All of these reasons are legitimate in themselves. But, taken together, they considerably restrict supply even though – as foreign examples have shown – demand is potentially sizeable. These restrictions also encourage the substitution of labour by capital and therefore result in growth that is both constrained and has an insufficient employment content. They are sometimes based on a notion of working rhythms that is out of step with the functioning of a modern society and technological progress. They are very costly for the economy. And, lastly, they do a disservice to those they set out to protect. The main victims are those for whom access to employment requires flexibility, adaptation, and freedom to choose working hours, i.e. primarily young people and women. A complete overhaul of all the legal and regulatory conditions governing a wide range of commercial and services activities therefore appears to be an urgent priority. Lastly, in order to increase France’s productivity, a shift towards technology- and sciencebased activities is essential. To do so, research and development (R&D) efforts must be encouraged. In this respect, while the share of public R&D expenditure is comparable or even greater than that of the country’s main trading partners, private sector R&D investment remains well below that in Germany, the United States or Japan. The creation of poles of competitiveness in 2005 and the Industrial Innovation Agency in 2006 contribute to achieving this strategic objective.

Sophistication of financial products has led to inadequate understandings of market players as well as lack of transparency in certain securities markets and intermediaries. One notable example is the unregulated and non-standardized markets for structured products where a fair evaluation of the instruments as well as of the counterparty risk has been very difficult, not only for market players but also for supervisors. Second, the current financial crisis demonstrates the amplifier role of the financial sector in a boom-bust economic cycle. In the environment of fast credit expansion, rising capital inflows, and lack of proper regulation, the inherent procyclical nature of the financial sector has contributed to one of the unprecedented build-up of financial imbalances in the US during the boom and a disorderly unwinding of these imbalances during the bust. Third, the crisis also raises a crucial question about the role of monetary policy in maintaining macroeconomic and financial stability. The important question is whether monetary policy should be employed to help deter the build-up of asset price bubbles apart from the macroeconomic stability objective. And fourth, Asian financial markets have been more susceptible to negative events in the major financial markets. Volatilities in the regional financial markets have increased, driven increasingly more by actions of international investors. We have witnessed large capital reversals during the periods of risk aversion as their investment positions were unwound both in the stock and bond markets. Ladies and Gentlemen, These four important lessons will be important inputs for us while we cautiously proceed with further integration.