€400 billion ), the danger of triggering a vicious circle between the cost of the debt and its share of gdp, with repercussions on the real economy, is ever present. around two thirds of the debt is currently held by italian citizens and institutions ; but this does not insulate it from the laws of the market, which seeks out yields and flees from uncertainty. fluctuations in the value of the debt also have an impact on the italian citizens, households, firms and financial institutions that hold it. ultimately, a significant portion of our savings is tied to the public debt. a lower valuation of the government bonds held by banks in their portfolios has an effect on their capital requirements ; above certain limits, it can reduce their ability to supply credit to the economy. the update envisages providing a significant cyclical boost to the economy by increasing the deficit ; to achieve this, we have to assume high multipliers, which cannot be taken as given. but how effective fiscal policies are in supporting the economy also depends on whether the government ’ s action is capable of convincing savers and the markets to remain confident in the process to consolidate the public finances. even assuming the full deployment of the expected expansionary effects of the budget, the update envisages a slower reduction in the debt - to - gdp ratio than both the current legislation scenario and with respect to the possibilities afforded by today ’ s economic conditions ; it postpones the achievement of a balanced budget to an unspecified date in the future. given the large amount of bonds that the italian state must periodically place on the market, the possibility that financial turbulence can arise, even unexpectedly, calls for clarity and certainty in the debt reduction process. credibility is self - sustaining : bolstering the confidence of savers and investors brings down the risk premium on italy ’ s sovereign bonds, facilitates the debt reduction process and makes it more secure. another matter that deserves attention is the funding of the budgetary provisions. when specifying the planned measures, it would be advisable to avoid accompanying permanent expansionary measures with advances of revenue, other temporary funding measures or safeguard clauses of uncertain application. narrowing the growth gap with europe, as stated in the update, is a key objective ; it is also necessary to get the debt - to - gdp ratio under control. higher growth and greater social cohesion are not at odds with fiscal discipline. lasting results can be achieved through budget recomposition : devoting a higher share to productive investments,

were most likely to fail. the wave of losses, consumer foreclosures and business failures infected every element of the economy. the deleveraging process commenced as highly - leveraged financial institutions, working with highly - leveraged consumers and business, had insufficient capital to withstand the financial blows. increasing numbers of homeowners were unable to keep up with their mortgage payments, leading to higher defaults. mortgage defaults, in turn, sharply lowered the values of mortgage securities held by financial institutions. these losses led banks to attempt to reduce their leverage, which required rebuilding tangible capital and reducing total assets – thus reducing loans. this placed downward pressure on asset values, losses worsened and the vicious cycle of deleveraging worsened. homes and businesses were lost to foreclosure and liquidation, while unemployment climbed. the large increases in leverage over the past decade have wrecked havoc on our economy and are responsible for the sluggishness of our recovery. strong economic growth simply cannot occur if consumers and businesses must focus on rebuilding balance sheets instead of on increasing spending, production and hiring of new workers. once again we have learned that the double edged sword of leverage is a pro - cyclical weapon. constraining leverage today, the largest financial firms are showing a solid recovery. regional and community banks continue to show stress but problems may have peaked as they have worked to reestablish stable capital and leverage levels. the market appears to be correcting and leverage based on high quality capital is returning to more historic norms. in time credit will once again expand and the economy will improve. but it won ’ t be quick or easy. therefore, we must now turn to actions that will prevent the impulses of consumers, businesses, and financial institutions from assuming ever more leverage as the expansion becomes a boom. if we take action now, then when the next economic correction occurs there will be less devastation to our economy. if we don ’ t change policy now, then this crisis will be remembered only in text books and leverage will rise again and lead to another crisis. i strongly support establishing hard leverage rules that are simple, understandable and enforceable and that apply equally to all banks and bank holding companies that operate in the united states. as we saw in the years leading up to the current crisis, leverage tends to rise during economic expansions as investors and lenders forget their past mistakes and believe that prosperity will continue with no end in sight. straightforward leverage and underwriting rules are not procycl