We have several specific dysfunctions, such as widespread tax evasion, the political connections of entrepreneurs, and cronyism, all of which distort competition in the economy, and slow down creative destruction and firm churning, with negative consequences for aggregate growth. The structural reforms that are needed to put Italy back on track should address these diverse and complementary issues in a bold and coherent framework.
Let me conclude. As Stan Fischer said in a recent Tinbergen Lecture in Utrecht, the big question monetary authorities face in these times is – what do you do if policymakers that should tackle problems do not act sufficiently? My answer is that monetary policy cannot solve the crisis, since it is rooted in fiscal policy and the vulnerability of the banking system.