Mr. Passera dismisses the notion that austerity drives are obstacles to infrastructure spending. “Good management of public spending is totally consistent with a certain percentage of long-term investments,” he says, adding that much of the funding can come from private investors if the government backs the investment with guarantees. “There has to be a mechanism of … public guarantees,” he says.

One example of how Italy’s infrastructure has fallen behind its European neighbors is the country’s broadband network. Much of Italy’s Internet access is slow and spotty; many Italian cities rely on networks made of copper wire rather than high-speed fiber optic cable. Telecom Italia SpA, the former state-owned monopoly, has recently said it plans to invest €7 billion in infrastructure projects, including fiber optic networks. Many analysts, however, have questioned whether Telecom Italia can finance a new network while digging its way out from under a €33 billion mountain of debt.

Mr. Passera says Telecom Italia should simply band together with smaller rivals, rather than trying to finance a fiber-optic network on its own. “We should concentrate our efforts in a very modern, effective kind of network, because competition (at) that stage is not the best possible way to invest money,” he says. At the end of 2008, Intesa Sanpaolo wrote down its 10% stake in Telco, Telecom Italia’s controlling shareholder, by €165 million to €378 million.