difficulties on these firms. infrastructure the strains on the economy ’ s infrastructure - most notably transportation and housing - have been evident for some time. in more developed countries, economic development was, generally speaking, a more gradual process. this facilitated improvements in the physical infrastructure to be undertaken in tandem with economic growth. in ireland, infrastructural developments have been unable to match the intensity of economic growth which has occurred over a relatively short period of time, so that bottlenecks have emerged. in an effort to reduce the infrastructural deficit, the government has initiated a programme of significantly increased expenditure as part of the national development plan. however, since the construction sector is already operating at full capacity, it will be some time before the benefits of this are visible. diversification / exposure to sector shocks by definition, it is difficult for small open economies to ensure a high degree of diversification. as a result, a shock affecting one sector can have implications for the economy as a whole. in ireland ’ s case, it is useful to focus on the two very distinct broad sectors in the economy. the first comprises the indigenous manufacturing sector as well as parts of the agricultural sector. these sectors remain quite dependent on the uk market and are exposed to euro / sterling exchange rate developments. particularly severe trading conditions could arise if an acceleration of wages in this sector was compounded by a sudden, significant rise in the euro against sterling. secondly, parts of the hightechnology sector remain particularly exposed to developments in the world economy and the us in particular. an insight into this exposure is obtained from the fact that, in 1999, ten foreign - owned enterprises accounted for over one - third of total exports of goods and services. asset price increases in the housing market, the rate of increase of prices accelerated sharply in 1996, and with very high annual growth rates being recorded since then, house prices have more than doubled. a number of factors have contributed to this. the demand for housing has risen substantially. this reflects fundamental factors such as the rise in the population in the household formation age group, significantly higher employment and rising disposable income levels. in addition, the expectation and now the reality - of lower interest rates resulting from emu participation have contributed to the sharp increase in prices. on the other hand, the response of supply until recently was quite sluggish. over the last year or so, however, there has been a significant increase in output, so that some mode

focus of the debate about possible policy responses. there are very differing views about both the effectiveness of further disclosure measures and the moral hazard risks associated with increased disclosure. i very much welcome the contribution which this conference is making to the debate, with both a full session and of course the keynote address devoted to hedge fund issues, including the disclosure issue. with regard to private equity deals and leveraged buyouts, even though recent market events appear to have halted the dramatic rise in deals, when normal market conditions are restored one wouldn't prejudge a return to the previous high level of activity. a major concern for central bankers and financial regulators in this area is whether the growth in these deals has been accompanied by any significant increase in credit risk for entities, such as banks, which are providing significant leverage to private equity deals and funds. while research, published by the ecb, suggested that large banks'exposures in this area are manageable relative to their capital buffers, there is also the issue of " warehousing risk ", whereby the movement of these risk exposures away from banks and into markets are contingent on liquidity in credit risk transfer markets and on the effectiveness of risk syndication processes. clearly, the area of private equity is one where we need a greater degree of analysis to inform our judgment about the financial stability issues arising, and i am very pleased to see that you have quite a significant degree of empirical research being presented here on an extensive range of issues in the private equity arena. with so much interesting research to be presented and debated, i don't propose to take up any more of your time this morning. to the organisers, i congratulate you on your efforts on bringing this collaborative event together and i wish you every success with the conference. i look forward to hearing the full conclusions of your deliberations, and especially to reflect on the policy messages. many thanks for your attention.