? when banks double the value of the assets and liabilities on their balance sheet, this does not necessarily double the number of transactions, or the amount of labour or physical capital required to produce the necessary services. this observation seems to undermine the justification for deflating asset values using a general price index such as the gdp deflator or the consumer price index. furthermore, the recent fall in asset prices and the de - leveraging process under way may lead to some surprising results in the breakdown of financial services into prices and quantities. let me turn to my second set of remarks, concerning existing measures of productivity in the financial sector and what they tell us about its sources. perhaps the most natural starting point is the measurement of scale economies, an issue on which academic researchers have long provided advice for competition policy. empirical evidence on returns to scale in the banking industry has sometimes suggested that larger institutions benefit from greater cost efficiency. however, studies of mergers and acquisitions have often failed to find such improvements. i think it is important to improve methods in this area for at least two reasons. first, increasing european financial market integration is likely to raise the size of the average bank. central banks often repeat that the european financial services industry is excessively fragmented. increasing integration should allow a more efficient provision of financial services, improving the allocation of capital to investments with better risk - return profiles and therefore raising the potential for economic growth. second, the recent depressed value of financial equity and public intervention in the banking sector to rescue distressed institutions will probably accelerate the process of mergers and acquisitions as the outlook recovers. thus the existence and extent of scale economies remain timely questions for research and policy. scale economies are only one source of productivity growth. what used to be called scope economies are improvements in efficiency obtained by altering the mix of outputs or the mix of inputs. in academic research, these have proven even more difficult to measure than scale economies. however, i would encourage you to think about these issues in light of recent events. the demise of the investment bank suggests a return to universal banking, with large groups taking over specialised financial institutions. such a development may be motivated by a need to improve risk management, but it could also bring benefits in terms of an improved mix of different financial outputs that are jointly produced. finally, an additional source of productivity growth is efficiency change, meaning the extent to which individual banks move towards ( or away from ) the best - practice frontier. again, looking at the conference programme, i notice a

that the new members will follow the example of ireland and not that of the former gdr. it is important to focus the enlargement process on what is relevant to the real economy. what is important for the candidate countries and the current eu economies is that the new members are given the chance to catch up with the eu. free trade ( as in the europe agreement ), stable institutions ( adopting and applying the eu's fundamental regulations, what is known as the " acquis " ) and a wise macroeconomic policy are the things we should hope for and expect – no more than that. the eu's institutions there was a discussion at the european council meeting in nice in december 2000 on the shaping of the eu's decision - making processes when the union is enlarged to include many more members than it has today. with regard to the ecb, the current regulations would lead to a situation where 34 persons would have the right to vote on monetary policy in the ecb council, if all of the candidate countries were also to take part in the monetary union. the council of europe therefore decided to introduce a clause into the regulations enabling the rules in the escb charter for participation in the governing council to be changed without having to call an intergovernmental conference. however, a change would still require unanimous support from all member countries and ratification by each of them. a proposal for a change in the voting right could be put forward by the ecb or the european commission. the new clause will come into force together with the treaty of nice when it is ratified by all of the current member countries. there is no given method of organising decision - making in a monetary union with many participants. an attempt to analyse the decision - making process in an enlarged ecb governing council has been made by the centre for economic policy research ( cepr ) in a report published in october 2001. the report discusses three models for improving the efficiency of the ecb councils'decision making in an enlargement of the number of participants in the monetary union : rotation, representation and delegation. that is to say, a rotating voting right between a number of central bank heads, similar to the federal open markets committee in the usa, the formation of constituencies of central bank heads with joint representatives on the ecb council, rather like at the bundesbank following the german reunification, and finally delegation to a small group of experts, roughly like the monetary policy committee in the uk. the cepr report