In particular, some of the job losses in the non-tradable sector are the outcome of the necessary rebalancing towards tradables and away from previously unsustainable domestic demand growth. However, the rise in unemployment in a number of countries has been aggravated by delays in structural reforms and, as I said, by a lack of downward flexibility in prices and wages after 2008. Job losses were largest among low-skilled, temporary workers in Spain and in the non-manufacturing sectors.7 As employment fell, unemployment – particularly of the young – jumped, especially in Greece and Spain, where more than a quarter of the total labour force is currently without a job. There was also a sharp increase in unemployment in the Baltic states – it rose from 5% in 2007 to 18% in 2010 on average in Estonia, Lithuania and Latvia. However, since 2010 in all three countries unemployment has fallen relatively quickly. By the end of 2012 it had improved by about 10 percentage points.8 In the most stressed euro area countries, there are no signs of a reversal yet. This is the result of the inherited very rigid product and labour markets, which have started to change and need to continue to do so vigorously to prevent further job losses. Again, this is not only a matter of efficiency, but also a matter of equity. Europe cannot afford a lost generation. 5  See ECB Monthly Bulletin Box (2012), Rebalancing of competitiveness within the euro area and its implications for inflation, June 2012, pages 64–66.

The rise of the renminbi as an international currency would facilitate trade, investment and financial activities that are commensurate with the continued growing importance of China in the global landscape. Of significance to the Asian region, the rising importance of the renminbi will reinforce the trend towards greater regional financial and economic integration. China is already the main trading partner for most economies in the region. The increased usage of the renminbi and the more developed regional financial markets for the renminbi provides an opportunity to recycle savings within the region and thus support the increased intra-regional investment activities. More renminbi-based trade within the region will create pools of renminbi liquidity which would create a demand for instruments which would in turn spur the development of more efficient and integrated renminbi capital markets in the region that can contribute towards better intermediation between the surplus and deficit units in the region. In addition, the renminbi can be a source of stability for the global monetary system. The increasing use and recognition of the renminbi as an international reserve asset will strengthen the foundations of the current global monetary system that is currently reliant on too few major currencies. With the increased economic and financial interconnectivity in the world today and the greater potential for international policy spillovers, a more multipolar global monetary system with more diverse sources of global liquidity would contribute towards a more stable international financial system. Looking ahead, these developments present tremendous opportunities for the private sector.