euro - area enterprises with a bbb rating for bonds with a maturity of 7 - 10 years have to pay an average interest rate of only around 4¾ %. this represents a premium of merely ¾ percentage point over comparable government bonds. on average, this figure has been twice as high since 1999. at the present, corporate bonds are obviously also benefiting from a search for higher yields. furthermore, euro - area bank interest rates are very low. credit standards have not tightened further. 3. economic conditions in germany since early 2004, the economic situation in germany has improved significantly. for a long time, germany ’ s growth lagged behind that of the other euro - area countries. this gap has now narrowed considerably. germany is no longer trailing behind the rest of the euro area. in the second quarter of 2004, gdp increased by 0. 5 %. in the first half of this year the annualised growth rate was 1¾ %. as potential growth in germany is only about 1½ % this means that there was an increase in capacity utilisation for the first time since many years ago. however, the recovery in germany is not broadly based. domestic demand has not yet taken off. growth has been driven mainly by exports. in the first half of this year, exports grew by 6. 2 %, while imports grew by 3. 7 %. from january to august 2004, exports were up by as much as 10. 9 %. this shows that the price competitiveness of the german economy is still very high, which enables german firms ’ to benefit from strong growth in their export markets. it is striking that the appreciation of the euro has had a far less dampening effect on exports than many had expected. it seems that the increase in foreign demand for german products in the wake of the buoyant global economy has more than offset the effects of the exchange rate. exports to the usa, for instance, which declined last year, have improved again. exports to countries outside the eu in particular have increased strongly. from january to july our exports to russia and china both grew by 22. 7 % on the year. despite all these positive figures we must not lose sight of our export dependency. the german economy remains vulnerable to a slowdown in global economic activity. this is the german economy ’ s achilles ’ heel. overall, domestic demand contributed little to growth in the first half of the year. the level of business investment was again disappointing. there was no increase in the second

the incentives for sound fiscal and economic policy even further, thus achieving the opposite of stabilising monetary union. ultimately, this approach would also not be credible to financial markets as its inconsistencies raise doubts about the public and political support. bis central bankers ’ speeches 5. conclusion let me conclude my speech on germany ’ s role in the global economy with some caveats. in spite of the rather favourable performance during the crisis, germany faces major challenges, overcoming the euro area ’ s sovereign debt crisis being the most pressing. in addition, the level of public debt has risen substantially throughout the crisis. consequently, and considering the increasing fiscal burdens caused by an ageing society and a shrinking working - age population, consolidation is a major task for germany, too. it is indispensable to ensure the long - term sustainability of its public finances. but unlike some other emu member states, germany is still in a relatively favourable position. this combined with the fact that germany continues to be an important economic player despite global shifts in economic weights is due, not least, to painful but ultimately rather successful structural reforms undertaken in the past. it would be short - sighted to rely solely on these achievements. but they could well serve as an encouragement to reformminded policymakers in other countries. and the fact that these reforms, including the emphasis on fiscal soundness, contributed to revitalising the german economy and to increasing its resilience should not be a cause for concern or complaint. instead, it should be seen as good news – for germany, but also for emu and the global economy. bis central bankers ’ speeches