However, the further integration of national capital markets towards a truly European financial market would be an important step towards safeguarding markets against country-specific shocks. Finally, greater efforts must be made to remove existing barriers in product markets. Since the early 1990s state enterprises have undergone extensive privatisation, the use of state aid has fallen and market entry barriers have been lowered, although not evenly across all countries or sectors. In addition, there are still significant barriers to the further removal of price pressures, and these will need to be phased out. EU Neighbouring Regions The ten countries that are about to join the European Union have made considerable economic progress in recent years in terms of macroeconomic stabilisation and structural reforms. As a group and individually, these countries have achieved significant and sustained improvements in their economic fundamentals. In this regard, the perspective of EU accession has been an important anchor for policies. However, the process of catching-up in real incomes has been significantly slower than expected at the start of transition, and today, as they prepare to join the EU, there is still a significant GDP per capita gap with the current Member States. Improving the growth performance of acceding  2  BIS Review 39/2003  countries remains an issue of vital importance. While EU membership itself and the lagged effects of earlier reforms should foster the catching-up process, sustained policy action is needed to further improve the growth environment in the acceding countries.

Also, the series of corporate failures in 2001-02 revealed weaknesses in corporate governance practices, including accounting and audit rules, which are currently being addressed by the US authorities. Latin America Over the last two years, growth in most Latin American countries has been weak. This year, however, there are signs of a modest upturn, with confidence slowly returning. This has been due, in part, to the direction of the structural reform agendas of many countries in the region. To strengthen the foundations for growth, policy-makers must remain committed to implementing structural reforms. Countries that have made the greatest strides in reform are already reaping the benefits. Both Mexico and Chile, which are at the most advanced stage of reform in the region, have proven remarkably resilient to turmoil in regional economies and have weathered the period of weak global growth well, considering their exposure to sluggish mature economies. Other countries in the region have embarked on reform agendas and should be encouraged by the international community to see them through as swiftly as conditions allow. East Asia As for the crisis-hit countries in Asia, economic performance has been positively correlated with progress in reforms. Stronger average growth potential in countries such as Korea and Malaysia reflects partly the authorities' determination in pushing through corporate reforms, reforming the financial sector and strengthening insolvency laws. In China, the authorities have repeatedly emphasised that banking reform, if coupled with the restructuring and privatisation of state-owned enterprises, is key to strong growth and financial stability in the medium term.