market fragmentation along national borders. this possibility, which has arisen in the past, is amplified by the incompleteness of the european union. it is a risk that does not concern only those countries that it affects, but that, given the economic and financial interconnections between member states, may rapidly reverberate throughout the euro area. fragmentation leads to many serious problems from an ‘ operational ’ standpoint. in fact, it hampers the proper and homogeneous transmission of monetary impulses to all countries and, in this way, makes it impossible to pursue price stability for the area as a whole. as early as last december, the governing council stated that flexibility in the use of its instruments would remain a key element of monetary policy whenever there are threats to monetary policy transmission. president lagarde clarified that this included the possibility of deploying existing instruments or introducing new ones to prevent the risk of market fragmentation within the euro area from materializing. the pandemic in particular confirmed that, under stressed conditions, flexibility in the design and conduct of financial asset purchases successfully countered the impaired transmission of our monetary policy, making our efforts to stabilize the economy and inflation more effective. in recent months we have witnessed a progressive materialization of the risk of market fragmentation. the marked increase in the spreads on italian and greek government bonds as well as, to a more limited extent, in other euro - area countries, is a cause for concern. these are tensions that do not appear to be explained by the changing macroeconomic outlook. for italy, especially, our analyses indicate that a spread between the yields on italian and german ten - year government bonds of less than 150 basis points would be justified by the fundamentals and, in any event, levels above 200 basis points would not. in recent weeks, the widening has intensified, accompanied by a progressive increase in market volatility. it is in light of these developments, in many ways unjustifiable, that we must view the decision, taken only yesterday, by the ecb governing council to apply flexibility under the pandemic emergency purchase programme ( pepp ) and to ask the eurosystem committees to accelerate the completion of the design of a new anti - fragmentation instrument. the first instrument – which takes advantage of the opportunity to flexibly reinvest the assets held under the pepp – is already part of the monetary policy arsenal. its use at this time is fully justified. much of the tension dragging on the economy has sprung from the

effects of the pandemic crisis : from the mismatch between supply and demand, which creates procurement problems and fuels inflation, to the sharp rise in national public debt, to the need to normalize monetary conditions which had become extremely accommodative in order to address the most acute phase of the crisis and to stimulate the recovery. the war in ukraine has also caused gdp growth to fall compared with what had been expected based on the boost given by the ngeu programme, conceived precisely as europe ’ s response to the effects of the pandemic crisis. the second instrument, currently being designed, will serve to increase – and to lay lasting, solid foundations for – the ecb ’ s capacity to ensure that the impact of monetary policy is as uniform as possible across the entire euro area. i would like to clarify two aspects of this decision and these instruments. first : their aim is purely one of monetary policy, intended to facilitate the pursuit of price stability ; they have no other purpose, much less that of financing imprudent and unsustainable fiscal policies. second : the gradual normalization of monetary policy and the action taken to fight fragmentation are fully complementary. the former cannot proceed in an orderly fashion without the latter ; in order to defend the appropriate monetary policy stance, we must prevent malfunctions or interruptions in its transmission mechanism. * * * i am convinced that the ecb ’ s determination will also contribute to restoring order to the markets. this will help investors to more carefully and accurately access the real condition of our economy. looking ahead, there are clear signs of improvement. the debt - to - gdp ratio is falling and, according to the european commission ’ s most recent assessments, it will continue to decrease this year and next. thanks to the high average residual maturity ( close to 8 years ), the average interest rate on government bonds should remain lower than the nominal gdp growth rate, while interest payments should stay low in the coming years as well. the net international investment position is positive ; italian producers are successfully competing on export markets ; household debt is the lowest among the main countries of the european union and that of firms is below the average ; conditions in the banking sector have improved in terms of the volume of non - performing loans and profitability, while capitalization, though down a little on last year, remains at high levels. today it is up to us to maintain and build on the strengths of our economy and keep the public accounts under control