. costs are high ; the quality of the services provided is still inadequate. small markets and the chronic weakness of some currencies have been a brake on the development of a more modern financial industry able to compete in the global market. in 1996 the current account of the european union ’ s balance of payments showed a surplus of $ 86 billion or 1 per cent of the area ’ s gdp. from 1990 onwards the external accounts of the eu countries fluctuated between deficit and surplus against a background of rapid growth of the world economy and moderate growth of domestic demand within the area. the limited increase in output, the steady decline in industrial employment and the rise in unemployment are indicators of insufficient competitiveness with respect to the rest of the world. the markets for goods and above all the market for labour are more rigid in continental europe ; unit labour costs in industry are comparable with those of the united states and japan, but much higher than those of newly industrialized countries in asia, latin america and eastern europe. the tax burden, and especially that relative to employee workers, is high. population ageing will profoundly alter the balance between the economically active and inactive members of society. the low level of economic growth depresses the propensity to invest. the prospect of economic and monetary union has forced european countries to take determined action to put their public finances back on a sound footing. to a large extent the effort required to adjust budget deficits has been made. a high degree of monetary stability has been restored. in several cases however, the tax burden has increased further. monetary stability is the primary objective of the unification ; it serves to create conditions conducive to investment and growth. the parameters for government deficits and public debts are playing a key role in achieving monetary stability in the area ; they were nonetheless conceived in a context in which the implications of the globalization of commerce and finance were still not sufficiently clear ; it is also necessary to try and reduce the burden on the economy of some items of the public finances and the ratio of taxes and social security contributions to gdp. to seek to enhance the union ’ s competitiveness through the exchange rate would be in contrast with the objective of monetary stability. competitiveness is in the first place a reflection of the share of resources absorbed - - directly in the form of wages, indirectly via some items of public expenditure - - by labour. it must therefore be enhanced through a cost of labour, a flexibility in its use and a level of direct and indirect taxation

ignazio visco : the economic and financial outlook of the euro area - halfway down “ the long and winding road ” keynote lecture by mr ignazio visco, governor of the bank of italy, at the aaron institute for economic policy conference 2019, herzliya, 16 may 2019. * * * the economic outlook this conference comes at a difficult and uncertain juncture for the global economy, the euro area and italy. after solid growth in 2017 and early 2018, world gdp decelerated significantly in the second half of last year. although there are signs that the downward momentum might have stopped, in many countries economic activity remains weak. according to the imf ’ s latest forecasts, in 2019 the global economy will expand at the lowest rate since 2009, when it recorded a recession. trade tensions, mostly fuelled by the new protectionist strategy pursued by the united states, and their effects on confidence, especially of private enterprises, are contributing significantly to this poor performance of the world economy. international trade progressively slowed in 2018, falling by 1. 0 per cent in the last quarter of the year, and recent data suggest that the economy remained weak in the early months of 2019. the progressive liberalisation of trade that has characterised the last few decades has come to a sudden halt and is being reversed in some important economies. the average tariff rate applied to imports by the united states, for example, more than doubled in 2018 ( from 1. 5 to 3. 3 per cent ). more generally, the system of supranational institutions and multilateral rules on international trade that supported the sustained global economic expansion after world war ii is encountering serious difficulties. protectionism is a response – a wrong one – to the challenges of globalisation and technological change, which both have momentous consequences for the job prospects of workers with lower skills. in the oecd countries, for example, the rise of automation is estimated to cause a high probability that as much as one job out of seven will be lost, while three out of ten may undergo significant changes over the next fifteen to twenty years. even though new jobs will be created, managing the transition will be no easy task. not enough has been done up to now to make appropriate plans for an affordable, timely and adequate retraining of workers, to invest resources in education, and to combat poverty and inequality. in the shorter term, global risks are still tilted to the downside. the economic outlook remains vulnerable