the single currency project. second, common supervision and a centralized resolution authority lay the basis for financial stability. banking union, together with other national and european policies – in particular, the monetary policy measures recently decided by the governing council of the ecb – is already contributing to the normalization in credit conditions for firms and households. the comprehensive assessment of the balance sheets of the largest euro area banks, which preceded the launch of the ( ssm ), enhanced transparency and dispelled doubts about the banks ’ resilience. further progress is expected as the ssm brings harmonization of supervisory and business practices, reducing investors ’ perception of risks. although complete normalization in credit conditions will likely require definitive exit from the crisis and a return to stable economic growth, signs of gradual improvement can already be discerned in the surveys conducted by the eurosystem and in other indicators. bis central bankers ’ speeches banking union has imparted a strong impulse to the efficiency of the financial system by fostering competition across euro area countries. consider for example the recent decree on the governance of the cooperative banks in italy. the initiative is the product of a good many years of reflection on the shortcomings of the cooperative structure for listed or very large banks ; at the same time, it can be read as part of a broader reform effort to bring the italian economy up to the best european standards of efficiency. 3. how to consolidate a promising start the important steps already taken need to be followed by further progress, on several fronts. since the list would be long, i shall mention just one general issue and two specific ones. the overarching issue : further progress towards european integration is essential. we should not forget that the current crisis was provoked, in part, precisely by lack of progress in european integration following the adoption of the single monetary policy. the bu project has gotten the process started again, helping to defuse the crisis. but we must not make the same mistake twice ; the integration process cannot be allowed to stall again. progress in this direction is particularly difficult at present, because national centrifugal forces seem strong. they are visible in various forms : growing support for anti - euro or euro - skeptical political parties in several countries, for one, and the difficulties encountered by european and eurozone institutions in discussing issues from an area - wide perspective, for another. national interests and perspectives are strong. take, for instance, the distinction between core and periphery, which has become standard in many

##d by the yields on the secondary market − has more than doubled ; by 2020, bank bonds amounting to €110 billion will reach maturity, namely about 40 per cent of those currently outstanding. the increase in sovereign risk is reflected in bank share prices which, after growing by 13 per cent between the beginning of the year and mid - may, have subsequently fallen by 35 per cent. such trends ultimately have a negative impact on the cost and availability of credit for households and firms. so far, banks ’ higher capitalization and a more stable funding structure have helped to dampen the transmission of these tensions to bank lending. an assessment of the overall impact on the economy of the increase in sovereign risk is an exercise that is subject to wide margins of error. yet it is difficult to imagine that a reduction in household wealth, greater difficulties for firms in accessing credit and investing, and a reduced capacity for public sector intervention would not have significant consequences on economic activity. italy ’ s public debt is sustainable, but there must be a clear determination to keep it so, by putting the debt - to - gdp ratio on a credible path towards lasting reduction. any uncertainty about italy ’ s committed participation in the european union and in the single currency must be dispelled, as it fuels volatility in the financial markets. on these conditions hinge the protection of household savings and the ability to support italy ’ s economic growth. cyclical conditions in recent months the outlook for the world economy has become less favourable. compared with april, the imf has reduced its global economic growth forecast for both 2018 and 2019 by 0. 2 percentage points. the worsening in the forecasts for world trade is more marked and equal to almost 1 percentage point this year and two thirds of a point for next year. the deterioration in the macroeconomic scenario reflects the tensions in trade as well as those that have broken out in emerging countries such as argentina, brazil and turkey. the risks have increased, especially those that could stem from new protectionist measures on the part of the united states. those implemented so far have affected a limited share of the goods traded at world level, but the reactions of the financial markets have been significant ; the repercussions on global economic activity could be amplified by a revision of firms ’ spending plans. according to the latest data, gdp growth in italy will be in the order of 1 per cent this year and will then slow in 2019, net of the effects of the budgetary provisions