around 2. 5 % in the years from 1973 to 1980, inflation accelerated to 10 %. except in germany, where monetary policy was directed with greater determination to controlling inflation, the 1970s were marked by high negative real interest rates. the shift in us monetary policy introduced by paul volcker in 1979 gave priority to controlling the quantities of credit and money ; interest rates rose sharply to well above the inflation rate. the upward movement spread to all the other leading countries. 1. global finance during the 1980s flexibility of the exchange rates between the main economic regions of the world was accompanied by the dismantling of the barriers to capital movements. growth in the industrial countries was no more rapid than in the previous decade ; it slowed in the 1990s. the persistence of budget deficits and large external imbalances, the rapid advances in data processing and telecommunications, financial innovation and the activity of institutions that collect and invest savings on a world scale all contributed to the creation of a single, global market for currencies and finance. the harbinger of this development was the growth of the eurodollar market, which had been boosted in the 1970s by the recycling of the surpluses of the oil - producing countries. the new conditions made it possible for countries to adopt a gradualist approach to correcting budget and, above all, external deficits ; it was no longer necessary for saving to equal investment in any given period. the global market was fuelled by the steady accumulation of external debt by the united states and the build - up of a net credit position by germany and japan. in all the leading industrial countries except the united kingdom public debt continued to rise in relation to gdp. gross financial assets and liabilities continued to grow much more rapidly than economic activity. between 1982 and 1995 the total liabilities of the six largest industrial countries rose from us $ 25 trillion to us $ 110 trillion and from four to six times their gdp. over the same period the degree of financial integration increased ; today, external liabilities are equal to 60 % of gdp. the growth in foreign exchange trading proceeded apace. favourable investment opportunities encouraged huge flows of capital into the emerging economies ; high rates of economic growth were often coupled with large balance - of - payments deficits and stable exchange rates. foreign investment in these markets increased from us $ 50 billion in 1990 to us $ 200 billion in 1995. in the oecd countries the assets managed by institutional investors rose over the same period from us $ 14 trillion to us $

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