that are compatible with today ’ s greater international openness of the markets for goods, services and especially finance. increasing the size and diversification of the capital market can make a decisive contribution to monetary stability and ultimately to the prosperity of the economy. europe as a whole is a net creditor with respect to the rest of the world. the creation of a single financial market that is no longer segmented by different currencies, in a context of price stability and greater competitiveness, will offer considerable scope for growth in the issue and trading of corporate bonds and shares, and for the development of related capital market activities, benefiting enterprises and economic activity and supporting their extension to world markets. looking ahead, the international monetary system will increasingly be divided into three large blocs : those of the dollar, the yen and the european currency. the currencies of smaller countries will tend to be grouped around, and refer to, the three of greatest importance. the strength of each currency will depend on the credibility of the monetary policies adopted. in the background there will be a tendency for the productivity and competitiveness of the real economy to take on renewed importance. it is necessary to foresee a recomposition of the area ’ s value added in the medium term at the expense of more traditional industries and to the benefit of more advanced services, especially financial services. important opportunities are opening up for italian and european operators that they must succeed in grasping by updating strategies and professional skills and by correctly assessing the related risks through the application of more advanced and complete models. 4. italy italy recorded another surplus on its external current account in 1997, of the order of 60 trillion lire or just over 3 per cent of gdp. towards the end of the year the country ’ s net external position returned to near balance. some 470 trillion lire of net government liabilities vis - a - vis non - residents ( mostly short and medium - term lira paper purchased on the italian market, but with about one fifth consisting of foreign currency bonds issued abroad ) were matched by net assets of more than 350 trillion held by the non bank private sector, about 100 trillion held by the bank of italy and smaller amounts held by banks and other financial operators. the bank of italy ’ s gold reserves amount to 2, 500 tonnes ; in addition the central bank ’ s external position improved from 51 trillion lire at the end of 1995 to 96 trillion at the end of last year. households and firms have converted italy ’ s

##alibrating the dynamic between the centre and the states that is critical for reforms to take root. bis central bankers ’ speeches reverting to mean or different this time? the weak and uneven global recovery post - crisis has raised concerns about the pace of future economic growth and what it means for returns on investments. despite ultraaccommodative monetary policy, most advanced economies have not attained so - called escape velocity. • the legacies of the financial crisis – in the form of debt overhangs – continue to exert a drag. • the structural deficiencies in the major economies, such as under - investment, cast a dark cloud on future potential growth. but one thing that ultra - low interest rates over the past six years have clearly done is to depress returns, particularly in fixed income assets. • us bond returns since 2009 has averaged 2. 3 % p. a. compared to returns of 5. 8 % p. a. over the past 20 years. this has contributed to a more challenging investing environment for government funds – namely pension funds, sovereign wealth funds, and central banks – many of which have significant allocations to developed market fixed income instruments. mean reversion is a key tenet of investment theory – the expectation is that as interest rates normalise, returns should revert to pre - crisis levels. but the cliche that this time is different could well be true. secular trends weigh on future economic growth, and consequently the real return on investment. drivers of future economic growth what are the prospects for future economic growth? there are, in my view, four key drivers of long - term growth : deleveraging, demographics, productivity, and energy. let me elaborate on each of them. first, deleveraging. global balance sheets need to undergo significant adjustments. this is a structural issue that will take time to address. • for about 20 years preceding the global financial crisis, there had been a significant build - up of debt in the advanced economies. • this period – often called the great moderation – could just as well have been called the great leveraging. household debt grew rapidly in the us and europe after 2000, driven by low interest rates and compression in risk spreads. it has come down a little since the crisis, more so in the us than in europe, but has still some way to go in both economies. but what little private sector deleveraging has occurred has been offset by public sector releveraging. in