provided to creditors – especially retail ones. all this, in a world of asymmetric information, can indeed be a source of serious liquidity risk and financial instability. the specific nature of the banking sector and the objective of financial stability should also be treated in a more structured way in the european commission ’ s approach to competition and state aid. adopted in 2013 – and based on the unfortunately premature conviction that the difficulties of european banks had by then been dealt with – the current approach greatly limits government intervention to support banks that are fundamentally viable in order to remedy market failures or negative externalities that are not originated by managerial shortcomings. indeed, according to the brrd, any public intervention that counts as state aid ( and is not among the very few exceptions allowed by the directive ) automatically triggers the resolution procedure. this, in turn, determines an overlap and, as a result, the prevalence of competition and state aid policy objectives over the objective of safeguarding financial stability. in other words, sufficient account is not taken of the fact that financial stability is of vital importance to the real economy. * * * to conclude, in the financial sector there are certainly risks of moral hazard as well as abuses and frauds, which the authorities, including banking supervisors, must prevent as effectively as possible. but prevention is not always possible and in periods of poor macroeconomic conditions risks of malpractice inevitably rise. this is why we need an overall resilient system, with banks well capitalised, better managed and more transparent, costumers with higher levels of financial education and authorities with severe sanctioning powers. this notwithstanding, we have learned that market failures are not infrequent, and information asymmetries and expectations ’ coordination problems may trigger sudden and possibly long waves of euphoria or panic. it is by now clear that markets are not always self - equilibrating and when they fail the consequences may be rather serious. on the other hand, markets should operate as much as possible without their force being bridled. there is no foolproof formula for striking this balance. clear rules, impartially applied, are essential, but so is the ability to make sound and timely decisions in the light of circumstances. in the case of banks, this calls for the possibility to recur to public backstops, and in a union like ours also a supranational one, in the presence of systemic risks and risks of contagion. this is

that two fifths of the industrial and service firms with 20 or more workers will reduce their staff this year ; the reduction will probably be most pronounced among the smallest firms. more than 2 million fixed - term workers will see their contracts expire this year ; more than 40 per cent work in private services, nearly 20 per cent in the public sector ; 38 per cent work in the south. workers on wage supplementation and job seekers already amount to about 8. 5 per cent of the labour force, a share that could rise above 10 per cent. households ’ disposable income and consumption are expected to go on falling, despite the substantial decrease in inflation. the governmental measures in favour of less well - off households and the incentives for the purchase of durable goods are providing temporary support. a first risk of the current cyclical phase is a sharp reduction in domestic consumption, to which firms could react by further restricting their purchases of capital goods and inputs. firms and the crisis thanks to the commitment of our regional branches, we have conducted a particularly thorough survey of the state of the italian economy, the difficulties that firms are encountering and how they are reacting to the crisis. expectations of a sharp fall in turnover ( of more than 20 per cent according to many firms ) and great uncertainty as to the duration of the crisis have caused investment plans for this year to be reduced by 12 per cent in industry and services overall and by more than 20 per cent in the manufacturing sector – exceptionally high figures by historical standards. restructuring in large parts of the economy began in the first half of this decade. prior to the crisis, some positive results were already visible in terms of productivity and competitive strength on foreign markets, but these difficult times jeopardize the process. according to our survey, about half of the 65, 000 industrial and service firms with 20 or more employees are engaged in restructuring. they expect a much smaller than average drop in turnover in 2009. at one extreme, the more financially solid among them are now buffering the impact of the recession by consolidating their technological edge and diversifying their outlet markets. there are a fair number of such firms, we estimate more than five thousand, employing nearly a million people. some appear ready to take advantage of the crisis by repositioning themselves in the market. at the other extreme lie the firms that, having decided to grow in size and technological intensity, and to open up internationally, had taken on debt. now, with the crisis,