggi parlamentare Pdl componente della Commissione Difesa del Senato sintetizza così, al Gazzettino, le linee guida dell'azione internazionale di due Paesi strettamente alleati come Italia e Stati Uniti: «Le società più prospere sono quelle libere. Le società pacifiche sono sempre quelle libere. Sui confini delle democrazie liberali come le nostre transitano merci e persone, non cannoni, come ricordava già nell'Ottocento il pensatore liberale Frédéric Bastiat. Pace, sviluppo, benessere si coniugano indissolubilmente con sistemi liberaldemocratici».

Dunque, secondo la senatrice, democratizzazione in aree critiche e ricostruzione postbellica non possono prescindere dalla creazione di un tessuto di relazioni economiche il più possibile solido: è una lezione tanto più valida quanto più ci si trova vicino a regioni del mondo sviluppate, com'è il caso dei Balcani, o dei Paesi ex sovietici Moldavia e Ucraina: questi ultimi ormai posti "sulla soglia" dell'Unione europea. Ma è una lezione che, in prospettiva, servirà anche in Medio Oriente - Libano e Iraq in particolare - e in altre zone ad alta criticità, vedi il Corno d'Africa.

Sul "pensatoio" italo-americano riunito per due giorni a Venezia - oggi la chiusura del workshop è affidata al ministro degli Esteri Franco Frattini - aleggia, ovviamente, il grande interrogativo su chi vincerà le elezioni Usa 2008. John McCain o Barack Obama? I giochi, ovviamente, sono ancora molto aperti e nessuno si sbilancia in predizioni. Tuttavia, negli accenni al cambiamento e al multilateralismo fatti, tra gli altri, da Sergio Marchionne e da Marco Tronchetti Provera, qualcuno ha letto l'attesa - o forse il desiderio - di veder sperimentare politiche nuove. Al di qua dell'Atlantico è soprattutto il senatore dell'Illinois - il possibile primo presidente afroamericano alla Casa Bianca - indicato come l'uomo del cambiamento, sebbene anche il senatore McCain, repubblicano come George W. Bush, abbia già indicato la volontà di una svolta rispetto all'amministrazione uscente, nelle relazioni inter-atlantiche, in quelle con la Russia, o con l'Iran.

A Joseph Biden, senatore del Delaware che occupa la prestigiosa poltrona di presidente della Commissione Esteri nel Senato Usa, è stata chiesta la conferma delle voci che lo danno "in pista" come candidato vicepresidente di Obama. Biden si è schermito: «Credo di essere più utile nell'incarico che ho al Congresso (il Parlamento americano) ma se Obama me lo chiedesse come potrei dirgli di no?».

Maurizio Cerruti

WWW.CORRIERE.COM

7 giugno 2008

LA FIAT CONTRO IL CARO GREGGIO

MARCHIONNE: VOGLIO ALFA E 500 IN NORD AMERICA

Se il Nord Ame-rica ha problemi con le auto che consumano troppo, l’amministratore delegato della Fiat Sergio Marchionne ha la soluzione, la 500. La notizia non è nuova - già in passato l’ipotesi era stata ventilata da più parti, anche dallo stesso manager durante un’intervista concessa al Corriere Canadaese - ma ieri lo stesso Marchionne lo ha ufficializzato parlando a Venezia. E lo ha fatto nello stesso giorno in cui in Canada la General Motors ha confermato la chiusura di uno stabilimento di Oshawa dove vengono prodotte auto che consumano troppo e col prezzo del petrolio che, sempre ieri, ha toccato il record di 139 dollari al barile. È in questo contesto che ieri Marchionne ha parlato a Venezia della crisi internazionale e dei programmi nordamericani della casa automobilistica torinese. Il libero mercato, ha detto Marchionne, resta il faro, ma la crisi finanziaria, partita da oltreoceano, è frutto soprattutto di una «liberalizzazione de facto» che ha consentito un ruolo eccessivo a «nuove, non regolate e leggere entità finanziarie». Con la solita pacatezza, l’immancabile golf girocollo nero, l’amministratore delegato di Fiat Sergio Marchionne non si smentisce di fronte alla platea del Consiglio per e Relazioni fra Italia e Stati Uniti, riunito a Venezia per la sua assise 2008. Ad ascoltarlo una platea di big dell’economia, della politica e della finanza italiana e americana, fra i quali il numero uno di Pirelli Marco Tronchetti Provera, Lorenzo Bini Smaghi del Comitato esecutivo della Bce e il presidente della commissione Esteri del Senato Usa, Joseph Biden. E proprio dagli Usa, mercato nel mirino, parte Marchionne. Conferma i target del secondo trimestre e dell’intero 2008, si dichiara pronto a crescere in Brasile e, soprattutto, ritorna sulla volontà di un ritorno in grande stile negli States, con l’Alfa Romeo e con la nuova 500. «Spero di portargliela il più velocemente possibile - dice della ‘piccola’ del Lingotto - Tutta la gamma. Stiamo studiando modi e tempi per produrla in America nell’area Nafta. Sarebbe bello produrla in Usa, ma sfortunatamente tutto è legato all’economia e quanto sono costosi gli Usa lo sappiamo tutti». Per questo «stiamo studiando i costi e se saranno da suicido non la faremo li», così come «stiamo cercando partnership». In America, del resto, Torino può già vantare il successo dei brand Case e New Holland.

Come è noto la Fiat sta considerando l’Ontario ed anche il Messico. Poi il discorso si allarga e Marchionne non si lascia sfuggire l’occasione di una platea mista italoamericana, per alcune riflessioni sulla situazione dei mercati, della finanza e degli stessi Usa. E lo fa a suo modo, affrontando il tema bollente della crisi dei mercati finanziari citando e incrociando senza timori, Money for nothing dei Dire Strait e il Fondo Monetario Internazionale. «La crisi finanziaria - afferma - che emerge da e negli Usa, è il risultato di una liberalizzazione de facto dei mercati dei capitali. Nuove, non regolate e leggere entità finanziarie hanno giocato un ruolo rilevante nel sistema finanziario». E ancora: «Le crisi finanziarie hanno spinto ogni organizzazione di fronte al test della trasparenza, dell’onestà e dell’affidabilità». Per questo è indispensabile innanzitutto separare l’attività delle banche da quella delle imprese, perché «la volatilità associata all’investment banking sta portando un danno enorme sui bilanci delle banche commerciali» e così «stiamo spostando il costo di questo rischio su persone che non dovrebbero pagarlo: utenti, consumatori, cittadini».

Nel suo discorso Marchionne ha anche duramente criticata la politica dell’attuale amministrazione Usa: «L’America in queste condizioni, dopo l’11 settembre, fa pena. È un Paese che si è chiuso in se stesso, che sta cercando disperatamente di andare avanti, ma che ha bisogno di un nuovo senso di leadership, di qualcosa di nuovo». La situazione negli Usa - ha aggiunto - «è veramente oppressiva, ma l’America è un Paese troppo importante per comportarsi così». Come detto, il discorso di Marchionne è giunto nello stesso giorno in cui il greggio è schizzato di nuovo verso un record dopo che il presidente della Bce, Jean-Claude Trichet, aveva affossato il dollaro americano spingendo l’oro nero alle stelle tanto che ora punta dritto verso i 150 dollari, quota che secondo Morgan Stanley toccherà entro il prossimo 4 luglio.

WASHINGTON POST June 8, 2008

A RETURN TO WOOING AMERICA

BY JIM HOAGLAND

VENICE -- Firmly back in power after a two-year hiatus, Prime Minister Silvio Berlusconi will welcome President Bush to Rome this week by extending him a helping hand on Afghanistan and Iraq. But the conservative Italian leader will also be peering over his departing friend's shoulder at who, and what, will come next from Washington.

The president is politically dead. Long live the president.

However hostile their publics are to Bush, Europe's most important leaders will be observing that natural progression of statecraft this week as they host Bush on his farewell tour of Europe. The president -- already toast in U.S. opinion polls -- will instead briefly be the toast of the Old Continent.

Bush joins European Union leaders for a summit in Slovenia and then travels on to be celebrated in Germany, Italy, France and Britain. He meets Berlusconi on Thursday.

"We are relaunching the era of particularly close and friendly relations with the United States" and not just with the departing president, Foreign Minister Franco Frattini said in an interview here. At the same time, it is no accident that Berlusconi has chosen this moment to push for the loosening of combat restrictions on Italy's troops in Afghanistan and to air the possibility of increasing the training that Italy already quietly provides for Iraq's defense and police forces. Bush, after all, is an old friend.

Berlusconi's return to power in April was one sign of a changing political environment in Europe that will encourage greater allied solidarity on Iran, Israel and other issues, said Frattini, speaking here at the annual meeting of the Council of the United States and Italy. "Italy is now aligned with the very firm approach adopted by the United States and its European allies on Iran's nuclear program" and will help enforce new U.N. sanctions if they are needed.

Frattini traveled to NATO headquarters near Brussels two weeks ago to outline the decision to loosen combat restrictions -- known as "caveats" in alliance jargon -- on Italy's 2,600 troops operating in western Afghanistan and Kabul. That move would give NATO more battlefield flexibility against the Taliban.

It will also inevitably focus new attention on Germany's long-standing refusal to enable its troops to engage in combat operations in Afghanistan -- as did President Nicolas Sarkozy's recent commitment of 700 additional French troops to Afghanistan.

On Iraq, Frattini disclosed that Prime Minister Nouri al-Maliki had recently asked Italy to upgrade its cooperation by providing military training for Iraq's fledgling naval and air forces and to increase the number of trainers that Italy provides through NATO to Iraq's security forces.

The Italian contingent, which has trained thousands of Iraqi police officers, numbers only about 50 officers at present. Any increased involvement in Iraq would be a welcome shift of direction for Italy, which withdrew its combat forces from Iraq in 2006.

The previous government, a center-left coalition headed by Romano Prodi, kept the trainers and a highly regarded Provincial Reconstruction Team of civilian-military advisers in Iraq after the 2006 pullout.

Prodi acted out of a sense of allied solidarity. But he was careful never to publicize the continuing Italian presence in Iraq for fear of negative public reaction and its effect on his coalition's fragile hold on power. Berlusconi, on the other hand, is more than happy to spotlight any helping hand Italy can extend to the United States.

"We believe it is important to show the Italian people that we are meeting our responsibilities and working with our friends," Frattini said, adding that anti-Americanism has not sunk deep roots in Italy or the rest of Europe. And Berlusconi's return to power suggests that being a friend of Bush's is not a fatal political condition.

Sarkozy has made a similar judgment. In addition to the fresh help in Afghanistan, he is holding out the prospect of France rejoining the integrated military command of NATO. But in the spirit of continuity he will delay that action until next year -- at the beginning of a new American administration.

Germany's Chancellor Angela Merkel is closer to Washington than was Gerhard Schroeder. And British Prime Minister Gordon Brown, after an initial distance-taking with Bush, will want to forge a new special relationship with the next American leader before going to the polls himself.

Divisive new issues -- trade is the clearest candidate -- could emerge to upset post-Bush trans-Atlantic relations. But Americans and Europeans have developed the habit over six decades of settling or putting aside old quarrels in time to contain the new ones that arise. That seems to be happening again.

www.williampfaff.com

June 10, 2008 FIAT CHIEF ON THE GLOBAL FINANCE CRISIS VENICE — Sergio Marchionne, the Italian-Canadian chief executive of Fiat — the leading Italian industrial enterprise — speaking about the present economic crisis last weekend, mentioned the well-known argument first made by the Austrian-American economist Joseph Schumpeter about the function of “creative destruction” in modern capitalism. The financial disaster of recent months has provided plenty of destruction. Whether creation follows depends not only on reforms but the restoration of responsibility in financial and corporate circles, Marchionne suggested.

He was speaking in Venice to the annual workshop of the Council for the United States and Italy. Marchionne is the man who brought Fiat back from what a few years ago seemed its deathbed to become one of the leading global automobile companies today, bigger and far more successful than General Motors.

Schumpeter’s argument says that capitalism proceeds through a process of replacing obsolescent or outmoded and fading corporations, institutions and processes, under the pressure of new and more efficient actors in the economy.

It is a convincing argument, confirmed by observation of what goes on in today’s globalized economy, as well as in technology, manufacturing and the organization of work and production.

It is particularly appealing in modern society, which rests on the all-but-universal conviction, or faith, in the inevitability of progress. If destruction is indeed the way society progresses, this is highly reassuring to those who might be tempted to think that catastrophes are bad things. Events such as the outbreak and devastation of the First and Second World Wars might seem steps backward for humanity, rather than forward, as many, if not most, people thought at the time. The wars were considered — in a phrase often heard — as “reversions to barbarism.”

However, Schumpeter’s argument concerned capitalist economics, not politics. Others have applied, or misapplied, his ideas. Some American neoconservatives thought, erroneously as it turns out, that deliberate destruction of undemocratic regimes in the Middle East would cause democracy to spring up spontaneously.

Last year, Canadian writer Naomi Klein published a best-selling book, “The Shock Doctrine,” which argued that certain leaders in the capitalist economy deliberately foster disaster for the political as well as material profits to be gained in the course of reconstruction.

It is hard to argue with Schumpeter’s argument about the capitalist economy’s workings. His main argument was that the dynamic and innovative entrepreneur is the principal agent of this progress, although scientific or technological innovation, or even the work of the intellectual — like Schumpeter himself — could have profound effect on the economy. (Schumpeter foresaw the eventual downfall of capitalism when it fell into the hands of the intellectual class, who would sacrifice dynamism to egalitarian goals!)

Sergio Marchionne brought Schumpeter’s thought to his analysis of the current financial crisis (summarizing his critique of how financiers think, with the song title “Money from Nothing” by Dire Straits, an international hit in 1985).

The hunt now is on for whom to blame for all of the destruction of wealth during recent months, and also for those guilty of letting it happen. He finds an allusion to Schumpeter in a recent working paper from the International Monetary Fund, which describes “the recent experience in the subprime market (as) a case study in the cost and benefits of financial innovation in an environment of shifting asset price dynamics.”

The benefits cited in that effort to find the “creative” aspect of the present destruction (one would like to think this ironical) are the expansion of home ownership due to the fall in the cost of high- risk mortgages, “especially among minority groups,” and the dispersal “of the default risks away from core depository institutions to the capital markets.”

The most destructive aspect of the failure of the system was that this whole universe of subprime loans, plus “securitization” with validation by the rating agencies, “flew under the radar screen of the regulators.” Over half the U.S. mortgage loans were made by independent lenders without federal supervision.

Marchionne quotes Edward M. Gramlich, a member of the Board of Governors of the Federal Reserve, as writing that “this is the way laissez-faire ideologues ruling Washington, including Alan Greenspan, wanted it. . . . They were and are the men who believe that government is always the problem, never the solution, and that regulation is always a bad thing.”

Fortunately, Marchionne said — speaking as a European executive — “the damage to the real economy is going to be limited to the U.S., and the contagion risk is limited.”

The Fiat CEO concluded that the problem has been unregulated lending, and no regulation meant tragedy. He said, “There is not a single doubt that the U.S. must increase its consumer protection mechanism,” and should restore the equivalent of the Glass-Steagall legislation of 1933 that segregated financial institutions according to their function, so as to prevent banks from owning asset management companies. This protects bankers from themselves, and everyone else from the illusion that money can be spun from nothing.