the next few months, taking account among other things of macroeconomic developments and their feedback impact on the public accounts. the estimated revenue effects of the measures to curb tax evasion are subject to uncertainty, both upside and downside. curbing expenditure growth will necessitate a sharp change of course with respect to the tendencies of the past decade. the limits on the resources at the disposal of central and local government will require, if service cuts are to be avoided, a serious overhaul of organization and territorial coverage. trade payables of government bodies and their public service firms must not be allowed to serve as an instrument for circumventing budget constraints. public financial adjustment and economic growth, together, are essential conditions for financial stability, which is in turn the pilaster of sustained growth. the indispensable modification of the overall composition of the public budget must be directed to stimulating growth. the reforms under way in the public administration and those that will raise the retirement age move in this direction. the curtailment of tax evasion can be a major factor for growth if it corresponds to the lowering of the rates levied on honest taxpayers. with the economic upswing, global payments disequilibria will tend to widen once more, heightening the connected risks to the sustainable growth of the world economy. the international monetary fund is fully committed to ensuring macroeconomic stability, but these imbalances, in being for more than a decade now, will persist for an extended period, and they will have to be funded. this is a titanic enterprise in both size and duration, and one that will only be feasible – without growth - threatening tempests – with capital markets that are far more robust, more transparent and better regulated than in the past. reform of the rules of finance the recent g20 summit in toronto observed that the agenda of essential regulatory reforms is proceeding on schedule. some aspects of the summit ’ s final declaration deserve special emphasis. first, the importance attached to the reform of basel 2 in order to increase the solidity of the system, including ambitious requirements on banks ’ capital levels and the definitions of capital. second, the affirmation of the need for further intensification of supervision, the extension of regulation to the shadow banking system, and the reinforcement of the derivatives market infrastructure. third, the resolution to reach an agreement at the time of the next summit in november. the new prudential rules will significantly increase banks ’ capital and improve its quality, limit

securities, which will continue for an extended period of time. should the macroeconomic conditions require it, the council stands ready to utilize all the instruments at its disposal to ensure, with the support of aggregate demand, the rapid readjustment of inflation towards the price stability objective. to reap in full the benefits of the expansionary conditions fostered by monetary policy requires the contribution of reforms to reduce the structural weaknesses of our economy, which magnify cyclical difficulties. decisive progress must be made in promoting a more business and innovation - friendly environment, encouraging labour market participation, raising the quality of human capital and improving the efficiency of public services. since 1999, italy ’ s annual average growth has been 1 percentage point below that of the euro area. in the absence of consistent structural progress, what at international level are cyclical slowdowns tend to be transformed here in italy into stagnation and a decline in productive activity. the wellbeing of households depends on numerous factors but the capacity of the economy to grow is vital. public investment can support it, in tandem with private investment, if rapidly and efficiently executed in the context of a gradual rebalancing of the public finances. above all, however, interventions to strengthen and modernize the productive structure, to render it more dynamic and capable of creating additional job opportunities, must continue to play a central role in italian economic policy. even if, as with past initiatives, they will take time to bear fruit, their implementation can immediately support firms and households ’ confidence and, in this way, their propensity to invest and consume. financial intermediaries the improvement of credit quality in italy, under way since mid - 2015, continued in 2018. in the third quarter the non - performing loan rate decreased to 1. 7 per cent, in line with the figures prevailing before the global financial crisis. for business lending, the decline came to a halt in the closing months of 2018 with the onset of the cyclical downturn. in the first nine months of 2018, also following a considerable number of disposals, the stock of non - performing loans ( npls ) decreased from €259 billion to €216 billion gross of loan loss provisions, and from €129 billion to €99 billion net of them. the npl ratio declined from 6. 1 to 4. 8 per cent in net terms ; the coverage ratio rose by almost 4 percentage points, to 54 per cent. for the significant groups, the reduction