the euro appreciation has on overall export demand and, even more so, on the economic recovery. the impact of world trade and world growth dynamics far outweighs the influence of the exchange rate. a strong currency is an asset. the strong deutschmark served germany well. 1. 2 risks inherent in the export - led recovery the economic outlook for the euro area and for germany are rather good, although some serious risks remain. the us twin deficits are a concern in this respect. in the late 1990s, the us current account deficit had its domestic counterpart in high investment spending. it was financed by foreign private investors seeking an opportunity to invest in the us corporate sector. today ’ s current account deficit has a domestic flip side in terms of a high budget deficit. it is financed to a large extent by asian central banks which purchase us treasuries by intervening in the foreign exchange markets. exchange rate movements like the dollar depreciation help to unwind imbalances in the world economy, even though they cannot do the trick entirely on their own. the domestic causes of those imbalances need to be addressed. for europe, the main task in this respect is to boost growth potential by embarking on structural reforms in order to ease existing economic rigidities. the monetary policy strategy of the euro area does not target the exchange rate. the external value of the euro is one of many factors shaping the prospects for price stability. the ecb governing council closely monitors developments in the euro ’ s exchange rate. currently, the strong euro allows us to keep interest rates at a low level in an environment where demand is picking up and excess liquidity persists. one of the reasons for the marked improvement in german sentiment indicators is the confidence generated by the evolving reform process. any perception that reforming zeal is weakening might therefore do harm to the recovering economy. moreover, reforms are crucial for enhancing competitiveness. 2. trends in the world economy i would like to widen my perspective at this point and discuss some rather global topics. globalisation, deregulation and market orientation have helped to change the shape of the world economy significantly over the past few decades. we have witnessed the integration of more and more countries into the world markets and a sharp rise in global trade. during the past 30 years, the cross - border exchange of goods and services increased ninefold ( in terms of volume ) to more than us $ 7, 000 billion in 2003. at the same time, substantial changes in

the regional composition of trade flows have occurred. while the industrial countries ’ real share in world exports has gone down from 70 % to 60 %, that of developing countries has gained ground. the fast - growing economies in east asia, in particular, have been extremely successful in integrating into the world economy. their market share of world exports went up from 6 % in the 1970s to about onefifth in 2003. by no later than 2010, east asia, including japan, might account for more than one - third of world trade and thus become the world ’ s most important trading area, ahead of the european union. the export - oriented development strategy of the asian economies - in contrast to the more inward - looking approach in latin america - has brought a considerable measure of success. it has stimulated not only cross - border trade but also economic growth. developing asian economies currently account for nearly one - quarter of global production. they have exploited their capacity for fast growth by • efficiently mobilising their physical and human resources • adapting foreign technology and • utilising the opportunities for specialisation resulting from their integration into the world economy. as a consequence, they have roughly doubled their economic weight over the past 30 years. real convergence - as suggested by growth theory - seems to work if the right conditions are in place. at the same time, advanced economies, most notably west and east european countries, have lost significant market shares in world production. slow population growth, modest gains in productivity and the breakdown of the former communist planned economies have hampered their economic performance. at present, advanced economies, while representing no more than about one - sixth of world population, account for 55 % of global gross domestic product ( gdp ) based on purchasing power parity ( ppp ) valuation - about 5 percentage points less than in 1980. the transition countries ’ share of global gdp has gone down from 12½ % to 6½ %, although there has been a small increase recently. for the sake of completeness, let me say that the united states ’ share of global gdp has not changed much over this period. however, in recent years china has been the most outstanding example in terms of economic performance. over the past ten years the chinese economy has grown on average by more than 8 % annually in real terms - faster than other asian countries and very much more than the advanced economies ( 2½ % ). admittedly, china is still a relatively poor country, but the pace at which it is catching up is remarkable