recently that “ the euro is a done deal ”. the euro area has in fact been a zone of stability in turbulent currency markets - and that performance puts in proper perspective earlier excited talk about spectators waiting to rip the euro apart. that never was in my view a serious issue, given the political commitment to the process - the economic issue has, as i say, been about the sort of regional tensions that might subsequently emerge. the big questions now - for all of us, not just for the euro countries - are, first, and most immediately whether we can avoid new financial shocks ; and, secondly, how we should manage the economic fall out from the financial shocks that have already occurred. developments since the imf / ibrd meetings in washington have in my view been quite encouraging. the japanese financial package is reassuring, and the strengthening of the yen has brought welcome relief to much of the rest of asia. united states congressional approval of the imf quota increase and of the new arrangements to borrow ( nab ) has paved the way to a vitally necessary increase in imf resources. brazil - which has been widely seen as the next potential emerging market domino - is clearly committed to taking strong corrective domestic policy action, which would command broad international support. and while there evidently has been a sharp contraction of wholesale market lending, within the financial sector in particular, in the united states, and suggestions there of a possible wider credit crunch, no new problems on anything like the scale of ltcm have in fact been uncovered. we are certainly not yet out of the wood, but the financial situation looks rather better than might have been expected two or three weeks ago. if we can avoid a new financial shock - and i am hopeful that we will - we still have to manage the global economic slowdown already underway. in that context there has been a good deal of talk about concerted interest rate cuts in europe and the united states to stimulate domestic demand and offset the effects of recession elsewhere. and it is true that those effects - both lower world commodity prices and falling external demand - do mean that interest rates in the industrial countries generally can be lower than they would otherwise be, which in turn will help to sustain global demand. but we do not all start from the same point. rates have in fact been cut in the united states and the united kingdom, where underlying domestic demand growth also shows signs of slowing. in continental europe, on the other hand, domestic demand growth has, as i say,

or quietly steer private sector initiatives on to a course serving the wider public interest. entrepreneurial innovation is the life blood of economic growth. but sometimes it outstrips the supporting infrastructure. that happened with some parts of our capital markets over the past decade or more. the recent initiatives coming out of the us treasury to strengthen markets are therefore to be welcomed in their broad thrust and goals. in particular, the bank of england agrees that more of the vanilla otc markets should be cleared via central counterparty clearing houses. lch led the way globally in opening up central counterparty services to interest - rate swaps, breaking a mis - think that somehow ccps could clear only exchanged - traded instruments. and recently it has made the welcome announcement that non - dealers will be able to access such central clearing, at least indirectly via “ clearing members ”, as for exchange - traded contracts. central clearing can help to provide transparency and consistency in valuations and haircuts. it can help to promote greater standardisation in terms. it makes haircuts more visible to the market as a whole, and to the authorities, who as overseers of the system should be prepared to form a view when haircuts are too low – and the associated market leverage is too high – for system stability to be assured. the role of the authorities is important. it is absolutely vital that management maintain the integrity and soundness of the key clearing houses as they expand their range. 2 as overseers of the payments systems embedded in clearing houses, the bank will work with the fsa and our international counterparts on this. it is often said that dealers resist such initiatives, as it can squeeze their margins. that may well be the perspective at desk level, but i suspect it is unfair to many ceos, who have a as the failure of hong kong ’ s futures clearing house demonstrated in 1987, very bad things happen if a central counterparty fails. many lessons were drawn. clear interest in the health, safety and soundness of the system. and if some didn ’ t recognise it before, they will now – as their predecessors did in the relatively recent past. the key industry associations can also play a constructive role in this whole area – as, indeed, they have in the past. this crisis would have been even worse if isda and others had not overseen the introduction of the collateralisation of derivatives - related counterparty credit exposures amongst the dealer community. but there are lessons about extending collateralisation,