adjustments that are not excessively onerous. to relaunch the economy, the public spending plans for the green and digital transition must be accompanied by reforms to make italy more business - friendly : private investment, company growth, and greater innovative capability within the industrial system also depend, to a high degree, on a significant improvement in the services provided by general government. given the unfavourable demographic outlook, productivity growth must be accompanied by a significant increase in activity rates. on the one hand, it will be necessary to accommodate the current trends by extending working lives and, on the other, we must facilitate participation in the labour market for those segments of the population, especially women and young people, that today remain on the margins of productive activity, above all in the south of italy. in this regard too, we can only reiterate the importance of removing the lags in the levels of education and learning that exist today. the year that has just ended was characterized by very erratic movements in the financial markets : in the early months of 2020, the yield spread between italian and german ten - year government bonds repeatedly went above 250 basis points. the consistent approach of the economic policies adopted at national and eu levels led to a reduction of tensions and a sustained decline of market interest rates. a decisive part was played by the resolute and swift action of monetary policy – with new purchase programmes whose flexibility allowed incisive and vigorous action in jurisdictions where the financial tensions caused by the spread of the pandemic had been greatest – and the decision to establish the next generation eu programme for the joint funding of individual countries ’ investment and development plans by means of issuing european debt securities. the yields on italian ten - year government bonds have gradually fallen to very low levels and the yield spread with the german bund has, in the last few days, fallen below 100 basis points, reaching its lowest level since the beginning of 2016. the set of measures adopted to support liquidity has also made it possible to preserve favourable conditions for accessing bank credit on the part of households and firms and to reduce the cost of bond and equity funding. faced with the effects of the public health emergency, which are expected to last longer than predicted last autumn, at its january meeting, the ecb governing council reconfirmed that its very accommodative monetary policy stance and its continued presence on the market are still essential in order to support the economy and prices in the euro area, also by bolstering

housing construction. expansion in investment in machinery and equipment has been insufficient to compensate for a fall in total construction spending. a recent drop in consumption was preceded by lower consumer confidence, which may have resulted from a stagnant real wage bill and low growth in total employment, both connected with the described shocks. available data suggest that economic growth may have picked up in the third quarter. encouraging information includes the strengthening of manufacturing production, exports, and pmis. additionally, services output and investment spending grew in july, while retail and wholesale sales have been increasing since may. prominent concerns center on the deterioration in construction. as in any economy, an upsurge in this sector is essential for a sustainable recovery. so far there is no indication that improvement in output is forthcoming, although public construction may soon bounce back bis central bankers ’ speeches as government expenditures align with budgeted outlays. on the other hand, a revival of private construction may not be immediate. housing has been on a weakening path since 2008, major developers now face solvency problems, and the restructuring of the industry will likely take time. on the other hand, the u. s. economy has continued to show signs of strength, in particular in industrial production, which may have a positive impact on mexico ’ s economic activity. thus, most analysts estimate that the current downturn will be short - lived with a clear rebound coming next year. however, downside risks to this scenario seem to prevail, including a pause in the u. s. economic recovery, which may limit the expansion of mexican exports, and a deeper deterioration of the domestic construction industry. 1 the impact of international financial conditions as in other emerging economies, mexico ’ s financial markets have been affected by the extraordinary monetary expansions undertaken during the last five years by major central banks, most prominently the u. s. federal reserve. until last april, these policies constituted an important factor behind substantial capital flows directed to emerging markets in the search for higher yields. obviously, greater capital availability benefits recipient countries, potentially providing additional and cheaper means for financing investment. nevertheless, significant portfolio inflows may also pose risk if they result in macroeconomic imbalances or financial asset price rises that depart considerably from underlying fundamentals. although symptoms of overheating and macroeconomic imbalances have surfaced in several countries, other emerging economies seem to have fared well in the midst of the recent capital bonanza. in particular, mexico was one of the preferred destinations of