UBI Banca Group

permanently balance public accounts and to comply with commitments made at European
level to balance the budget in 2013.
In order to create the conditions necessary to revive the Italian economy, the legislation was
followed in 2012 by new liberalisation and deregulation measures and the start at the same
time of negotiations with trade unions and employers to reform the labour market.
The most recent ISTAT (national office for statistics) estimates for 2011 show the deficit to
GDP ratio falling to 3.9% (4.6% in 2010) and a debt to GDP ratio of 120.1% (118.7% in 2010).
Financial markets
During the second half of the year the United States and European yield curves both shifted
downwards for maturities of over one year, a reflection of a move by investors towards lower
risk, United States and German securities. While in the United States the trend was affected,
amongst other things, by weaker expectations of growth and the consequent continuation of
particularly accommodative monetary polices, the change in the European yield curve was the
result of two cuts to the reference rate made by the ECB and of the expectation of a further cut
in the light of reduced pressures on inflation. For the short term, however, the European yield
curve is much higher than the American curve, incorporating a higher perception of risk.
After a positive start, the equity markets of major world economies started to feel the effects
of the growing sovereign debt crisis, with heavy losses over the summer, which affected the
performance measured over the whole twelve months to a large extent, despite the signs of
recovery seen in the last quarter.
As shown in the table, almost all the main stock markets ended the year with significant
losses except for the United States share indices which, because of their lower volatility,
remained basically unchanged compared to the end of 2010.
Turbulence over the summer also affected emerging markets (-20.4% for the MSCI index).
Downward pressures seemed to ease in the first few weeks of 2012 due to measures taken by
the ECB and corrective action taken on public accounts in some countries in the euro area,
including Italy.
Taken together, the three finance laws enacted since the summer of 2011 should reduce the deficit by three percentage points of
GDP in 2012 and 4.7 points on average in 2013 and 2014.
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