In April this year, the ASEAN countries also doubled the size of its regional financing facility, the ASEAN Swap Arrangement (ASA), from $ to $ billion. The ASA is a further initiative to maintain regional economic and financial stability through a mechanism that provides short-term liquidity support to member countries facing temporary balance of payments difficulties. Strengthened strategic partnership as a natural way forward Ladies and Gentlemen, As we advance forward, both the EU and ASEAN through the rebalancing of global growth have the potential to contribute towards alleviating the imbalances in the global landscape. The process of increased inter-linkages between our two regions has already begun. As a pre-cursor to the establishment of a Free Trade Agreement (FTA), our regions have embarked on the TransRegional European Union-ASEAN Trade Initiative in 2003. Work is also already underway to expand trade and investment flows through closer ASEAN-EU co-operation in trade, investment and regulatory issues, among others. While barriers between our regions will continue to be lowered under a future FTA, it is also important to maintain coherence between liberalisation and economic stability. New areas in specific sectors of mutual interest that would complement the path to greater growth for both regions need to be explored. This would contribute towards reinforcing the sustainability and effectiveness of the ASEANEU partnership and, thereby, increase the potential to contribute to global economic stability. Allow me to conclude my remarks here. Thank you for your participation in this Euro Conference.

And this tax is: undemocratic (rarely approved or discussed in the Parliament), regressive (a heavier burden is put on the poor; those that cannot protect themselves from it), and economically inefficient (high inflation inhibits economic growth and ultimately reduces budgetary revenues). And an inflationary environment creates the wrong incentives. In a highly inflationary environment incentives to produce are reduced. For entrepreneurs to take a decision to produce (the “make it” approach) and not redistribute (the “take it” approach) one needs a long-term stable environment. Therefore by maintaining price stability the central bank gives a clear incentive to gain experience in production, not in redistribution. Per contra, by not carrying out its main function, but letting inflation rise in the economy, the central bank gives incentives to engage in redistribution and in higher than necessary transaction costs to avoid the inflation tax. Let me illustrate this with some Croatian experience. In the twenty years preceding independence (from 1971 to 1991 - Croatia at that time being part of former Yugoslavia), average inflation was 69% per annum. In 1992 and 1993 the average yearly inflation was more than 1000%. Similar trends remained until October 1993, when the Stabilisation program was launched. From my personal experience I can assure you that in a highly inflationary environment a household’s objective is to avoid the inflation tax. Currency substitution and “shopping around to find old prices” are the main behavioral patterns, not long-term planning. The same can be said for production.