, not as a refusal to use quantitative assessments based on an informed and probabilistic reading of the available evidence. anyway, the general view of the latest official projections is very cautious and correctly postulates that the support deriving from the fiscal stimulus and inventory rebuilding cannot last forever. beyond the short term, it still remains to be seen how soon and how far private demand – consumption and investment – can take up the slack and give rise to a selfsustaining recovery. in fact, in much of the industrial world private consumption is still stagnating at best, and its weakness appears even more significant if one excludes the effects of temporary measures, such as the various “ cash for clunkers ” schemes in the united states and in the major continental european countries, or the reduction of the vat in the united kingdom. to the extent that subsidies have merely brought part of households ’ planned expenditure forward, once these programmes expire consumption may lapse again. with anaemic demand prospects and with banks still curbing credit as they deleverage, investment too is bound to simon ( 1972 ), p. 170. see also visco ( 2009a ). be sluggish at best for some time. and without a pick - up in the pace of investment it is hard to imagine any return to a healthy growth path. the main risk is that rising unemployment rates will undermine household confidence and depress spending. as long as jobs are still being lost, there is plenty of potential for destabilizing feedbacks. lower employment can trigger more mortgage defaults and put additional stress on key financial institutions. in other words, as long as the employment picture continues to worsen, the risk that things could deteriorate again remains great. 2. challenges for international cooperation 2. 1 repairing the financial system one of the main challenges is to complete the repair of the financial system so that it can support the return to sustained and stable growth. as the financial markets appear to be regaining confidence, it is important that the reform momentum not be lost. the decisions of the g - 20 summit in pittsburgh point to a renewed effort to overcome the deep flaws that affected the financial environment prior to the eruption of the crisis. although the question of capital requirements for banks is certainly most prominent, it should be considered only part of the solution. to discourage excessive leverage, the quantity and quality of bank capital should be raised. but it is also of paramount importance that the perimeter of regulation

focus on those clients having limited access to alternative source of funding. in the coming months, it will be pivotal for the bank to consider where the resources needed can and should come from. the persistence of low interest rates calls the current business model into question. the current income generation capacity is unable to boost capital to support increased lending, even in the absence of strong cost dynamics. this calls for a multifaceted approach which would not exclude widening the revenue base of the bank, modifying the price of its services, and optimizing its balance sheet, while adhering to the highest standards of budget discipline.