from regulatory authorities. at the end of march 2005, major banks are expected to reduce their nonperforming loan ratios to about half autumn 2002 levels. at the same time, the industrial revitalization corporation of japan will cease its purchase of loan assets. from april 2005, fixed asset impairment accounting rules will be introduced. firms continue to strengthen their business structures and competitiveness. initiatives based on the private sector ’ s creativity and vitality will be the driving force for japan to achieve steady economic growth under global competition. together with firms, financial institutions also play an important role in supporting the japanese economy. dynamic expansion of the economy will not be possible if financial institutions remain dependent on regulatory authorities and generous safety nets. not only firms but also financial institutions will be confronted with frequent new entries to and withdrawals from the market, as well as consolidation and reorganization in their respective industries. this makes it all the more critical for financial institutions to demonstrate their firm intention to stand on their own feet, and enhance their credibility in the market. in this regard, let me point out some of the major tasks to be addressed in 2004. in order to achieve reform of the economic structure and a sound financial system more rapidly, financial institutions, especially major banks, must work harder with firms to revitalize the corporate sector, while expediting the disposal of nonperforming loans. it is true that some financial institutions have already established subsidiaries specializing in corporate revitalization. further efforts, however, are still required in areas such as the more effective use of the industrial revitalization corporation of japan and the resolution and collection corporation. in corporate revitalization, regional financial institutions basically face the same problems as major banks. there are more than a few borrower firms with competitive technology and expertise, which find it difficult to improve profitability because of the financial legacy of past borrowing. for this reason, the strategically important issues that many regional financial institutions address include the provision of detailed consultation services to borrower firms, the extension of greater assistance to borrower firms, and the prompt realization of business revival. we hope that their efforts will bear fruit. financial institutions also have an important role to play in helping the corporate sector to develop the new businesses that will underpin japan ’ s future economy, while at the same time supporting ailing business firms. regional financial institutions in particular are expected to play an active role in generating new businesses in their region. we observe the first shoots of new regional businesses in a variety

to mitigate the inevitable recessionary effects of fiscal consolidation, the composition of such measures must favour the reduction of current public spending and of taxes, particularly in a context such as in europe where taxation is already high by international standards. there is no doubt that lasting growth is essential for reducing unemployment, particularly among young people. in some european countries youth unemployment has reached levels that damage people ’ s faith in prospects for a decent life and which risk giving rise to extreme and destructive forms of protest. output growth was essential for the success of the european social model. the extraordinary economic growth during the so - called “ golden age ” – namely the thirty years that followed the second world war – allowed a significant improvement in the material wealth of a large portion of the european population. at the same time, this wealth strengthened the growth process. at that time the foundations were laid in europe for modern welfare systems aimed at protecting individuals against the risk that unemployment, illness or old age could lead to a deterioration in their living standards. it is in part thanks to these instruments that the financial crisis and the recession have not had the same devastating social effects as the great depression. many years ago rudi dornbusch said, exaggerating rather, that europeans were so rich they could afford to pay everybody for not working. this is no longer the case, but we do not wish to lose the solidarity which inspired that model in such very different times. therefore, today we must adapt that model in line with the changes that demographic dynamics and the new environment of global competition demand. this must be done to reduce youth unemployment, increase consumption and preserve the very essence of welfare. another aspect of growth sustainability, in a european context, that i would like to draw your attention to today is that of income distribution. for almost twenty years there has been a trend towards a higher concentration of family income in europe to the detriment of the poorest households, as statistics published by eurostat show. a more equal share in the fruits of the production of national wealth helps foster a culture of saving and, therefore, of collective involvement. a sense of being an integral part of a country and of having a stake in its economic future strengthens social cohesion and encourages individual economic behaviour that leads, in the aggregate, to economic prosperity for all. there are a number of tools governments can use to achieve this aim, but first of all social cohesion must be sought by removing the barriers which limit individuals ’ opportunity to pursue their