gradually waning, even well before the introduction of the euro. in italy, potential growth declined from an average estimated at around 2. 5 % in the early 1990s, to 1. 5 % by 1999. the decline continued afterwards, and is now estimated by the imf and other institutions to be close to zero. so how can we reverse this trend? raising potential growth is principally about lifting the labour supply ( the amount of hours people work in the economy ) and productivity ( how much people produce per hour worked ). see my introductory remarks at the economic and monetary affairs committee of the european parliament, brussels, 23 march 2015, http : / / www. ecb. europa. eu / press / key / date / 2015 / html / sp150323 _ 1. en. html. bis central bankers ’ speeches given our ageing population, however, we can only expect limited gains on the labour side. we therefore have to focus our efforts on making our economies more productive. for most countries in europe, and for italy in particular, productivity growth rates have been very modest. between 2000 and 2013 productivity 2 in the euro area grew cumulatively by 9. 5 %, by barely 1. 3 % in italy and by 26. 1 % in the us. total factor productivity 3, which assesses the efficiency of the use of inputs to productive processes, has only grown by 1. 1 % in the euro area. in italy it has fallen by 7. 7 % and in the us it has risen by 10. 5 %. productivity can be raised through the emergence of new firms using more efficient technologies and by the reallocation of resources among already existing firms. the benefits of technological progress often appear over the longer term because the efficient use of a new technology often takes a long time to learn, while the reallocation of resources can lift productivity over a shorter time horizon, given that it implies a shifting of resources within already active firms. if we want to raise productivity quickly, the key factor is reallocation. firm - level analyses in the euro area suggest that there is much scope for improvement here. 4 within individual countries there are a few highly productive firms and many which have low productivity. it is essential to act so that those high - productivity firms can grow, so that they can benefit from an adequate flow of capital them and so that the people have the skills needed to be able to work there. to achieve each of those three goals – growth,

few would deny that where european institutions have been invested with executive power, they have used it well. competition policy has been effective with both large companies and large countries. monetary policy has achieved a high degree of policy credibility. and for the ssm it is perhaps too early to judge, though i am certain we would not have had such a rigorous clean - up of our banking sector without it. if we look at the rules - based approach, however, it is difficult to reach such a positive conclusion. the fiscal rules have repeatedly been broken and trust between countries has been strained. and for economic policies rules - based approaches – such as the macroeconomic imbalance procedure – have so far not attracted much ownership from national policy - makers. so in my view the conclusion from recent experience is clear : if we agree that further institutional convergence is needed in the structural domain, then our long - term goal must be to move from a rules - based system to one based on stronger european institutions. 9 i must stress however that to make such a step, we first have to respect and follow the rules we have now. if we look at monetary policy as an example, we did not begin by creating a new institution. this would have been impossible. we had a series of rules - based systems – the “ snake ”, the european monetary system, the exchange rate mechanism – the experience of which led us to create the single currency and the european central bank. these various stages were however essential, because they gradually built trust between countries and led to a convergence of views about how best to conduct monetary policy. so there is no question today that the rules can be ignored because institutions would be better. on the contrary, it is only by following our rules that we can establish the mutual trust on which future institutions can be built. it is essential that the european parliament makes this process its own and imbues it with democratic legitimacy. 5. conclusion the way forward for the euro area that i have described today may seem simple, but it isn ’ t. it requires vision and perseverance. all those involved have to play their part in a sustained economic recovery. see my speech at sz finance day 2015, frankfurt http : / / www. ecb. europa. eu / press / key / date / 2015 / html / sp150316. en. html. am main, march 2015, bis central bankers ’ speeches but i also recognise that, in the process, we must not lose