Fiscal excesses in several countries camouflaged the erosion of competitiveness, resulting in a wider deficit in the external trade accounts, as shown in Chart 4. Inside a monetary union the alarm bells caused by current account deficits are not as loud as they are when each country has its own currency. Before monetary union, such problems were countered, with questionable effectiveness, by currency depreciation. But inside the monetary union these current account deficits were simply financed by capital inflows, largely flowing from the countries in the north to most countries in the periphery. Chart 4 also highlights the separation within the euro area between selected countries in the north, running a generally current account surplus, and selected countries in the periphery with a negative balance. The upper band depicts the maximum and minimum of the data range for Germany, Luxembourg and the Netherlands. Similarly, the lower range depicts the corresponding boundaries for Cyprus, Greece, Italy, Portugal and Spain. It is not surprising that those countries in the lower part of the chart featured prominently in the unfolding crisis. Eventually, when markets reoriented their focus towards economic unsustainability, the flow of capital reversed direction; market discipline now took the form of capital flight. There is also no doubt that financial institutions took on excessive risk, including investments in complex and, as is now well known, mispriced financial instruments. Crucially, the heightened degree of riskiness was not complemented by adequate capital buffers.

The definition that I found most meaningful is: irrespective of the size of system, whether it is a country or a small firm, good governance, as a concept, ensures that the rules of the system are equal, fair and clear to everyone. Although I will focus mainly on economic governance, let me briefly mention that in order to completely grasp the notion of good governance, one has to look at its subtitles. Political governance, legal governance, economic governance, and corporate governance are the most well known among several others. In fact, these subtitles overlap with each other. For example, political governance has common issues with economic governance, while economic governance has implications on corporate governance. Accordingly, economic governance is defined as the nature and practice of economic management, regulation and development; or the institutional environment that constraints and coordinates economic action. Distinguished guests, Another point associated with the analytic evaluation of governance is that good governance provides a very important set of pillars, which are effectual in the design of an economy. The four of them are 1 the most useful ones for every economy: transparency, accountability, rule of law and participation . First, transparency means that the needed and the necessary information is freely available and 2 directly accessible to those who will be affected by decisions and their enforcement . Second, accountability is a mirror image of the responsibility and liability of an organization or institution for its decisions and actions to those who will be affected.