funneling savings towards key projects, such as road and telephone networks. in those days, central bank independence was not perceived as a crucial issue. the central bank shared with the government the responsibility for key economic policy decisions, and implemented those decisions using the powers it had on the financial market and on banks. let me recall that in the sixties keynesian thinking became dominant in economics, and the phillips curve oriented decision - making in most countries. stable money had ceased to represent a goal per se, and was often sacrificed in order to achieve a higher rate of employment. monetary stability was essentially being judged in terms of the exchange rate, rather than in terms of consumers'purchasing power. the landscape dramatically changed in the seventies and eighties, with the oil shocks, double - digit inflation rates in several countries, and a renewed emphasis put on the need for central banks'independence. the hypothesis of a new long - term decline from the end of the nineties, the italian economy slowed down markedly. low gdp growth, falling total factor productivity and shrinking export market shares suggested the idea that italy was entering a phase of long - term decline ( slides 6 and 7 ). how come? there is a wide consensus by now, to which research done at the bank of italy gave a significant contribution, that some features of our economic and social structure had become unfit to the new technological paradigm and global trade environment. i am referring first of all to the insufficient dynamics in firm demographics : that is to say, we had – and still have – too many small firms, too few capable and willing to grow. that reduced the general ability of the economy to exploit the potential gains from new technologies and global export markets. the reasons for such a chronic dwarfism of the italian corporate sector were rooted in our peculiar " doing business " ecosystem, characterized by a cobweb of laws and regulations affecting economic activity, sometimes redundant and incoherent, often inspired by an anti - market ideology ; suffocating red tape ; inefficient judiciary. to give you an example, suppose that a successful italian small firm saw the concrete opportunity to make a dimensional jump, either through internal investment or acquiring a competitor : more often than not it just gave up, and stayed as it was. why? because it feared to become too visible to bureaucrats, to tax officials, to unions, to local politicians, to judges. but even when those fears were not justified, the family owners of the firm could decide anyway

wealth and sophistication of italian society in those times ( slide 2 ). but after that a long period of decline set in, both economic and political. the guilds, which had been a growth factor in earlier times, became jealous custodians of their privileges, stifling innovation. the ruling classes, satiated with consumption, stopped searching for new horizons. most european countries achieved national unification in the xvi century, not italy, which became just their battlefield. in terms of gdp per capita, italy fell far behind in the european ranking. the very same perception of italy by foreigners changed. in the xvii and xviii centuries our land was avidly trodden by young aristocrats and wealthy bourgeois from all over europe, in bis central bankers ’ speeches search of roman temples, and eager to buy antiques. finally, italy had become the scenario of her majestic ruins ( slide 3 ). johann wolfgang von goethe, the famous german poet and thinker, being a genius, was among the few able to break this arid and exploitative scheme during his journey in italy, the italienische reise he made in the late xviii century : to him, italy offered not only the coliseum, but also interesting conversations with craftsmen, innkeepers, civil servants. in the first half of the xix century italy was plagued by underdevelopment and poverty, hitting the bottom of the european ranking in terms of per capita gdp. the evolution since the creation of a unified state following a struggle lasted half a century, political unification was achieved in 1861, though still partial : rome and venice joined the new kingdom only in the following ten years. the new italian state had to embark on a painstaking effort to put in place the physical as well as the legal infrastructure of a modern country. the first two decades of unity were far from brilliant in terms of growth. one of the major bottlenecks was the inadequate transportation network, especially railways. only in the 1880s the annual growth rate of the economy surpassed 1 per cent. early in that decade italy joined the gold standard, which was proof – at that time – that it had a viable economic management. it seemed, for a moment, that the country had reached its place among the european powers. but the international financial crisis of the nineties had a devastating effect on the economy : foreign capital fled and a housing bubble burst, leaving many bankruptcies behind. currency convertibility was soon suspended. financial reconstruction had to