Europe has the resources, the talent, and the scale to rival the US and China — so why doesn’t it […]
Europe has the resources, the talent, and the scale to rival the US and China — so why doesn’t it act like it?
In this episode, recorded live in Milan with the Adam Smith Society, Ricardo Silvestre sits down with Marco Cecchi de’Rossi, an investment committee member at Arpinge SpA and board member at SIDAM for a wide-ranging conversation on what’s really holding Europe back.
They dissect the non-tariff barriers still fragmenting the single market, the case for AI in classrooms and workplaces (and where regulation should draw the line), patent enforcement against unreliable markets, and what the corporate board of the future needs to look like in an age of multi-crisis and rapid change.
This podcast is produced by the European Liberal Forum in collaboration with Movimento Liberal Social and Fundacja Liberté!, with the financial support of the European Parliament. Neither the European Parliament nor the European Liberal Forum are responsible for the content or for any use that be made of.
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This conversation was recorded during the event ‘Governance without Goals? Restoring Strategic Vision in European Finance and Industry’, organised by the Adam Smith Society in Milan.
Ricardo: I’m very happy to have Marco Cecchi de’Rossi with us. After a career in non-commercial banking at Mediocredito Centrale and private equity at Sofipa, Marco helped establish the credit rating industry in Italy. At present, he acts as independent member of Arpinge SpA’s Investment Committee — a private investor in renewables, mobility, and carbon credits, all very interesting topics for the podcast. He’s also a board member of SIDAM SRL, a company producing medical appliances. It’s fascinating to see you working on renewables, carbon credits, and mobility. Tell us from your vantage point: how do you see the tension between a generational gap of people not worrying about it, and people who think we should worry more?
Marco: Well, my experience, unfortunately, is a long one — because I was studying in the Netherlands, in Amsterdam, in 1974. You may remember what happened in ’73, ’74 to the energy market, and not only that, also to the financial market. I’ve kept that shock experience for a long time. Then later I had a chance to work in the era of the Club of Rome ideology, which is a kind of ideology that is very anti-capitalist, anti-liberal-democracy, and so on, and which comes up and down over time. It has been very prominent again until about two or three years ago, and now what I notice is that we are seeing a shifting of paradigm — again, towards a more realistic, practical, or pragmatic, which is the word of the day, approach to the problem. The first and most outstanding sign of this — I may use the example of Greenland to explain it — is that the problem is no longer just oil or coal. It’s the table of elements. If you want to have growth in the medium term — I’m talking about the long term; even in my company we invest over 30 years — you have to look at the system of all the natural resources needed to have development. That of course includes energy, because energy, especially electrical energy, is basic for the new technologies and the new model coming now. But if you lose sight of the whole picture, you don’t understand what’s going on. Probably you don’t want to understand, or you’re a victim of propaganda. The fact is, this is so important for Europe. The problem is that Europe — if you look at it as a whole, 27, 28, 30 members, doesn’t matter, exclude Russia because they don’t want to be included, not because they shouldn’t be (I mean the present government, not the Russians) — we have all the means, all the materials, and all the resources, financial and non-financial, to be a great economic area, comparable to the United States and China. When I speak to entrepreneurs here, especially exporters, they say, “Yes, of course we export, but we could stay in the European market alone, because the scale is enough.” What has been missing — in Italy especially, but not only in Italy, also in Germany and elsewhere — what has made these countries become net exporters, is that the internal market was not scalable. There were barriers. And the barriers still exist. This is probably the most important issue, and the most difficult to resolve: reducing the non-tariff and tariff barriers within the EU. Then you can have agreements with the South, the East, the West, everywhere you want. But the first problem for Europe, for the European Commission, is to be able to reduce the non-tariff barriers. You want to build a 28th or 29th fiscal system — that’s an idea, of course, just for companies of a certain size, for banks of a certain size. That’s an idea. It should certainly be studied, but it has to be done now. You mentioned that we need to negotiate outside of tariffs as well as on tariffs — because, for example, we cannot have an agreement with the United States on tariffs when we don’t even know if those tariffs are constitutional or not. So sometimes European commissions trip on themselves, and that’s too bad.
Ricardo: Now, you explained this need to look at the whole table of elements, and I want to move on to labour. Because there is a natural concern about more automation, more AI-driven manufacturing and workplaces. There’s a discussion now that AI actually isn’t taking jobs from the primary sector, but from later sectors — for example, lawyers, and I know there are some in the room. So how do you see this playing out? And what recommendations do you have for the European Union workforce to remain at the heart of industry in the EU?
Marco: Well, my first recommendation would be: stop trying to prevent youngsters from using these tools. You can decide if it’s age ten, eleven, twelve, et cetera, but prohibition has never worked — not in terms of development, not in terms of preventing fraud or difficulties. So this is a tool, and it has to become easy to use for everybody, starting with the youngsters. Because of course, if you start with a seventy-year-old like me, it’s probably not useful for anybody.
Ricardo: Don’t underestimate yourself, Marco. Come on.
Marco: Very kind of you. But yes — I say, no limits in a sensible way. In schooling, in instruction, you have to bring this in from the elementary or primary school all the way through. Help people become accustomed to it. You can’t escape it, no way. That also means taking it inside companies — starting with the banks, I would say, because there are such complicated procedures inside that could be simplified. May I say something about myself? My first computer was an Apple. It was a kind of box like this, with a screen about ten centimetres wide. When it came into the company, the secretaries especially, and all the employees who weren’t analysts or top analysts, were terribly scared, because they could do the same work in less time. The same will happen with AI applications now. You have it in your phone, here in your pocket. So no fear — just keep using it.
Ricardo: I’m going to push back on that. I don’t know how much we can be, as liberals, too far on the front line of innovation without regulation. Because just as we record this — and I’ll update it if needed — Sam Altman, the head of OpenAI, has said we need to regulate this tool. So what is the middle point?
Marco: I fully agree. I am a liberal, but I am not a libertarian, as we said before. Any market, especially when there are jumps in technology, needs to maintain a certain level of control — initially from the outside, then from the inside. It’s the same in finance. What banks and bank regulators do now was not conceivable twenty years ago — the kind of instruments, the kind of securities they control. We have good examples. In Europe, we have ESMA, the European Securities and Markets Authority, which does a very good job for part of the market, including the rating agencies. I know them very well. So it’s possible to do it. You have to let go, but you shouldn’t avoid keeping an eye on what is happening. Without interfering, without imposing models — that has to come from entrepreneurial abilities in whichever market we’re talking about.
Ricardo: Let’s talk about one of the areas you know so well — value chains, particularly on the medical side. Tell us how companies can secure supply chains. This connects to something that, in Brussels, is also a recurring conversation: strategic independence for the European Union, decoupling. But on the other hand, there has to be a balance between the need for strategic autonomy and having suppliers. Please get into that.
Marco: It has to do — even the company I’m looking at now is mostly concerned by many governance aspects, but mainly by patent enforcement. The problem with that kind of company, be it AI or pharmaceuticals, is patent enforcement. And the rules are not the same everywhere. When you have a huge market — and I won’t mention which one, but you can imagine — which is not reliable…
Ricardo: You can say it. We’re fine.
Marco: Well, you guess. It’s not reliable. I say that from experience — direct experience. When you have to approach one of the largest South American markets, you know you will have problems. You might have unfair competition. But still, there is a juridical system that guarantees respect of the rules. When you go further east, you’re not so sure. It’s not something you can solve from Europe — except by saying: if you want to export into this area of the world, be sure you have to comply with the rules. And if you don’t, you are expelled, sent away. There’s no other way. Because it’s a problem of size and scale. So if your market — where you come from — is very large, you have leverage. But at the same time, from that market, they also have a problem, because they need to export. Especially in this last period, they have a terrible need to export, because their whole model is now based on net exports, since their internal development is not enough to absorb and resolve all the problems. So, as I said: patent enforcement. If it’s not possible to enforce in that area, you either avoid the market or you retaliate. This is a matter of power. There is no other way. When we say capitalism, one always has to think that there are at least two models of capitalism, to be very simple: one is liberal-democracy capitalism, and the other is state capitalism. They are not the same. My point is, if you want an international order that means international organisations, there has to be one that is able to enforce the rules — which is, of course, a matter of power.
Ricardo: You challenged me to go into this next topic, and I think it’s really interesting, because normally it’s not something front of mind when we think about the future of banking, industry, or innovation: the corporate board. Corporate boards exist, and they make decisions. Let’s talk about that. This is an area of multi-crisis and rapid change. There’s a need to be fast and flexible, but at the same time to be safe, so you protect your clients and yourself. What is the board of the future? How can a board be structured so that it can manage new technologies, but also remain concerned with the client — the person walking in with an idea? Tell us a little about this board of the future.
Marco: This was a topic introduced by Mr Alessandro De Nicola, with the word “robots.”
Ricardo: And just an aside, Marco, very quickly: one of the events of the European Liberal Forum is called Technopolitics. It’s fantastic — I recommend our Italian friends to go. At the last one, we were asked to present new ideas for technology use, and one of them was to have legislation written by large language models at the European Parliament. So we’re already at the point of adding robots into the equation. But please, the board of the future, Marco.
Marco: Frankly, I would be scared if we had another set of legislation written by somebody else, or something else, because I think the problem is to streamline the current regulation, not to add another source of regulation. But apart from that, what I want to say about corporate governance in general is that the complexity — even for a small-scale company like the one I follow, not to mention the one investing in everything from solar power to infrastructure to mobility — is that you cannot have a board whose members are able, on their own, to see the full chain of risks and deliberate on a resilient basis. So you need to have external support. External support doesn’t mean a consultant. I’m totally unfamiliar — I don’t want to work with consultants, because consultants are normally used to say that you’re right when you’ve already made a decision. That’s their work. It’s not only lawyers — all kinds of consultants. That’s what they’re paid for. So you must have committees around the board, with members from the economic, financial, or technical community who are independent in some way. This is not the same as having independent members of the board, which is a totally different story. These must be people who are independent but fully inside the decision-making process. So before going to the board, you must have an opinion produced by independent experts. Then the board can decide on its own, because the board members are personally and fiscally responsible. So it’s the board’s decision, but they must have something coming in from outside. It’s not the typical credit risk committee of a bank — it’s something more. But it shouldn’t be something made by consultants. It should be made by a committee that is part of the governance structure, and has to be heard before the board makes a decision. This is something I’ve seen working very well over the last ten years at a small scale. By small, I mean a few hundred million in investments have been made — but it has worked, the results are there, and the company is resilient. And as I said, this is now not only about risk from the technical or capital point of view, but also, for example, from the ESG point of view. In that company, we have two committees: one more on ESG factors, and the other more on the economic and legal side. They are a necessary step before the board examines the investment.
Ricardo: How scalable is this idea? How much resistance will you find, even from the consultant class?
Marco: It’s not scalable downwards. For a small company or a smaller bank, it can be costly — not cost-effective. So one could say it should be… I don’t know, that’s a matter of scale. But that’s the problem with small SMEs in general. There are some functions that are very expensive, and nobody is willing to invest in them unless they have a problem.
Ricardo: I’m going to keep following up on this idea on the podcast, and maybe have you back in the future when more boards of the future are instituted. I’ll also ask you, Marco, if you can give us some literature that I can put in the podcast show notes, so people can learn more about this. And I know you’re not a man of social networks, so I’ll ask your permission to put at least your email in the notes for people who want to get in contact. I’ve been talking with Marco Cecchi de’Rossi. Marco, this was a delight. Thank you so much for coming to the podcast.
Marco: Thank you.