the start of bond and share purchases by highly - leveraged intermediaries ; the latter borrowed funds at low cost and then invested in financial markets, making substantial use of derivative instruments. the parallel growth of the new economy in the united states, consisting essentially in an increase in the productivity of capital and labour connected with the large - scale application of information technology to production, led to a flow of capital to the united states and a continuous rise in share prices, which, in five years, roughly tripled. the ratio of financial wealth - shares, bonds and the money stock - to annual gdp at current prices rose from 240 to 360 %. the growth of derivatives makes it possible to carry out transactions with very high leverage, increases the velocity of circulation of the money balances used for financial transactions. interest rates and the cost of capital have decreased. the recovery of the world economy, under way since 1999, is connected with these developments. the american economy, performing as a high - growth component of the global economy, attracts capital while simultaneously helping to sustain economic activity in the rest of the world with its imports. the low cost of capital is helping the expansion of investment in europe and other parts of the globe. these developments can be said to have constituted an application on an international scale of the process, theorized in the past by tobin, of monetary expansion increasing the value of the existing capital stock and thereby stimulating investment. the process up to now has followed a virtuous course, without excessive inflationary pressures thanks to heightened competition and productivity gains in the united states. its achilles ’ heel is the rise in the prices of raw materials and energy products. 5. the gold reserves of the central banks today amount to some 32, 000 tons, about one quarter of the world stock. like other real assets, gold can appreciate when there is widespread inflation, which remains a threat. gold ’ s importance as a monetary anchor came to an end with the emergence of more rigorous monetary policies in the 1980s and especially the 1990s. but in periods of crisis gold can constitute a sort of reserve or guarantee “ of last resort ” for a country, as italy demonstrated during the 1970s. this view appears to be shared by the central banks of the leading industrial countries ; when they signed the september 1999 agreement, they stated that gold continued to have an important role to play in the management of global reserves. it is up to economists to analyze whether and to what extent, in an international monetary system that has surely not

##ing discussion on the budgetary union and plans for a political one. the agreements reached in the last two years in the matter of public finances have reinforced the commitments entered into previously but they have not established more demanding targets. the new european governance has increased the automatism of coherence checks on policies and objectives and of potential sanctions ; countries have been asked to recognize the european rules in their national legislation. even the “ debt rule ”, which calls on countries to reduce by 1 / 20th annually the amount by which their debt exceeds the threshold of 60 per cent of gdp, in fact renders operational a requirement already embodied in the treaty of maastricht. for italy, compliance would not entail the adoption of a permanently restrictive budget policy stance, but it does imply the return to a stable growth path and it requires a faster pace of adjustment to the geopolitical, technological and demographic changes of the past thirty years. the new macroeconomic imbalance surveillance procedure is an early warning mechanism based on a scoreboard of indicators and alert thresholds. the indicators are analyzed by the european commission in an annual report identifying the countries to be subjected to indepth review. in the case of particularly severe imbalances, the commission draws up, for approval by the european council, a set of specific recommendations calling for adjustment measures ; failure to comply may lead to sanctions. until two years ago europe had no tools with which to manage a sovereign crisis. the first measures to support greece, and to a smaller extent ireland, involved the use of bilateral loans. in may 2010 the european financial stability facility ( efsf ) was instituted – a temporary mechanism that was also adopted for portugal and has remained in operation until this year ; the bonds issued under the facility are guaranteed by the member states. in july 2011 the efsf was flanked by the european stability mechanism ( esm ), a permanent crisis management tool instituted by international treaty and endowed with capital of its own ; esm loans to spain were used to bolster the country ’ s banking system. the total lending capacity of these two instruments, initially set at €250 billion, has been raised progressively to €700 billion. when the efsf was launched the only method of intervention available was to grant loans under support plans for the countries in difficulty ; this has gradually been extended and now includes, with appropriate conditionality, interventions on the primary and secondary markets for government securities, opening of precautionary credit lines,