Among the legal advances are greater clarity on the enforceability of rights of netting and closeout in the event of default of a counterparty, better clarity in master documentation regarding rights and remedies, and better harmonization domestically and internationally of key provisions in different  2  BIS Review 33/2004  master netting agreements for different products that might hedge one another. These, combined with the wider prevalence of collateral arrangements overall, provide derivatives dealers greater protection in the event of counterparty default and expand their capacity to enter into transactions under normal market conditions. The development of new clearing arrangements has also strengthened the resiliency of the crucial payment and settlement systems that provide the backbone of the U.S. financial system. Existing payment and settlement systems also have implemented improved safeguards not only against the impact of the default of a system participant, but also against the potential impact of external events, such as those experienced on September 11. Overall, these changes suggest that, at a fundamental level, significant strides have been made in enhancing the resiliency of the U.S. financial system. High levels of overall capital, greater diversification of credit exposure, increased use of collateral, and the stronger payment and settlement system infrastructure make our financial system stronger today than it has been. With these favorable developments, however, come a range of challenges. I want to discuss a few of these and their implications. This is not meant to be, and is not, a comprehensive list. The first is the challenge of complexity.

According to the IMF and the OECD, around 80% of this unemployment level appears to be structural, that is, generated by our own burdensome rules and regulations. EMU certainly stimulates structural reforms in the labour market. With increased capital mobility and a better functioning single market, firms will become more and more sensitive to overall labour cost differentials and business regulations in choosing a particular location in the euro area. They will therefore exert a considerable pressure for appropriate reforms. b/ In addition to structural reforms, a strong emphasis will continue to be put on competitiveness. Pre-euro economic policy meant monitoring the balance of payments and the foreign exchange and interest-rate markets. The authorities thus received constant feedback on key indicators affecting national economic performance and could react accordingly. These indicators were sensitive, multiple and very reactive. In contrast to the pre-euro period, a loss of competitiveness will not show up quickly on radar screens like foreign exchange markets, interest-rate markets or the external accounts. As a result, economic managers must monitor the relevant competitiveness indicators with even greater vigilance. The sanctions for economic policy errors could come more slowly and insidiously via rising unemployment and weak growth. The rules of a market economy, especially competition, continue to apply to each economy. Jobs are created by consumers when they choose the goods and services they feel are the best value for money. Businessmen allocate these jobs to various possible locations in various countries according to the relative competitiveness of these locations.