by the credibility of the eurosystem and the progress made in the reform of european governance. fears of euro reversibility are linked in the first place to those concerning the sustainability of public debts and the competitiveness of member countries. for this reason the activation of omts and their continuation are subject to specific undertakings regarding public finances and structural reforms as part of assistance programmes. the financing of the programmes with esm resources is an incentive to further strengthen the governance of the union, which is essential to achieve a permanent reduction in the european component of the differentials. monetary policy can guarantee stability only if the euro - area ’ s economic fundamentals and institutional architecture are consistent with it. every country must do its part. the announcement of omts produced immediate benefits : medium and long - term yields in the countries under pressure decreased and the fragmentation of markets along national borders was attenuated. albeit with fluctuations linked to the remaining, pronounced uncertainty about the determination of all the member states to proceed with the strengthening of the union, the yield spreads between euro - area government securities remained on a downward trend. that between ten - year btps and bunds is about 250 basis points today. on 19 july a group of economists of various nationalities and affiliations published a manifesto in support of outright monetary transactions ( a call for support for the european central bank ’ s omt programme ), arguing that “ the success of the omt announcement proves that the omt is primarily a monetary policy instrument … it is the responsibility of a bis central bankers ’ speeches central bank and a defining feature of a lender of last resort to assume liquidity risk, including through the purchase of financial assets when necessary ( a step that has also been used by the bundesbank itself in the past ). ” there are different standpoints ; it is understandable that some should question the compatibility of outright monetary transactions with the constitutions of some euro - area countries, but the doubts about the possibility of making effective use of esm resources must be dispelled quickly in order to preserve the progress made, safeguard the rights and not thwart the efforts of those who have helped to develop the instruments of financial support. the omt announcement prevented a financial collapse with potentially devastating consequences for the european economy : all the member countries benefited, not just those at the centre of the sovereign debt crisis. more than anything else, however, a shared determination to advance towards a full european union is essential. the ecb and the national

there has been uncertainty, mistakes have been made, decisions have not been easy. but the way ahead is clear. we must proceed along the path of integration. the banking union project is designed to break the spiral between sovereign debt and the conditions of banks and credit. the bis central bankers ’ speeches importance of this has been further underscored by the handling earlier this year of the banking crisis in cyprus, which was resolved only after problems of coordination between european and national authorities had emerged. the creation of a single banking supervisory mechanism in which the ecb and the national authorities play a pivotal role is the first step. it must be completed by rapid introduction of a common bank resolution scheme and common deposit insurance. the contours of the project for the common budget for the euro area must be defined and a timetable for its realization drawn up. the report of the european commission last november and the one drafted by the presidents of the european council, the commission, the eurogroup and the ecb move in this direction. the institution of common mechanisms of financial support for structural reforms in single member countries can constitute the occasion for the launch of the project and the issue, on a trial basis, of joint debt securities. the italian economy italy ’ s weak recovery following the global financial crisis ended in the second half of 2011, when our government securities market came under pressure. there ensued a vicious circle between the state of the public debt, of banks and credit, and of the real economy. economic activity contracted by 2. 4 per cent last year. this year too will register a substantial fall in output and employment. a cyclical upturn towards the end of the year is possible ; it will depend on the acceleration of world trade, the implementation of appropriate economic policies, positive developments in expectations and investment conditions, and the availability of credit. the recession is deeply undercutting potential output and threatens to erode social cohesion. in 2012 italy ’ s gross domestic product was 7 per cent smaller than in 2007, households ’ disposable income was more than 9 per cent lower, and industrial production was down by a quarter. hours worked were down 5. 5 per cent, and more than half a million jobs had been lost. the unemployment rate, at 11. 5 per cent this march, has practically doubled since 2007 ; it is nearly 40 per cent among young people and higher still among those in the south. the financial and international origins of the crisis, on which economic policy makers have mostly focused