in the us, the equilibrium between demand and supply cannot be ensured at moderate price levels. in brief, there are, above all, structural factors at the heart of the current crisis which will take time to recover. this suggests that to accelerate the adjustment economic policies of a structural rather than cyclical nature are necessary. let's turn to those economic policies. what are the do ’ s and don ’ ts in the light of both economic analysis and of past experience? let ’ s start with the don ’ ts. what do the errors of the past teach us and, in particular, what was done in earlier crises, in 1929, 1974 - 75, 1992 - 93 and in 2001 - 2002? there are at least four errors that should not be repeated. the first error that should be avoided is to allow that some exogenous price increases lead to a generalised higher inflation on a permanent basis. the rise in headline inflation must remain temporary and limited to food and energy prices, and not spill over other sectors of the economy. from this standpoint, the gravest danger is to index wages to inflation and, in particular, to inflation of external origin. this is a well - known finding in the economic literature and broadly confirmed by experience. the countries with wage indexation mechanisms are those that have least capacity to cope with external shocks like the oil price increase. they tend to feed into a wage - price spiral, with negative effects on purchasing power and employment. this experience is not unique to the 1970s. even today in the euro area, countries like spain that still have indexing mechanisms have above - average inflation. unemployment has started to rise again – the first sign of an economic slowdown ; the unemployment rate in spain is at around 9 %, compared with 8 % in the middle of last year. in italy, where there is no automatic indexing, the unemployment rate is below 6 %, the lowest level since the early 1980s. it would be especially damaging for employment and inflation if the reform of the italian wage bargaining system currently under debate, aimed at tying wage levels more strongly to productivity, were to contain inflation indexation clauses. even worse would be the situation if a possible indexation were to be tied, as some are advocating, to a price index of frequently purchased goods, such as that developed by istat for analytical purposes and reflecting only the frequency of purchases, not their economic value. the second error to avoid is to tackle the effects deriving from a supply shock

, like that connected to the increase in the oil price, with policies to stimulate demand. if the increase in oil price and other commodities is protracted, anticyclical policies simply postpone the adjustment by several months, making it more expensive. from the first oil shock – in the mid - 1970s – it is possible to gain very clear insights that ought not to be forgotten. the comparison between the experience of germany, which avoided using monetary and fiscal policy to compensate for the loss in purchasing power caused by the increase in oil price, and that of italy, which instead sought to stimulate domestic demand is illuminating. the german economy and that of other countries which followed the same path emerged stronger from that difficult phase of adjustment than countries like italy which followed the illusions of keynesianism and only engineered a higher inflation rate. 1 the depreciation of the exchange rate did not allow to increase market share on a sustainable basis. italy is still paying for that error, with a public debt above 100 % of gdp and a debt burden that weighs heavily on taxpayers. the third error that history invites us not to repeat is to put up protectionist barriers to stop or impede the economic and financial integration under way at global level. experience shows that such measures damage economic growth and tend to worsen crises. the 1929 crisis see figures 1 - 4 in the annex. was characterised not only by its deepness but also by the policy mistakes committed at the time, which introduced protectionist barriers with the aim of protecting national economies from international competition in the hope that this would succeed in better coping with the crisis. many countries adopted measures to restrict trade with the aim of favouring local production at the cost of imports and trying to protect jobs. in june 1930 the united states introduced the smoot - hawley tariff act, which imposed disproportionately high duties on imported goods. other countries took retaliatory measures. international trade declined ( some say it contracted sharply ), deepening the depression and delaying the recovery. 2 at the current juncture one the few factors supporting growth is international trade, driven in particular by emerging economies. without this contribution, growth would be stalling completely in advanced economies. under these conditions, thinking of curbing international trade would be a mistake in the same way as in 1929. to isolate a country from globalisation means weakening it economically. the empirical evidence shows that there is a clear relationship between a country ’ s degree of integration in the global economy and its