there has been a large trade surplus. in the first three quarters of 2004 the growth in gdp amounted to 8. 8 per cent year on year. the peso ’ s exchange rate against the dollar, which at mid - 2002 had weakened to nearly 4 to 1, subsequently staged a recovery and has stabilized at around 2. 9 pesos to the dollar since 2003. benefiting above all from the increase in revenue produced by the strengthening of economic activity, the primary surplus on the federal budget rose to 3. 6 per cent of domestic output in the first nine months of 2004, from 2. 8 per cent in the corresponding period of 2003. the problem of restructuring the debt remains open at international level. 2. the financial markets as we have pointed out for some time now, conditions of abundant liquidity prevail in the international markets. the credit and monetary expansion has been very robust in recent years in the united states and japan and has spread to the emerging economies of asia whose currencies have been managed with reference to the dollar. since the beginning of 2002 the broad measure of the money supply has grown by 56 per cent in china, by about 20 per cent in south korea, and by between 12 and 16 per cent in the other asian countries. in europe, the 12 - month growth rate of the m3 money supply, after falling to 4. 9 per cent in may 2004, rose to around 6 per cent in december as a consequence of the expansion in currency in circulation. the plentiful supply of credit at global level has had a limited impact on consumer price inflation, thanks to greater competition and the spread of products originating from countries where labour costs are extremely low and social protection is scanty. in the united states, large productivity gains have helped to contain inflation. bond and share prices in the industrial and the emerging countries remained stable at the high levels of the start of 2004. by contrast, in most of the industrial countries house prices continued to rise. yields on ten - year government bonds have stabilized since october at around 4 per cent in the united states and approximately 1. 4 per cent in japan. in the euro area, given the low inflation rate and the uncertainty about the strength of the recovery, longterm yields fell to 3. 6 per cent in january of this year. the yield spread between the bonds of us companies with a high credit rating and ten - year treasury paper was equal to 0. 9 percentage points in january ; the corresponding spread for the securities

a different set of reforms. there is one thing we can learn from germany ’ s experience, though : reforms do pay off eventually. this is an important point to remember and it is confirmed by the current state of the euro area. let us take a closer look. 3. the euro area : approaching the end of the crisis in the euro area, the end of the crisis is getting closer – slowly but steadily. most importantly, the euro area as a whole has finally emerged from recession. so far, we have seen four consecutive quarters of positive growth, and looking ahead, we expect growth to continue. latest projections by the ecb suggest that euro - area gdp will grow by 1. 0 % in 2014 and by 1. 7 % in 2015. and this recovery is not only driven by the “ core euro - area ” countries such as germany. some of the crisis - hit countries have also finally embarked on the path to recovery. it seems, then, that the efforts to implement structural reforms are indeed bearing fruit. competitiveness has improved in most peripheral countries. improving competitiveness in turn drives exports higher. all peripheral countries, except cyprus, are projected to see some export growth this year. these achievements are reflected in current accounts increasingly reverting to positive balances. and germany is part of this rebalancing equation. since 2007, germany ’ s current account surplus vis - a - vis the euro area has shrunk continuously from 4½ % of gdp to 2 % of gdp. as business investment in germany is projected to pick up in 2014 and 2015, this rebalancing should continue. the progress that these abstract figures reflect is also visible in more concrete events. for example, ireland, spain and portugal have exited their financial support programmes without any friction. all three countries recently returned to the sovereign bond markets at relatively low yields. at the same time, stock markets in these economies have been rising for some time now. these developments underscore the progress that some peripheral euro - area countries have made in adjusting their economies. however, despite these favourable developments, there is again no time for complacency. in many countries structural reforms are far from finalised, as a report by the eu parliament suggests. at the same time, public debt is still very high in many countries and has to come down. against this backdrop, the recent debate about loosening the rules of the stability and growth pact worries me. it seems that the experience from the crisis