ignazio visco : accounting for the long - term costs of the recession remarks by mr ignazio visco, governor of the bank of italy, at the iea - isi strategic forum 2014, final roundtable “ accounting for the long - term costs of the recession ”, rome, 23 september 2014. * * * 1. the legacies of the great recession are many and multifaceted ; they not only affect current cyclical developments, but may also have permanent bearings on our economies. however, today ’ s difficulties and opportunities, as well as tomorrow ’ s prospects, are the result of deep underlying forces that were already reshaping the functioning of the world economy well before the great recession began. a. crisis legacies for economic growth 2. in advanced countries such as the us and the uk, gdp ( imperfect an indicator as it may be, especially in the face of the increasing role of digitisation ) has now overtaken its pre - crisis level : however, the growth rate remains lower than before 2008. in the euro area as a whole, current gdp still remains below its pre - crisis level, to which it might return late next year. it should also be underlined that the weak recovery is no longer confined exclusively to stressed countries of the area. 3. what is more worrying is that the crisis may have left lasting scars. the high correlation between the increase in estimated output gaps since 2007 and the fall in the ( estimated ) growth rates of potential output suggests that lower investment and higher unemployment ( or under - employment ) may have had an impact extending well beyond the current cycle. 4. this is particularly worrisome for countries with high public debts, whose sustainability requires a return to steady economic growth, and which may also suffer, as is presently the case in the euro area, from excessive disinflation. and this is why structural reforms and accommodative monetary policy are so much in demand these days. 5. that the legacies of the crisis go well beyond the short term is best epitomized by ongoing talks about risks of hysteresis ( the extent to which cyclical developments affect an economy ’ s longer - term dynamics ) and the revival ( by larry summers ) of alvin hansen ’ s 1930s hypothesis of secular stagnation. in essence, this hypothesis relates to factors that generate permanently higher savings and lower investment, in a context where monetary policy is unable to reduce the real interest rate to the required

meeting of shareholders : “ corruption, criminal activity and tax evasion not only undermine the community but also distort the behaviour of economic agents and market prices, reduce the effectiveness of government action, increase the tax burden on those who do their duty, and restrict productive investment and job creation. well - functioning public administration improves the operation of markets and competition, reduces firms ’ costs, and is reflected in the quality and cost of public services and thus on the tax burden. the efficacy of the reforms depends on it. ” 22. these policy actions should not be eluded. for them to be effective, they must be seen as a part of a fully - fledged strategic reasoning on the prospective functioning of our economies. more generally, while we try to better understand the challenges posed by structural and technological change, there are questions that it is fundamental to address. among them : how should the education system adapt to enable the teaching of those skills essential to keep up with new technologies? how can we enable displaced workers to acquire skills which will not become, or are less likely to become, redundant through computerisation? how can public policy smooth the social impact of technological progress and allow a wider distribution of its fruits? bis central bankers ’ speeches