them to rest not because fiscal discipline would not have to be observed but because by ralph's it has been really set in a sophisticated constitutional framework at the national level and all the enforcement instruments aren't there and political ways to comply is there. it is a very interesting moment for all of us to concentrate more on the growth of the imperative is. of course how can growth degenerated in europe in a context of continued budgetary discipline? i think most of the experts, we

have to come maybe by coordinated macroeconomic policies that the g-8 and g 20 mainly it will have to come from structural reforms or supply-side measures within europe. this means we really have to work on the cake. what makes the cake more similar to the optimum currency area we see, otherwise the euro being a solid currency will never deliver its potential for economic growth and well-being but in order to make the cake a real cake we need to have a single market although we come out -- when we were here

together many of you in 2006, since then the single market has been in crisis, not in further development. why? because the backlash against integration, integration fatigue observed in many countries has put more and more in question the objective, the single -- we have seen concerns in france concerning an army of polish plumbers who apparently were ready to come to france and were seen in many countries increase in the resistance towards cross border takeover bids and we have seen in many countries the

growing economic nationalistic sentiments and all that. so the single market has been less and less a wished for development and more and more a resistance development. but even the known the market is in crisis because many in europe following the financial crisis have been putting in question intellectually and politically and emotionally whether the market economy was after all going to generate deployment. so not an easy time for a single market let alone for global european economic policy which wanted to bet on a stronger single market but now i think we are really at the moment where we have to work in that direction if we want to make growth a reality in europe and

as i into already six years ago in this room, the paradoxes that there are many countries within the euro zone, therefore, which live the lives of the monetary union which however do not really take very seriously their job as regard to economic union because in many continental countries large continental economies which are key to the euro zone, we find less compliance with the rules of the single market of competition of markets and openness, then we find on the average in countries like the u.k. sweden, poland, these are all countries which do not belong to the euro zone but are more compliant and

intellectually in line with market principles. this can perhaps explain why my government in italy is investing a lot in making use of the fact of having been admitted to the meetings with the heads of governments of germany and france and to play with them in order to provide punishment to the processes. but we, more than either of these two in the relationship with the u.k. with poland, with countries which although not belonging to the euro zone are not yet on the euro zone can put pressure on us for us all to

become a bit more economically integrated real entity and it is a pity not because we propose to think but because the think the prime minister commented on the occasion of the european council of the ninth of december where he finally decided not to stay on board the compact agreement. he did not go down the road that we had suggested for britain, namely to ask for a price in order to stay on board a treaty which is politically painful for europe to ratify at home but please ask for an acceptable price like a stronger commitment on the part of the euro zone countries to accept them which

would have been in the interest of the u.k. and other non-european countries, repeat moment with specific deadlines concerning missing will market. please don't ask the position we could only reject because they would be a regressive credit to the process of integration like exactly what he asked for, namely, namely the unanimity rule on any future decisions on financial regulation which we could not accept and was not accepted but this is just an observation on the link between the policy operation lines that can be established in the different degree of adherents to

the key elements of this composite set of countries, the discipline growth, was supermarkets. let me come to the conclusion by saying if a country wants to be coherent, if it pushes the e.u. level in order to see a concrete policy with deadlines in order to stimulate growth through more sand or markets among other things than that country has to be coherent and not only will have to comply with the budgetary rules but will also have to be more insistent on reforms domestically so that it can have a market which can cope with the challenges of a more and more real single market.

the the vote but terror consolidations that our government is committed to in italy. i kept the objective that my predecessor had set in agreement with the pcb, extreme financial emergency for italy, this can explain the effect that the italian government expected to balance the budget by 2017 which means a couple years before the other member states and after a quick reflection, to speak to that commitment although some macro economy is contend that that was the optimum course.

he raised any authority and ability to increase developments, presenting themselves first, we put together a package adopted and quickly converted into law by the parliament to chief balanced budget by 2013 which we applied as 5.5% of gdp primary, net of interest statements which would be the highest in the area and we have introduced something unheard of in battalion but also other member states history of reforms, fracture reform of the

pension system, going into a fully contribution based system with the increase of the retirement age to 67 for men and women by 2017. this was done with only three hours of general strike which means that i say this not to the note the weakness of labor unions. they are not week. i want to stress the majority of the italian popular opinion including labor unions which accepted -- nicolas sarkozy could not believe we had it without people in the streets for weeks, fracture reform. then we proceeded in the month

of january to repackage -- this would be the politically most difficult but we would see in the next few weeks, we will bring home the conversion by the parliament with a minimum changes to the package to really introduce much more competition, opening up in areas ranging from the liberal professions to a topic that one gentleman has been following the very closely with a high degree of responsible awareness. about the bonding between the

gas generation and gas distribution systems. so all things going in the direction of more competition than open this, which i believe could only be done through a very strange government like the present one, which as many of you will know, does not enjoy a majority of the coalition of parties but enjoys or has so far enjoyed the support in parliament of parties which hardly speak to each other, coming as they do from a highly belligerent past but they are supporting this effort. of course they support this effort. what we will do is budgetary consolidation on structure

reform is bold enough and politically costly enough because these other things could not have been putting in place and secondly, if a party from the right had to support a reform squeezing out from the liberal professions in their constituencies, they will accept this only if we do pension reform for example in the area which is more a constituency of the left with equal boldness. there is a virtuous mechanism in a homogeneous way which makes -- which insures that we maximize the number of people who are

unhappy but at the same time we seem to i cannot fully understand how it was political system that normally to supply the government's decisionmaking, were ready and willing to see in

place. final point, i think there's a continuing -- i don't want to give anybody the impression that we forget the labor reforms. this is the third big killer. budgetary consideration, competition and labor reform, we -- even we cannot intend to proceed -- there are negotiations going on. by the end of march. they are being oriented in the direction of reducing -- this is something of the imf has recommended to italy, reducing segmentation of the labour market, reducing the uneven

treatment between insiders and outsiders who cannot get in and also changing the nature of some social protection mechanisms so as to reduce the system between italy and some nordic countries having more security, namely compatibility between labour market made more flexible and modernized system of social protection centered on the individual worker but not the individual job as was the case for so many decades. this cannot be -- it cannot be an unbiased report i am

submitting to you because i am certainly very biased although i as well as by ministers' -- like my ministers -- the foreign minister. the foreign minister at this time, the secretary of state certain of the minister by no means but at any rate most of us -- we are putting together this experiment and we cannot say how the final results will be but we do feel without exaggeration

which politely started introductory work without exaggeration but we feel there is a link between the degree in which italy succeeds in shifting from being a problem to being a solution and i think -- above all the degree to which the experiment which proves successful in italy and the degree to which italy would be able to exercise influence on the overall course of e.u. policymaking towards a compact for growth in a fiscally compact europe. we feel there is a great similarity of feeling in policy perspective between the u.s. --

and this is an additional reason for interest and commitment on our part in washington today and i hope that although i have been exceedingly long then there will be some time for us to benefit from your and the other guests remarks and suggestions. [applause] >> thank you enormously for that very encouraging outlook and report. we strongly support you. we have very heartened.

let me ask you to -- you have rightly stressed the need to go beyond fiscal austerity to mary it with growth strategy. tell us a little about your growth strategy both for italy and for europe. what is a reasonable expectation for resumed economic activity once the fiscal consolidation takes place, structural reforms to take affect, what could we look for as a growth target for italy over the coming medium term? can you give us any estimate of the extent to which the reforms you are now putting in place might generate that growth? any quantitative estimates on what payoff of your policy?

and then at the european level in your fascinating interview in the wall street journal yesterday you talked as you did some today about the need for europe as a whole to adopt structural reform including germany. elaborate a little bit there too. what specifics do you have in mind? what are the priorities and what could be the payoff in terms of resumption of european growth within the next two or three years? >> yes. the prospect for growth in italy. first of all, growth in italy will be necessary not only for the sake of growth and reduction

of unemployment in itself but also in order to make the budgetary situation attainable and it is interesting that even the rating agencies put more emphasis on growth as a condition for budgetary sustainability. of course we are not putting in place a strategy for growth from the demand side, but what do i mean? certainly we are not compensating the deteriorated

estimates for economic growth in italy and elsewhere in 2012 by additional demand, clearly we are not doing this. i believe if the markets see the improvement in the policy outlook for italy and the sustainability of the budget, they will deliver a benefit to in italy in the form of lower interest rate. we have been plagued by a very high interest rates on medium and long-term treasury bonds. the spread between the ten year treasury bonds and the german

bonds reached 574 basis points, a moment in which the political scenario change in italy and since has come down to 344, which deserves to -- two remarks. one, coming down of short-term interest rates has been much more remarkable, much bigger and this leads many people to believe there are some political uncertainties that are keeping longer term interest rates, what might happen in italy. i would like to be a bit reassuring. one message goes in the direction many of you have seen,

to the financial times last week, supporting more openings than ever before, the current government and committing to this support in the medium term, how everything can change but does provide italy with the perspective of responsibility in that particular political sector where most people were seeing a potential source of instability. at any rate interest rates are coming down more short-term than long term. i believe if this john ridge -- if this potential is out of the way, this process of declining interest rates will accelerate and i think we will come out what we did on the budget, is

support for growth from lower interest rates on treasury is but also indirectly on bank loans. then there is the supply side. we saw work done by 0 s c b of the specialty, they need a specific work on these sort of liberalization measures that italy has been introducing. they and others come to the conclusion that this opening up of markets altogether generate 11% increase in productivity, half of which could be there in the first three years alone

rather than in the short term. then of course the global and european policy becomes more extraordinary, and enhance our efforts to the european level and i come here to the second part about structural reforms beyond italy at the e.u. level including germany. i think perez a lot to be done instructor reforms country by country which is responsibility of the various governments but also in part with the european commission for example the fact that the european commission has opened infringement procedures put in legal and politicalexamp

european commission has opened infringement procedures put in legal and political stimulus on countries to comply with service areas. and there are procedures -- germany and greece, even in germany there is greater domestic liberalization. something of a normally try to conveyed to our anglo-saxon friends, to persuade germany to play the growth game and another frame of mind but they are more likely to respond positively if one calls them to fully go in the direction of their invention, the social market economy of the 60s open up

markets and i believe that if germany fully went to the opening up of these services sector, that will stimulate its own growth as well as through increased exports of services from other thing is from germany, all of european growth. lastly there are some policies at the e.u. level, structural reforms and policies at the e.u. level which have, in my view, change in order to reflect the growth -- now that we are no longer -- the most virtuous in the world. that means in particular much more resources devoted -- many

more resources devoted to the yield budget and to cross border -- and although i happen to be also the finance minister, i would not buy the argument put forward by my colleagues of saying the e.u. put the lot of pressure and the national budget. we are not ready to in the future have a greater e.u. budget but i think this makes no sense. economies of scale and provision some of which can only be provided at a level of the e.u. so it was important to apply -- a difficult mentality we are working towards. it is important that the whole

e.u. policy is done and becomes more growth-oriented and this will in the end generate some demand expansion across europe without which the purely supply-side reforms would not in themselves generate growth. >> let me ask you to elaborate on a couple comments you just made about the evolution of europe. you are now prime minister of italy but for a long time you have been one of the architects of europe. you have written many reports about the future of europe, not to mention your ten years implementing europe as a commissioner. as europe works its way through the current crisis what do you see as the medium to long run

outlook for the european union as a whole and the future prospects of the integration exercise? many of us have observed europe has faced many crises ever five or six decades. some were existential. out of all of those europe did seem to come out stronger and move forward. will that happen this time? >> i think this is happening this time. we are moving perhaps without being aware toward some degree of political union. the crisis brought about an unexpected acceptance by national governments of much

greater coordination at the e.u. level of national budgetary policies. since last year, the so-called european sector is in place. this means each allow our governments to submit to the european commission and to the european council of ministers in the first half of the year before it goes to the national parliament a draft budget. this is incredible issue. was asked by the european commission for years and rejected by member states to the sovereignty of parliament but now it is in place. so this is one aspect. then the acceptance of a much

enhanced economic surveillance on even the process of fracture reforms in member states so there is an acceptance of more operational instruments of supervision by the e.u.. in itself, slow. 27 or the 17 members of the euro area has moved considerably, thanks to the greek crisis and if i look in five years time i would imagine euro area that would have composition more numerous than the current one.

i don't see countries going out of the euro. i see some countries coming in the euro in the next few years. i believe the permanent crisis management system which we will put in place soon will be there as an ordinary crisis management. the e.u. was not contacted to manage crisis and efficiency and this crisis forced that to update the machinery. i believe that we will see a shift in the current -- of the functions relative to the member states with some areas moving

up. for example, there is a slow process which in my view will accelerate concerning tax coordination, a very sensitive topic is going ahead. tax policy will be more centralized but on the other hand some policies which have been running for decades as if it were in an incubator, now ready to be delivered in a network, in governance for network systems. this is the case of competition policy which in 2004 without forced although keeping abreast of coordination. i would imagine a europe which would be not necessarily more cumbersome but focusing on its core business, the core business

of europe will evolve over time, but the ability to respond to crisis luckily enough is still there. the worst case scenario of course would be to have crisis in order to respond to them. the best case scenario would be to have an ability to modernize even without crisis. we are not so virtuous yet. >> one more question and then i want to open it up. you met with the congressional leadership this morning. you are going directly from here to the white house to meet with president obama. what can the united states, the rest of the world more broadly do to help you? and is there any specific role for the international monetary fund coming back into the

picture as it did at the outset of the crisis to help support resumption of stability? >> this is a moment when the german chancellor has for two months constructively asked me what can we do more for you? and maybe this will also be the question by president obama and effectively did come up in meetings this morning with the congressional leadership. i think italy is not in a state where it needs financial support.

but it needs better governance and wants to contribute to better governance. this has largely to be achieved within europe. for example i think we came to a deep common understanding with germany that anything with it would improve sections by the market that the euro zone is well governed in terms of readiness to put up adreadiness fire walls would actually imply a small probability that such financial resources would have to be used because they would be credible enough for the mere fact that they are there. with the u.s. i think this would be the topic of my

conversations. i don't know. i opened up with eight. >> we will get you there on time. >> given the fact that the u.s. is struggling foster have budgetary consolidation and oriented toward growth and we are doing exactly the same in a different context, how we can develop synergies in order to do this more easily. as to the imf, there is prominence in the imf in this room. i would say that the imf, being a veryhe tey and constructive role, i think that the imf

drivers when it says concerning crisis management and financial firearms -- firewalls, we cannot do more with europe unless the europeans give proof of believing in themselves, in us and doing themselves more than they do in terms of firewalls. this is the correct attitude where i perhaps would see room for improvements also on the part of the ito th would be in having a broader understanding of specific situations in which

the strict adherence to a model might prevent pragmatic solution to the problem. i don't have the latest details about the agreement reached with the prime minister and the agreement between him and the political parthows but it is my understanding that many of us in europe including member states which traditionally are on the side of caution and discipline belhowve that this is the momen to consider that if there is a minimum of compliance -- this is a moment to turn the page and

extinguish this explosion. >> okay. the floor is open. with two standing mics in the back end a couple traveling mics here. please identify yourself and farawxt. we have a question in the back and one over your. >> the greek program will apparently include a retroactive collection direction claus -- cotheyective action ver o cf1 o fs. won't this impose a risk for bondholders for a hknher price for issuers of local law bonds such as italy or any other cutheyent deficit country since they are at risk for issuers aside from greece who now have to pxt more because greece is writing a contract what that was originally denied by greece and the ec then this would happen. now that it has power incredible

is the assertion? isn't there a cost to the rest of the european issiskrs rewriting bond contract? >> two things. one, the hknhest political level, it has been clearly said that the role given to the ps i after the meeting between germany and france has caused a lot of problems and will not become a permanent feature of policy. secondly, don't you belhowve -oi am returning the question to you -- do bet you belhowve the risk of

countrhows was already largely incorporated into the markets and therefore interest rates already, i happen to think the answer would be yes. so i do bet eto tuect that this would worsen the position of the italian treasury in the market whereas i'd do think once this page is turned, the benefit would be considerable for every issue were over all themselves. [ino cf1 o fdible] >> on the future of european integration you didn't talk i dout banking sector issisks. we now have the banking supervisor assessing the results

of the stress test and determining what they think is needed but in terms of getting thire outcomes is up to the individual states to try to fknure out what has to be done. >> my friend was too visionary when invoking a real e.u. structure is an events proved that he was visionary but highly realistic and in fact europe has gradually moved in that

direction with subsequent policy decisions but i think you're absolutely right. i should have mentioned this because the banking sector is illustrative of two things. one, that when i was saying earlier that there has been integration or a rejection of integration, the european banking system until three or four or five years ago has undergone a very remarkable process of integration, following the crisis, wish to stay closer to father and mother has prevailed and the treasury being the source of rescue money has induced banks to retrenched

to some extent. so there has been more fragmentation in the european banking system and that is also -- that is because two elements are not pronounced enough yet. one is there is room for state aid which is state aid, not e.u. wide. secondly there is this ambivalence situation where banking supervision is half baked between the real e.u. level and the national level. thank you for raising this. europe will not make a decisive

step towards being an integrated single market with the appropriate policy instrument at the e.u. level until this is remedied. >> as the prime minister said we have to be sure he gets to the white house on time and have a bite of lunch. we have time for two quick questions. at the head of the ku, ask your question when right after the other. and choose how to respond to the two. >> mr. prime minister, you described germany -- you described germany as being social market economy. you asked the central government should be bigger. don't you fear your message may be taken in the wrong way within republican candidates and more seriously how do you respond to

the allegations we hear in the debate here that europe is a socialist country and america is moving in that direction? >> ask the second question and respond to that. >> thank you very much, prime minister. my question is again, regarding germany, germany has grown rapidly but the surplus, italy has grown relatively slowly and had quite a large deficit around 3% of gdp. is this a sign of major competitiveness of italy, germany and the rest of the world and how does your plan beyond structural reforms which take a long time to work actually deal with that? >> can i take the second --

>> please do. >> the second question first. the answer is unambiguously yes. italian entrepreneurs and managers in this room would probably confer that italy has accumulated sizable worsening of competitiveness. that explains to a large extent quietly for the last 12 or 15 years has had an average rate of growth about half that of the euro area, not on the euro area. structural reforms play only in the long term. yes and no.

coming out of italy, estimates i gave earlier, some structural reforms can come up rather quickly and i think the direction of policy has really to look at the factor of productivity. as your economy would call it. which means a lot of work has been done in the labor markets in order to facilitate increases in productivity and closer relationship between rewards and productivity but also a lot has to be done by remedying elements of competitiveness which are outside the firm like structures -- huge bureaucratic burdens.

each of these can play out its effect in the long term. i think international investors, the markets are watching closely what each country does that is not in these areas. i perceive a few of italy in the international business community as the view of a country which has very strong fundamentals in many respects which compare very well with those of others in europe. i will not lease them here. they are prevented from generating actual growth because of these constraints. i believe once the markets would be convinced things will change

and have started changing, they will -- and stay with us and exo reviews processes by moving in like a on treasury bonds. not here to promote them. my deputy in new york working also towards that. given current levels of these 5% rates on medium to long-term bonds in italy, if really one is to see that greece is moving outside the problem area and this policy process in italy is going to continue, people tell me once we reach this conviction there is a remarkable room out there for capital gains on

italian treasury bonds. not that it could happen as to achieving rather early on the benefits of competitiveness policies, german growth, is this a speech on germany? no. i spoke already too much on germany about germany. but the first question brings us to germany again. i am sorry. if europe has the model of a social market economy and if i say there would be a heavier government in brussels for

europe, how will this resonate with the republicans in congress and the u.s.? an eminent journalist is inclined to sharpening views than in the following sophisticated ifs and buts. but the social market economy contains the market for many of our countries in europe before the full impact of european integration. what you're really brings is much more pro market orientation. most of all in the network industries and they have been

achieved because of europe. so europe has been a powerful sector for liberalizing the e.u. economy. speaking about the social market economy is done in the appropriate context that is not underlying the socially sizing effect of european integration. on the contrary. equally for the government of europe by justices, some functions will have to go out to brussels that can be brought from brussels to the nation -- capitals or the regions. i do not expect a heavier brussels government.

but it is true that the border line between socialism and pro market attitude is very thin and mobile. i always remember a day in 2001. the previous day i was commissioner of competition and the previous day unblocked the ing honeywell merger and french state aid to a company. i was described as the socialist in the u.s. press and as a dangerous neoliberal in the french press. >> mr. prime minister, we could go on all day. we wish you the best of luck. we are with you. we support you. we hope and pray for your success