the impact of deeper product and financial market integration and convergence of macroeconomic policies. differences in trend growth are now the main reason for most differentials, something which also explains why the dispersion of growth rates shows a considerable degree of persistence. what conclusions can be drawn from these observations? firstly, that, since it turns out that there is more heterogeneity across countries in trend output developments than in cyclical movements, monetary policy is confronted with a relatively symmetric environment in those fields where it has an impact. secondly, for the competitiveness mechanism to work properly, wage and price rigidities have to be tackled by national structural reforms. moreover, decentralised fiscal policies based on automatic stabilisers are also an important instrument in reducing growth differentials. but sound public finances are a necessary condition for automatic stabilisers to work fully. member states should draw lessons from their maladjusted fiscal policy in the previous upswing and get their budgets into surplus during good times. v. lessons from eu integration and challenges for africa as previously mentioned, the road to eu economic and monetary integration has been paved by three long - term structural factors. first and foremost, there has been a strong underlying political will which has its roots in the reconciliation and cooperation process initiated in europe after the second world war. secondly, economic integration advanced considerably over the following decades, fostered not only by trade interdependence, but also by the web of social linkages created through business, tourism or educational exchanges. and, thirdly, there is a growing economic consensus moving away from active demand management policies towards a more medium - term orientation, based on structural, supply - side - oriented policies with a monetary policy strongly geared towards price stability. those three factors have reinforced each other in a long process of gradual building on prior achievements. although that process was repeatedly interrupted owing to a diversity of economic and political difficulties, it comes to the credit of europe's political leaders that they were able to appreciate those difficulties correctly and to respond to them with a visionary and forward - looking project, sometimes in the face of strong opposition. an important ingredient in the success of emu is also that the project was flexible enough to address specific concerns and overcome various sources of resistance while keeping a high degree of consistency as regards its aims and conditions of access. in launching its own economic and monetary integration process, africa is starting out from quite a different position, in all three above - mentioned fields. countries on the

. over the first four months of this year, non - residents increased their holdings of south african equities and bonds by no less than r34 billion. this enabled south africa to continue with the programme of gradually relaxing exchange controls, and also helped the reserve bank to increase its net foreign reserves by r4. 9 billion during the first quarter of this year. south africa can continue to hold the confidence of foreign investors, provided we are also prepared to continue to apply the sound monetary and fiscal policies of the past year. if not, foreign market sentiment towards the country can change very quickly, and we can easily be forced into a new financial market crisis of our own. with his latest budget, the minister of finance reconfirmed the government ’ s determination to maintain the necessary disciplines in fiscal policy. the reserve bank is known for its conservative approach towards monetary policy, and is equally determined to maintain strict disciplines in the management of the money and banking systems of the country. in this way, south africa will continue to benefit from being part of the global financial system, and to make use of the savings of other countries to help finance growth and development. in summary, it depends on us and on the economic policies we apply, whether an east asian crisis will also develop in south africa. foreign investors nodded their approval of the policies of the past year. we should therefore not deviate unnecessarily from the course of the existing policies.