In any event, it is important to stress that facing the challenge of population ageing (which is not exclusive to Spain, but is proving particularly acute in our country) will call for the adoption of a multidisciplinary strategy to encourage the participation of elderly workers, to adapt migratory policy to the needs of the labour market and to boost the birth rate. Despite strong job creation during the recovery, the unemployment rate remains very high, and its persistence (in particular among specific groups, such as the lesser skilled) raises the risk of it becoming structural. In this respect, the high skills mismatch between the employed and unemployed calls for active employment policies to boost the employability of each socio-demographic group, using those instruments which, further to appropriate assessment, have proven most effective. Furthermore, the number of temporary employees as a proportion of total employees stands in excess of 27% and there is some evidence of new temporary contracts being of shorter duration in the recent period; in addition to the social difficulties that generates, human capital accumulation is also impaired. Reducing the incidence of temporary employment would call for boosting the attractiveness of permanent hires. Thirdly, I wish to refer to productivity. The Spanish economy has continuously posted very weak figures for this variable in recent decades, and this has prevented a greater degree of real convergence with our European partners. Improving the dynamics of this variable is crucial for raising the economy’s potential growth in the long term, and the well-being of our citizens.

Tarisa Watanagase: Dealing with volatile capital flows Welcome address by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the 42nd SEACEN Governors’ Conference, Bangkok, 28 July 2007. *  *  *  Your Excellency Minister of Finance, Mr. Rodrigo de Rato, Mr. Hervé Hannoun, Fellow Governors, Distinguished Guests, Ladies and Gentlemen, I would like to begin by extending a very warm welcome to all of you to Bangkok. We are pleased to host the 42nd SEACEN Governors’ Conference and the 26th Meeting of SEACEN Board of Governors here in Bangkok. I would also like to express my sincere appreciation to His Excellency Chalongphob Sussangkarn, Finance Minister of Thailand, for his presence here to officially open the Conference. This year’s theme on “Living with Volatilities: Is SEACEN prepared for Rising Fluctuations in Exchange Rate and Capital Flows?” comes at an opportune moment, given a recent volatile and uncertain market conditions. This volatility has posed challenges to central banks in maintaining monetary and financial stability. Let me share with you some of my views on this very important issue. It is traditionally believed that emerging markets are subject to more volatile capital flows than developed countries due to underdevelopment of our financial markets and weak institutions. Thus, putting in place a more flexible exchange rate policy, credible monetary policy and sound domestic financial system could help emerging markets reduce the volatility of capital flows as well as its negative effect on the economic stability.