other countries have done even better and for longer periods of time ; between 1995 and 2007 the primary surplus averaged more than 6. 5 per cent of gdp in canada and about 5 per cent in belgium, denmark and finland. that is no small achievement, but it is not beyond our reach. according to the government ’ s plans, to meet the objectives outlined in the economic and financial document and avoid next year ’ s scheduled vat hike will require the definition of corrective measures in the order of 1. 5 percentage points of output in the three years 2018 - 20. a constant, protracted effort to keep the public accounts under control is indispensable to a lasting reduction in the ratio of debt to gdp against a backdrop of a return to stable growth. this would have positive effects on confidence, economic activity, and interest expenses. while not the only answer, given the constraints on public real estate assets and their heterogeneity, and the characteristics of the state ’ s portfolio of shareholdings, privatizations could help to speed up the reduction of the debt. non - performing loans the repercussions of the crisis could not but affect banks ’ balance sheets. between 2007 and 2015 the ratio of bad loans to total loans i. e. exposures to banca d ’ italia the governor ’ s concluding remarks annual report 2016 insolvent debtors, more than tripled, reaching a level that was still below the peak recorded in the mid - 1990s ( figure 6 ). in several cases, banks ’ difficulties were exacerbated by fraudulent conduct and imprudent lending policies. at the end of 2016 italian banks ’ non - performing loans, recorded in balance sheets net of write - downs, came to €173 billion or 9. 4 per cent of total loans. the €350 billion figure often cited in the press refers to the nominal value of the exposures and does not take account of the losses already entered in balance sheets and is therefore not indicative of banks ’ actual credit risk. of the €173 billion in net non - performing loans, €81 billion or 4. 4 per cent of total loans were classified as bad loans, against which the banks hold real collateral and personal guarantees of over €90 billion and almost €40 billion respectively. the remaining €92 billion are other non - performing exposures, whose nominal value has already been written down by roughly a third. for some of these, a return to regular payments is

not suffering from an overvalued currency ; the current account in the balance of payments is in surplus ; our spending power has been defended. the european rules on the public finances contain some elements of flexibility, to be invoked by always paying careful attention to the scale and rollover of the debt. monetary policy has done what had to be done for the area as a whole, aiming at guaranteeing price stability by sustaining demand ; it will continue to do so in the appropriate time and manner. there is often talk about when we will commence monetary policy normalization, though not always with the necessary analytical rigour. some speak of desiring a forced acceleration, others by contrast, conjure up the spectrum of potentially drastic consequences. when the decision is made it will mean that aggregate demand conditions and prices in the euro area have been restored to the desired levels. at national level the exit will be manageable if all the actors involved behave responsibly. looking forward, the gradual return to higher interest rates if growth levels increase should not concern us unduly. what should worry us instead is the risk that rates increase as a result of a fall in market confidence, the consequences of which, given the weight of public debt, could prove serious. we are facing difficult issues in europe : the exit of the united kingdom from the european union, growing migration flows, the threat of terrorism. the biggest obstacle is the dearth of confidence that has developed in recent years, the return of mutual mistrust and prejudice among member states and between the peoples of europe and its institutions. we must take arms against these tendencies. the process of european integration has guaranteed seventy years of peace and prosperity. it has made it possible for many generations of young adults to study abroad and to develop a sense of belonging, surmounting linguistic and cultural barriers ; it has provided working adults with new job and professional growth opportunities ; it has intensified trade and strengthened financial ties. europe must remain an anchor of stability in a world that appears ever more unstable and politically unpredictable. the willingness to cooperate more closely on issues such as immigration, defence, security, justice and banca d ’ italia the governor ’ s concluding remarks annual report 2016 representation at international fora is undoubtedly a positive signal. we must continue on this path, tackling the issues that still stand in the way of effective economic governance of the euro area. at times we also criticize european rules that do not satisfy us completely or the decisions by european authorities of