endangered and the stability of the euro ’ s financial system at risk. the ecb sterilizes these interventions, which do not finance public deficits. its independence is not in question. these measures will have to be discontinued as quickly as possible, as soon as the markets spontaneously resume trading of the securities of the countries involved. this will require rapid, significant and discernable progress in adjusting government budgets and the fully operational status of the financing mechanism set up by the european union and the imf. but enduring stability of the markets can only come with the resumption of growth, for it must not be forgotten that this crisis is above all a crisis of competitiveness. the recent events pose, again and more powerfully, the old problem of european economic governance. a strengthening of the stability and growth pact is urgent. the commitment to achieve a structural budgetary position in balance or in surplus must be made cogent by introducing sanctions, including political sanctions, for non - compliance ; the accuracy of statistical information, particularly public finance statistics, must be ensured. cogent constraints and commitments must also be introduced for structural policies. the disparities we have been witnessing for some time in actual and potential growth rates and the seriousness of the imbalances in intra - area trade in goods and services signal inadequacies and inconsistencies in national policies. some objectives of public action to enhance economic growth in the long run, for example those bearing on the labour market participation of both the young and the old and on competition in the markets for services, should be accompanied by controls and, in some cases, sanctions. the italian economy in the two years 2008 – 09 gdp contracted by 6. 3 per cent, almost half the entire growth achieved in the ten preceding years. households ’ real income diminished by 3. 4 per cent, their consumption by 2. 5 per cent. exports fell by 22 per cent. rapidly spreading uncertainty and the deteriorating outlook for demand led firms to cut investment, causing it to contract by 16 per cent. wage supplementation rose to 12 per cent of total hours worked in industry at the end of 2009. employment decreased by 1. 4 per cent, the number of hours worked by 3. 7 per cent. some 9, 400 firms became involved in bankruptcy proceedings in 2009, a quarter more than in the previous year. the firms hardest hit are the smallest ones, which often depend on subcontracted work. those that had embarked on restructuring before the crisis have

regulatory framework in which the financial industry will operate in the years to come. on several occasions i have described the guidelines that continue to inform this plan ; how they draw from the diagnosis of past weaknesses a model for present and future action ; and how the ultimate objective of this work is to make the system more resistant to crises. some crises may be prevented, others will be inevitable ; but we can take action to limit their damage and contagion. the agenda develops in four directions : ( i ) draw up general rules for the banks : a more robust capital base, lower financial leverage and control of liquidity risk are the pillars of this ; ( ii ) introduce specific provisions for systemic intermediaries designed to reduce the likelihood of their failing, enable their orderly administration if this should happen, and prevent contagion ; ( iii ) reduce the importance of ratings in supervision, while simultaneously increasing the competition between rating agencies and exercising effective control over the integrity of their decision - making and the transparency of their evaluations ; ( iv ) increase the transparency of trading on regulated financial markets ; and bring overthe - counter markets back within a framework of universally accepted rules that impose standard contracts and the settlement of trades with central counterparties that are subject to supervision. the first set of reforms requires the utmost international convergence, otherwise regulatory arbitrage and market integration will preclude their effectiveness. for the second set it would be more appropriate to talk of minimum harmonization : all countries should adopt measures in respect of systemic intermediaries, but it is illusory to imagine that the method and timing of their implementation will be the same across countries because differences in institutions, markets, business models and economic history are too great. only when governments and regulators can allow the institutions that deserve to fail to do so without causing a catastrophe such as that following the collapse of lehman brothers will they have regained true independence from the financial services industry. in the united states an ambitious project to reform the regulation of the financial system is taking shape ; for the aspects bearing most closely on international cooperation it is in line with the agenda of the fsb, whose work is proceeding according to schedule. however, this year ’ s appointments will be decisive. the most important deadline is the presentation to the g20 summit in seoul next november of the new rules reforming the basel ii accord. the financial industry contends that the regulatory reform could impede the recovery. but the application of the new rules will be gradual and will not begin until the