ecb has continued to satisfy the entire demand for liquidity. inflation expectations, by contrast with some other countries, are firmly anchored. this fact must not be forgotten : it is the credibility built up by the ecb over the years that has enabled monetary policymakers to exploit the full scope for flexibility in dealing with the crisis. the securities markets programme for the purchase of the securities of euro - area countries under financial pressure injected liquidity into markets in a state of crisis, averting the collapse of the european financial system and preserving the monetary policy transmission mechanism. the resolute commitment to sterilize the liquidity so created remains. once the solidity of the economic recovery is confirmed, the phasing out of unconventional monetary measures will need to be resumed. although temporarily suspended in recent weeks because of the severe strains originating in the greek government securities market, this process has been under way since the end of 2009. no twelve - month refinancing operations have been offered in 2010. the operation that resulted in the unprecedented liquidity injection of over €400 billion a year ago reached maturity on 1 july. in the auctions held in the past two weeks banks requested far less than the amounts maturing, resulting in a significant reduction of excess liquidity. because some banks are still having difficulty in accessing market funding, this has translated into a moderate rise in money market rates of about 10 basis points. the monetary policy stance must not be altered by the condition of these marginal intermediaries. their problems need to be dealt with by the relevant national authorities using appropriate instruments. in italy, a three - year budgetary adjustment package was approved in late may – ahead of the usual schedule in view of the financial market tensions provoked by the greek crisis. the measures are designed to reduce net borrowing by €12 billion in 2011 and €25 billion in both 2012 and 2013. two thirds of the adjustment is to come from reductions in expenditure, above all current expenditure. on the revenue side, the measures focus mainly on combating tax evasion. notwithstanding the short - run costs of the budgetary adjustment in terms of economic growth, prompt action was unavoidable : the projected scenario was not sustainable. we are still paying the price of the slowness with which italy ’ s public debt - to - gdp ratio was reduced in the decade following the inception of the european monetary union. whether the adjustment measures will effectively succeed in attaining the net borrowing objectives can only be determined in the course of

mario draghi : economic overview and banking supervision reforms address by mr mario draghi, governor of the bank of italy and chairman of the financial stability board, at the italian banking association annual meeting, rome, 15 july 2010. * * * in the life of the italian banking association ( abi ), today ’ s gathering marks the handing over of the baton to a new president. to corrado faissola, i would like to convey my personal appreciation, and that of the bank of italy as a whole, for his competent, level - headed and decisive leadership of abi through one of the most difficult periods in the history of economies and financial systems. to giuseppe mussari, i wish success in his new undertaking. he will accompany our banking system during a phase fraught with perils but also offering excellent opportunities for a financial system that is able to interpret and serve the real needs of households and firms. the state of the world ’ s economies the global economic recovery is uneven and of uncertain resilience but it is going ahead. the international monetary fund estimates growth in global output at around 4. 5 per cent this year and next : 8 or 10 per cent in some large emerging economies and scarcely 1 per cent in the euro area. here in europe the recovery, driven by the expansion of world trade, remains exposed to risks : the persistent weakness of domestic demand in our countries ; turmoil in still - fragile financial markets that overreact to the heightened perception of sovereign risks ; and possible inflationary pressures in the emerging countries, which would lead to more restrictive policies. the italian economy is now benefiting from the renewed vivacity of world trade. the bank of italy ’ s economic bulletin, published today, presents a scenario in which the volume of exports expands by 9 per cent this year and 5 per cent in 2011. consumption and investment will remain weak because real incomes are stagnant and employment prospects uncertain. economic policy bottlenecks the consequences of all nations ’ economic policies are ever more interwoven and interdependent. an acceleration in the adjustment of imbalances in the public finances is indispensable ; the effect on the economic recovery will be positive if the adjustment helps to reduce yields on sovereign debt, which often constitute banks ’ benchmark in determining the cost of credit. but if the cloud of uncertainty hanging over bank balance sheets is not removed, funding difficulties will persist. monetary policy in the euro area remains strongly expansive. the governing council of the