. and regulatory change can stimulate new applications of technology that foster greater efficiency and growth. at times, there is a complex interplay between changing technology and regulation. in the payments arena, regulators and rulemakers need to be aware of how technology is changing the industry and, when appropriate, remove artificial barriers to innovation. let me highlight several important examples of recent adjustments to rules and regulations that have changed the way payments are initiated and processed. beginning in the late 1990s, the national automated clearing house association ( nacha ) changed its rules to permit the so - called conversion of checks to electronic fund transfers via the ach system ; subsequently, the board modified its staff commentary to clarify the application of regulation e to these transactions. 4 today, businesses can use the information on eligible checks they receive over the counter and at lockbox locations to create ach debit transactions. partly as a result of the private sector ’ s expanding use of check conversion, the total volume of checks collected by federal reserve banks has in recent years fallen faster than the estimated decline in the number of checks being written. in 2003, congress passed the check clearing for the 21st century act ( check 21 ). 5 broadly speaking, check 21 was designed to foster market - based improvements in the check collection and return system, mainly by authorizing – but not requiring – banks to truncate or stop the flow of original paper checks and to create legally equivalent substitute checks for presentment to the paying bank. 6 in 2004, the board published regulatory changes to implement check 21. the legal and regulatory changes associated with check 21 are encouraging the banking industry to use new technologies to create and process digital images of checks and to print substitute checks only when necessary to meet legal presentment or customer requirements. in a recent report to congress on check 21, the board noted that the adoption of new clearing techniques was slow at first but has accelerated significantly in the past year. 7 for example, between march 2006 and january 2007, the banking industry ’ s use of substitute checks increased three - fold and its use of electronic check images increased five - fold. this pattern of adoption is consistent with early conjecture from the banking industry that the scale and scope of required changes to individual bank technology systems and operations would take time to implement. in addition, check 21 has started to alleviate the check system ’ s dependence on large - scale air transportation to move checks around the country, a vulnerability that was highlighted when planes were grounded following the events of september 11. to address

the soundness of economic policy, foreign capital inflows have ceased suddenly and given way to outflows, supplemented by substantial exports of italian capital. in late 1992 and again in early 1995 non - residents disposed of very large quantities of italian securities ; at the same time residents ’ purchases of foreign financial assets increased considerably. these outflows put the lira and securities prices under very heavy pressure. the reaffirmation of monetary policy ’ s counter - inflationary commitment, the continuation, albeit with pauses, of the efforts to adjust the public finances, and the policy of wage moderation were decisive in easing the pressure and restoring conditions for a stable inflow of capital from abroad. looking ahead to a situation of recovery in economic activity and a reduction in the external current account surplus, the diversification of residents ’ financial portfolios will not put pressure on the exchange rate if non - residents continue to buy large amounts of italian securities. during the current year, characterised by favourable expectations regarding the italian economy and the prospects for economic and monetary union, non - residents ’ purchases of government securities, totalling more than 80 trillion lire up to september, have contributed to the sharp contraction in the long - term interest rate differential between italy and the countries with a longer record of price stability and a lower level of public debt. exports of italian capital have also increased, however. one of the reasons for the gradualness with which monetary policy has been eased has been to ensure favourable conditions for foreign investment in italy, taking into account the continual, structural outflow of italian capital. as economic and monetary union draws closer and national monetary policy ’ s room for manoeuvre gradually narrows to the point of disappearing, the macroeconomic equilibrium of each country will come to depend increasingly on budgetary, incomes and structural policies. in the absence of changes in the relative values of currencies, imbalances will impinge on competitiveness, production and employment. public spending in italy is now equal to more than 50 % of gdp. reducing this ratio will make it possible to ease the burden of taxation and social security contributions. in order to enhance italy ’ s competitiveness and reduce the cost of labour, it is also necessary to remove the obstacles hindering competition in the markets for goods and arrive at a more flexible use of labour. 4. concluding remarks in addition to benefiting the participating countries, the creation of a stable monetary area in europe will contribute to the stability of the real and financial macro