In this respect, the volatility seen on international financial markets in recent weeks serves as a reminder of the need for prudent risk assessment and for the right resources to adapt to a broader and more demanding financial environment. But it is not only the conduct of national authorities that must rise to the challenges entailed by the ever-increasing complexity of our financial systems. At the international level, growing economic and financial integration requires reconsideration of the guiding principles of the multilateral financial institutions, which have hitherto remained perhaps too anchored in the bilateral supervision of national policies, without paying sufficient heed to the increasingly complex links globally. The strengthening of multilateral surveillance, especially in the financial realm, would thereby provide for a more effective contribution by these agencies to embedding international monetary and financial stability. The European environment in 2005 the euro area economy posted a modest average increase in GDP, and one lower than in 2004 and than in the other developed economic areas. Nonetheless, year-on-year growth was on a rising profile throughout 2005, attaining a rate of increase in line with potential in 2006 Q1. The economic performance differed, in fact, from the first to the second half of 2005. In the first six months output was markedly sluggish, the result among other factors of the temporary easing in the momentum of world trade, the strong increase in oil prices and the effects stemming from the appreciation, in the previous years, of the effective exchange rate of the euro.

The buoyant global demand for commodities and the attendant rise in their prices were conducive to the economic growth of the commodities-exporting countries, while widening the room for manoeuvre of their economic policies. The Latin American countries benefited from this positive effect on their terms of trade, enabling them to reconcile relatively high growth rates with current-account surpluses. In this respect, a clearly contrasting use was made of this greater flexibility by the Latin American countries: while some have sought to strengthen their macroeconomic fundamentals and reduce their vulnerability by limiting and improving the terms of their debt, others have given an interventionist bias to their policies which seriously undermines the maintenance of legal security and dents their mediumterm investment and growth prospects. As stated, an essential ingredient in the stability of the world economy has been the maintenance of moderate inflation, despite the rise in energy and other commodities prices. Admittedly, the dynamism of China and other emerging Asian economies has contributed to this increase in commodities prices; but their penetration in the international markets for manufactures has also helped contain wage and price pressures. The greater anti-inflationary credibility of monetary policies is, in any event, responsible for anchoring inflation expectations at moderate levels, having prevented the so-called "second-round effects" – via prices and wages – that prompted a global inflationary spiral in the eighties in the wake of dearer energy.