, the importance of innovation and knowledge has grown. consider, for example, the quality of management : since the information - technology revolution, this factor has become highly correlated with productivity growth. more in general, italy has paid the price of the delays that we have documented with respect to the main advanced countries in terms of innovation capacity, human capital, and fragmentation of the productive system. 30. with the recent development of digital technologies, italy has unsurprisingly started to accumulate a new delay. this is similar to the one observed in the 1990s with reference to the rise and diffusion of information and communication technologies. today as back then, also given their size, italian firms seem unable to take advantage of the adoption of the new digital technologies, which require adequate skills and managerial capacities. as a consequence, not only is the production of digital goods and services low, but their use by firms and households is also modest. the index that summarises the level of digitalisation in europe ( the digital economy and society index, desi ) places italy in 25th place in the european union this year ( slide 15 ). the gap with respect to the other countries is especially large in the use of internet services as well as in the digital skills of the population. 31. as a result of these dynamics, gdp per capita has slowed down since the mid - 1990s and, after the double - dip recession due to the global financial crisis and the euro - area sovereign debt crises, has never been fully recovered ( slide 16 ). labour productivity ( measured by gdp per hour worked ) started to stagnate in the mid - 1990s and its weakness persists today. 32. the key variable underlying the dynamics of gdp per capita and labour productivity is the so - called total factor productivity : the component of production that is not explained by the stocks of labour and physical capital employed in the production process. changes in this variable measure, albeit imperfectly, the gains in the efficiency of production due, for example, to organisational changes, new technologies or a better quality of human or physical capital not captured by the statistical measurement of accumulated capital ( slide 17 ). 33. the current economic crisis has shown that, in the short term, economic growth depends on several, often unpredictable, factors. in the long run, instead, productivity improvements are the key ingredient for economic development and the most important factor explaining cross - country differences in income and gdp ( slide 18 ). it is for this reason that, in order

patrick honohan : household indebtedness – context, consequence & correction address by mr patrick honohan, governor of the central bank of ireland, to the limerick law society, limerick, university of limerick, limerick, 14 march 2012. * * * how quickly the lubricant of credit turns into the millstone of debt, the slingshot of leverage into a lethal boomerang. dealing with debt has, throughout history, been a central – and frequently fraught – challenge for economy and society. early ireland provides some of the more colourful examples : debts having been measured ( according to some of the brehon laws ) in units of cumail – female slaves – a point made much of by one recent academic commentator abroad using the example slyly to elide the difference between debt and slavery. slavery did indeed exist as a possible penalty for non - payment of debts in early ireland ; apparently as an alternative to death! as fergus kelly, the premier scholar of early irish law, has drily remarked, “ the economic inducements for the wronged party to opt for enslavement rather than execution are considerable ”. fast forward a thousand years or so and, as the accumulation of debt through borrowing grew into a major force driving the direction and scale of economic development worldwide, so society ’ s approach to dealing with situations of overindebtedness have also tended to evolve, and this is so in the great crisis of debt generated in the new millennium. the irish private sector was not alone in accumulating debt during the first decade of the new millennium. but, easily sourcing the funds from abroad – thanks to the impeccable national credit rating – the banks in ireland readily accommodated the demand for credit from ( a ) big developers and from ( b ) house - purchasers who bought the houses they were building, in many cases risking over - extension in order to get onto the bottom rung of a property ladder that seemed to be soaring out of reach ; in other cases scrambling up that ladder, or branching out into the buy - to - let market, at home and abroad as a seemingly promising investment in the rising market. [ charts : household debt - to - income ratios over the years, international comparison ; ( ii ) bank net borrowing from abroad as % gnp 1999 – 2011 ] first to feel the cold draft of creditor withdrawals were the banks. their borrowings from the international market had been mainly at short - term, and