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In 2003, Italian finance minister Giulio Tremonti stunned many of his colleagues when he became the first senior European official to warn about the downside of unbridled free trade with China. The conservative cabinet minister has just published a sharply worded book entitled Fatal Risks: Old Europe, China, Suicidal Marketism and How to React. During an interview in his office at the Finance Ministry headquarters, Tremonti told Time's Jeff Israely that Europe's worst enemy isn't China—it's Europe itself.

TIME: What was the reaction when you first called for new controls on trade between Europe and China?
Tremonti: I was considered crazy. Everyone else had been repeating over and over what a fantastic opportunity China was. I said it was a fantastic opportunity, but also a source for acute concern. Now everyone sees those same concerns too.

TIME: What should European leaders do to confront the trading advantage that China and other emerging Asian economic powers possess?
Tremonti: My position isn't against the Chinese. They look out for their own interests, and Europe should simply do the same. Once the world has been opened, you can't turn around, you can't undo it. But Europe for too long hasn't protected its economic interests. Europe doesn't have any real industrial policy, doesn't have a strategy for attracting capital. We have too many rules and regulations on businesses coming from Brussels. There is an almost obsessive quantity of rules, yet we are freely importing from countries that don't have any of these rules.

TIME: Why do you consider the World Trade Organization a Pandora's Box for Europe?
Tremonti: The opening of the world to free trade happened too fast, and was too intense. From 1994 to 2001, the world opened up in one fell swoop, and when China entered the WTO [in Dec., 2001] it all multiplied even further. Japan after World War II, for example, was brought into world markets gradually, over the course of 30 or 40 years. Europe didn't enter globalization, but globalization entered into Europe. And Europe found itself unprepared.

TIME: Aren't you espousing old-fashioned protectionism and nationalism?
Tremonti: I'm not a protectionist and I'm not a nationalist. I believe in the market. But I also read Adam Smith, and in his writings you'll find the word rules and the word time cited over and over. Capitalism is like an old clock. It has weights and balances that need to be regulated [to give markets time to adjust to changes].

TIME: Why is Italy the first to suffer the effects of China's economic boom?
Tremonti: Italy is particularly vulnerable because so much of our industrial production comes from mid-level to relatively low technology, and also because of the high cost of labor.

TIME: Has the euro exacerbated Italy's problem with China, given that it has appreciated against the dollar over the past three years?
Tremonti: In a two-year span, we went from one excess to another: from the repeated devaluation of the lira to the overvalued euro. It's been a shock for the Italian economy.

TIME: But aren't Italy's problems primarily homegrown policy and structural failings, rather than outside competition? Haven't even many of the promised reforms of this supposedly business-friendly government come up short?
Tremonti: We've passed far more reforms than our predecessors. In 2001, the world was a different place, and we have faced difficulties, both internally and externally. Democracy is a complicated thing. Even the Thatcher government accomplished almost all its reforms in the second term.

• TIME talks with Italian Finance Minister Giulio Tremonti