Don’t write off the US economy, says top Vatican banker

Rome, Italy, Aug 10, 2011 / 03:43 am

The United States is not necessarily “a nation in decline or struck to the core” according to the head of the Vatican Bank.

“The United States remains the most technologically advanced country in the world, with the highest GDP, surpassing one and a half times that of Europe, four times that of China, and ten times that of Italy,” wrote Ettore Gotti Tedeschi, President of the Vatican Bank, in the Vatican’s newspaper L'Osservatore Romano.

His Aug. 9 comments came in the middle of a week of global financial uncertainty due in large part to concerns over the U.S. economy. Last week the credit ratings agency Standard & Poor’s marked down the United States’ credit rating for the first time in its history amid fears over the U.S.’s ability to pay its debts.

“The fact that it has been declassified does not flatten it to the ground, but probably will cause it to be more humble and open to collaborating with Europe,” said Gotti Tedeschi.

In a long and distinguished career, 66-year-old Italian Gotti Tedeschi has held several high-profile posts in business, banking and academia. He has been the head of the Vatican Bank – or Institute for Works of Religion – since 2009.

He also suggested that economically talking-down the U.S. is just as misguided as over-hyping China’s growing economic power.

“The great Asian nation has a GDP not much higher than that of Germany alone and must confront a series of not-easy problems: absorbing severely reduced exportation, internal growth in consumption and the consequent rise of production costs, reduced competitiveness, risk of inflation.” 

In an attempt to find a solution to the present crisis Gotti Tedeschi proposed a global summit recognizing that all economies are currently in the same fiscal boat. 

“There are no longer countries that are exempt from the crisis or immune from the temptation of increasing public debt in order to resolve their problems. But attempts at individual solutions can aggravate the communal situation and favor speculation.”

This way, he said, can lead to a common approach to the unpalatable but unavoidable conclusion that “only a period of austerity, managed in a integral way, can be the real key for returning to growth.”

He concluded by outlining his particular strategy for new growth which is based upon encouraging family to save - and then invest part of those savings in small-to-medium size businesses.

“This strategy would guarantee new resources for investments which today banks and funds are not able to obtain; it would produce more aggressive programs of growth, reinforce employment and even offer greater guarantees to the banks for their financing.”

Finally, he suggested that governments that presently do not have permanent economic advisory boards, consisting of academics and industrialists, should now think of creating such a body.