in partnership with greek firms penetrate these markets. thessaloniki, the second biggest greek port is expected to play a pivotal role in the economic integration of the southern - eastern european countries. the border of bulgaria, and of landlocked fyrom are about 80 kms from thessaloniki and for their respective capitals, sofia and skopje, thessaloniki is the natural outlet to the mediterranean sea. likewise, the southern provinces of serbia and parts of romania can equally be served efficiently by the port of thessaloniki, which, in addition has an interesting cultural life and a pleasant life style. the advantageous location of thessaloniki will become even more evident after the completion of the planned and partly financed by the eu of the north - south eu road and railway axes. the renewed optimism about the greek economy is now reflected in many areas. i wish to refer to the example of construction and housing. there was a widespread belief that construction would be the main victim of a slowdown in the post - olympics period. there was talk of a housing bubble and of a supply glut. indeed there was a construction slowdown in the immediate aftermath of the olympics and a levelling off of housing prices, but since last year we are seeing a renewed dynamism in this sector, unexpected in its degree. in addition to greeks, many more foreigners than in the past are building secondary residences in the greek islands and in the mainland. total credit growth at around 20 % annually and 30 % for credit to households since 2001 has been one factor underpinning strong private demand in recent years and has been fuelled by the low euro area interest rates. i fully accept that we should monitor developments in this area but we are far from becoming alarmed. greece is a country with a still relatively low household debt - to - gdp ratio – 38 % compared with 56 % for the euro area. the rapid credit expansion in this area reflects fundamental changes in the greek economy and has underpinned the transformation of a fragmented stagnant inward - looking banking sector into a dynamic modern banking sector with strong international competitive presence. the lifting of foreign exchange controls in the mid - 1990s and of household credit restrictions in 2001 as well as privatisations and the mergers between a large number of smaller banks since 1997 has created greek champions ( up to the second half of the 1990s almost 2 / 3 of greek banks were controlled by the state and were moreover, badly run, compared with about 15 % presently, which are managed by professionals ). the biggest 5 banks

with inevitable dampening effects on growth. similarly, it was pointed out that the turn - around from a rising trend in net eu transfers in relation to gdp to a falling trend would also impact negatively on growth. indeed, net transfers fell, from 4. 7 % of gdp in 1995 - 1997, to 2. 1 % of gdp in 2005, but growth continued unabated. in addition, since 2004 greece, which is heavily dependent on oil imports, suffered from the rapid rise in energy prices as well as from the appreciation of the euro, which affected especially greece ’ s main manufactured export products – textiles, garments, shoes – which after the lifting of the quotas had to confront strong competition from the emerging markets in asia and the countries in transition in south - east europe. the fact that greece avoided the problems faced by other countries, such as portugal, after a period of excessive demand growth is a sign of underlying improvements on the supply side. however, equally important is the restoration of the historical links between greece and the countries in southeast europe, around the black sea as well as with egypt. for more than 2000 years large greek communities, in some cases numbering hundreds of thousands, had settled and prospered in these countries. the communist regimes, revolutions and nationalism caused the amicable relations with our wider neighbours to be suspended, and many of these communities disappeared towards the end of the 1940s and in the 1950s : for example, in the 1950s more than 250000 greeks had to leave egypt. after 1990, the historical forces of gravity have been re - established ; nationalism, as is the case in all eu countries, is now taught only in history books. as a result, friendly relations with our neighbouring countries have been restored. greece has been a key supporter of bulgaria ’ s and romania ’ s eu membership, and eventually turkey ’ s, as well as of the other south - eastern european countries. a little story of the weight of history is the immigration to greece in the last ten years of thousands of greeks, whose ancestors had settled in russia between the 1st and 3rd century b. c. and who, in spite of the fact that they were cut off from greece for almost 800 years, spoke some greek and preserved many greek traditions. until almost the end of the 1990s, greece had a big handicap : it was located at the periphery of europe without direct land connections to the main eu members and was surrounded by countries whose economic development had stalled for about 50 years. nowadays, its