, which would be conducive to economic expansion. it is, however, probable that the moderate tax ratio does not reflect low fiscal pressure as much as the use of inappropriate mechanisms which yield insufficient revenues. one reason for this is that direct taxation is rather progressive, which creates a disincentive for work, or at least for work in the formal economy. at the same time, it is common knowledge that tax evasion is still widespread. these phenomena may well be compounded by distortions inherent in the system, among them the charging of a minimum national insurance contribution on part - time work. all of this suggests that the taxation system should be further refined in order to enhance the degree of compliance and to shift the tax burden away from productive activities. conclusion on this same occasion five years ago my analysis of the country ’ s economic condition led me to conclude that the status quo was not sustainable. i expressed the view that the time had therefore come for us as a nation, not as followers of narrow sectoral interests, to revisit the choices made in the past and to establish new priorities commensurate with the prevailing economic realities, with the limited resources available to us and with our core values. the situation we face today compels me to reiterate this appeal with greater conviction. for we have clearly not done enough. speaking in april 2002, a year after the collapse of the high - technology boom and looking ahead to the next upturn in the economic cycle, i observed that when the tide eventually rose, it would not necessarily raise all boats. countries which benefited most would likely be those who made the greatest effort to adapt to evolving market conditions. the tide has risen, even higher than expected. global gdp is likely to increase by up to 5 % this year, its strongest pace for a generation. this growth is being largely led by robust consumer spending in the united states and booming corporate investment in china, but japan is also growing fast and even the euro area is showing signs of recovery, while emerging economies as a group are enjoying their fastest growth for at least twenty - five years. in sharp contrast, the maltese economy is again this year likely to post one of the slowest growth rates in the eu. returning the economy to a sustainable growth path closer to its potential rate must, therefore, be a priority objective. how should it be pursued? in today ’ s highly competitive global economy, there are no quick fixes or painless options that will

on costs, including labour costs, which represent more than half of the total. some progress has been made on this front, but we need all parties to participate, and take responsibility, in an action not unlike the one successfully launched in the second half of the 1990s to reduce the gap with the leading foreign banking systems. a major part of this effort must consist in a rigorous review of executive compensation. cost containment requires a radical rethinking of the distribution channels to make full use of the opportunities offered by technological innovation. standardized and low - value - added services can be distributed at lower cost through remote channels, and the traditional distribution network should be reviewed to concentrate on the supply of more complex products. it is not an easy task, and it requires a profound transformation of banks ’ organization and operating structure and considerable investment in staff training. targeted mergers and acquisitions, based on robust economic premises, may facilitate the restructuring and the recovery of efficiency. the process of financial integration in the euro area is encouraging a wider use of technology. the transition to the new payment standards under the single euro payments area, which will be completed by 1 february next year, is an important element. it affects firms, consumers, banks and other payment service providers. the availability of efficient services will benefit the economy as a whole ; according to studies sponsored by the european commission, the efficiency gains resulting from the transition to the new standards will be in the order of 0. 2 per cent of european gdp. the bank of italy is committed to ensuring that all those involved in the initiative put in place the necessary organizational, technical and procedural arrangements within the time limits. corporate reorganization, including within groups, and more streamlined boards are needed in order to improve the chain of decision - making, by making directors more accountable and eliminating unnecessary costs. mechanisms must be adopted to prevent a misinterpretation of banks ’ relationship with their local area from steering lending and investment activity in the wrong direction, putting the soundness of banks ’ balance sheets at risk and hindering the efficient allocation of resources. in addition to disbursing credit, italian banks often participate directly in firms ’ capital. such equity links must not be a source of distortions in lending decisions or give rise to attempts to prevent debtors ’ difficulties from emerging. these risks, like all others deriving from relationships with counterparties closely linked to banks, must be appropriately monitored by banks ’ governing bodies. the supervisory authority cannot intervene preventively with regard to individual transactions,