extent of its underground and illegal economy and tax evasion, which translates into an excessive tax burden for those who always play by the rules. the resulting injustices and profound distortionary effects reverberate on the economy ’ s ability to grow and firms ’ capacity to innovate ; they generate rents that damage the efficiency of the productive system. a comprehensive rethinking of the tax system that also takes account of the changes in the social welfare system must adopt the objective of reducing the tax levy on the factors of production. • the sustainability of the public debt is not in doubt, but its high ratio to gdp is being maintained by the low growth potential of the country and is, at the same time, an obstacle to economic growth. economic growth and prudent fiscal policies to encourage investment should, instead, reinforce each other, in a virtuous circle that our country is capable of activating, favouring a reduction in the burden of debt servicing costs. • italy ’ s difficulties are amplified in the south of italy. first and foremost the business environment needs to improve in the southern regions, above all as regards guaranteeing legality. the technology gap is even greater, public policies are less effective : 75 per cent of unfinished works are located in these regions, of which only 30 per cent are public works. the south of italy is fast becoming poorer, in part owing to the emigration of its youngest and most highly - educated people to the centre and north of the country. it is a trend that has immediate social costs and negatively impacts growth prospects. • there have been numerous attempts to deal with ‘ the southern question ’ over the years, with interventions that have been as differently structured as the results have been disappointing. the development of the south is essential to the development of the country : about one third of the italian population lives in the southern regions, producing almost a quarter of italy ’ s gdp. measures to support growth in the regions that are lagging behind must not distort the incentives for firms and workers, preventing the employment of the most productive resources. it is necessary to act on the factors underlying the delays – it is not enough to try to compensate for them with monetary transfers. the effects on the southern economy of efforts to reform the public administration, schools and infrastructure can be extremely significant. * * * • lastly, allow me to express my most sincere wish that these national consultations may conclude with concrete actions that allow us to take the steps forward that the

however, geopolitical events, such as sharper internal and international tensions in the oil - producing countries or shocks due to individual corporate events or linked to single sectors of production, could trigger brusque changes in agents ’ attitudes and a sudden reallocation of savings and investments, leading to wide swings in the prices of real and financial assets and in exchange rates. this possibility is small today but not entirely absent. the widespread use of derivative instruments may offer a better means of risk management, but it could also accelerate the propagation of extreme events. 3. integrated, efficient and robust markets efficient and well - regulated markets, apart from performing their normal function of allocating financial resources in the best way possible, are crucial to ensuring that the system is robust enough to withstand violent shocks, however unlikely. policies designed to speed the integration of europe ’ s financial markets and their infrastructure contribute to orderly and lasting economic growth. market integration allows firms to exploit economies of scale by reducing the cost of access ; it increases the opportunities for diversifying investments ; it ensures more efficient allocation of resources ; it improves the ability to absorb shocks ; it strengthens the stability of the system. in europe, market integration has been furthered by the single currency and the stability - oriented monetary policy. it has not gone far enough yet. additional measures are needed to harmonize laws and regulations and adapt the infrastructure. the greatest progress has been made in the money market, thanks among other things to the development of the target settlement system. in november 2007 this will be superseded by target 2, which will bring further benefits to firms in terms of liquidity management. as you know, the bank of italy has been a key figure in the project, alongside the french and german central banks, and intends to maintain that role. in the case of government securities, common platforms such as mts have gradually extended their operations, increasing the liquidity and efficiency of the european market. the equity market is still fragmented. there are evident advantages, typical of a network economy, in concentrating trades ; the attraction of a stock market for issuers and brokers grows with the number of present and prospective participants. on the other hand, for the stock of smaller firms in particular, the information advantages of national markets lead to better liquidity conditions. forms of horizontal consolidation and federation between national markets would achieve both benefits. unrestricted and equal access to settlement systems and multiple links between the various markets would foster both competition and efficiency. italy ’ s stock exchange