not smoothed out. hence financial markets and financial institutions contributed 62 % to the absorption of idiosyncratic state shocks. we therefore see from the us example a research study conducted by london economics a few years ago estimated the benefits of the integration of european bonds and equity markets to be around 1 % of additional gdp over a ten - year period. london economics, 2002, “ quantification of the macroeconomic impact of integration of eu financial markets ”, report to the european commission. see also “ eu productivity and competitiveness : an industry perspective. can europe resume the catching - up process? ” by mary o ’ mahony and bart van ark, european communities, 2003, for a comparison of the financial sector contribution to annual labour productivity growth in the us and the euro area. see p. asdrubali, b. sorensen and o. yosha, 1996, “ channels of interstate risk sharing : united states 19631990 ”, quarterly journal of economics vol. 111. that the financial channel can be much more important than the fiscal channel. this is an additional reason to speed up financial integration in europe. in a more recent study, it was found that the euro area situation has begun to converge towards the situation of the united states and that there is already modest but non - negligible insurance through inter - state capital flows. it was found that in the euro area ( excluding luxembourg ), capital markets would have smoothed out about 10 % of the country - specific shocks to gdp between 1993 and 2000. 6 a set of indicators published by the ecb also points to an increasing degree of integration of euro area financial and banking markets. 7 for instance, there is significant evidence that euro area corporations are taking advantage of the possibility to raise funds. as a result, the euro corporate bond market has grown significantly since 1999, and has the potential to grow even further, judged by a comparison with the us. in 1999, the outstanding volume of bonds issued by nonfinancial corporations was just 3. 9 % of gdp in the euro area and 24. 3 % in the us ; by 2006 it had increased to 12. 5 %, but relative to gdp the us corporate bond market is still one and a half times larger than that of the euro area. integration in retail banking, by contrast, has been slow so far, although it has picked up in the last two years. there are still differences in bank deposit and lending interest rates across euro area countries, whose cross

ultimately, globalisation is an opportunity, not a threat. globalisation fosters economic prosperity and raises living standards. it may facilitate increased labour inflows to the euro area, which, in certain sectors, would help to reduce bottlenecks in labour markets and hence ease wage pressures. meanwhile, resources are allocated to the most profitable activities across the world. in addition, globalisation helps to intensify the exchange of investment capital for know - how between regions. as a matter of fact, the euro area has become an attractive place for foreign direct investment ( fdi ). imf statistics reveal that fdi into the euro area amounts to more than 30 % of euro area gdp, whereas the comparable figure for the us is 16 %. in sum, increasing globalisation leads to structural changes that are sometimes difficult to quantify. developed economies need to be sufficiently flexible in order to absorb these structural changes smoothly. overall, however, these developments should be seen as increasing economic prosperity as they improve the international allocation of resources. in addition to globalisation, european countries are facing the challenge of integration in their product, labour and financial markets. i will turn to these issues now. 3. economic and financial integration in europe and a comparison with the united states in a monetary union, economic and financial integration is crucial as it ensures smooth adjustment processes to economic shocks. in a monetary union like the united states or the see box 13 in the june 2007 issue of the ecb monthly bulletin entitled “ is the downward impact of globalisation on import prices waning? ” there are, however, other factors – independent of globalisation – that can help to explain the decline in global inflation, such as rapid technological progress and structural reforms. these factors have helped to increase the growth potential of economies and thus to facilitate price stability. moreover, greater budgetary discipline and “ better ” monetary policy that enhances the credibility of central banks have probably also contributed. euro area, where regional monetary and exchange rate policies are options that are no longer available, it is important to make sure that other shock adjustment mechanisms function properly. such mechanisms are needed in order to prevent a country or region from entering into a period of protracted low growth and higher unemployment, or into a long period of overheating, after experiencing a country - specific shock. allow me, now, to elaborate on four main features of economic and financial integration in europe, namely trade, financial integration, labour mobility and business cycle synchronisation.