is driving so many sovereign ceilings still justifies such stringent caps. moreover, i am not fully reassured that there is no double counting taking place in these calculations : in other words, that country credit risk is not already being captured in the credit risk assessment of the pool and third parties to an abs transaction. be that as it may, i recognise that it is the rating agencies ’ prerogative to decide on the best methodologies to assess risks and that these methodologies will not change overnight. i do believe nonetheless that providing more transparency on how ratings are derived and, in particular, disclosing ratings absent the sovereign ceiling to investors could certainly help, as suggested in our recent paper with the bank of england. this proposal is underpinned by my conviction that it is investors who should decide whether to apply the sovereign cap or not when assessing a transaction. in fact, i would argue that rating agencies should publish the ratings absent any cap – whether for a sovereign, swap counterparty, account provider, or other entity – and then add on the caps in a building block approach, all for the sake of clarity. and, in my view, it behoves the rating agencies to provide more transparency on the precise methodologies for determining and applying sovereign ceilings, given the impact of these measures on the structured finance market. this points to the important role that market participants themselves have to play in reviving european abs. it is one thing for regulators to improve transparency or credit ratings agencies to provide more granular information ; it is another for market participants to analyse it and trade on it. for example, i recommend that market participants look closely at what the ecb is doing with our loan - level data initiative. we are providing much higher quality information on which they can make informed credit risk assessments of abs, either on the basis of the individual underlying loans, or on the basis of the summary information made available in the respective data repositories. i realise that there is no free lunch, and that there are financial and resource implications to such detailed scrutiny. but i am convinced that the more market participants “ get their hands ’ dirty ”, the more the abs market as a whole will benefit. this is because more informed market participants means greater discipline for data providers, less automatic reliance on others ’ opinions, and greater awareness of gaps in the transparency requirements across financial products. bis central bankers ’ speeches conclusion let me conclude. the eurosystem places great importance on the health of european

to 50 employees in the euro area ( excluding luxembourg ) is estimated to have been around ten times larger than in the us 18. the immense importance of this issue is increasingly appreciated by the successive eu presidencies and european governments and several initiatives at national or eu level have started to implement actions for a “ better regulation ”. fourth, to fully exploit productivity potential, the labour and product market reforms just mentioned need to be accompanied by policies that help to diffuse innovation and technological change. this includes, inter alia, measures to support innovation by higher investment in research and development ( r & d ). in 2004, roughly 1. 9 % of euro area gdp was spent on r & d. the us spends 2. 8 % of gdp on r & d. 19 europe has set itself the target of achieving a share of 3 % of gdp by 2010. to make these measures most effective, they need to be accompanied by efforts to improve the labour force ’ s level of education and expertise. the impact of education on growth may be related to innovation, as well as the adoption of new technologies. additionally, better education and training help to reduce mismatches in the labour market and allow for a smoother reallocation of workers between sectors and firms. 20 the last decades have already brought about an enormous increase in the level of educational attainment, the so - called “ catch - up effect in education ”. in the euro area, according to oecd data for 2003, an average of 73 % of those aged 25 - 34 had attained at least upper secondary education, compared to only 46 % of persons aged 55 - 64. 21 nevertheless, meeting the challenges of technological progress and ensuring the labour force ’ s employability and flexibility, requires that human capital is continuously adjusted to labour market needs through improved education and training as well as lifelong learning. in 2005, the us annual expenditure on higher education institutions per student was 22, 234 usd, while in the euro area only about 9, 200 usd was spent. furthermore, we need more high quality scientists and researchers. in the eu we have about 5. 3 scientists and researchers per 1000 workers, which compares to the us ’ s 9 per 1000. 22 groningen database. see also ecb ( 2006 ) ” competition, productivity and prices in the euro area services sector ”, ecb occasional paper series. no. 44. see the world bank web site www. doingbusiness. org. eurostat data. see g. sc