as a whole, because it understands the danger of systemic risks, that can wreak havoc. i cannot pretend that there were not tensions here and there, or losses due to the write - offs of nonperforming loans, to plummeting share values and to laying off costs, but only a few banks posted operating losses and, moreover, those, as a rule, were relatively small. even today, after three years of a downturn, the capital adequacy ratio, has remained well above the minimum 8 % in almost all cases, and for the e. u. as a whole the average is above 10 %, which underlines the good health of the banking system. moreover, it is expected that it will continue to improve as the recovery gets underway. here, i wish to repeat the very positive role of central banks, which, almost all were over more than 50 years, and many of them still are the supervisory authorities. indeed, central banks succeeded in creating a competitive and sound banking system in europe during the last fifteen years or so, during a period characterized by liberalization in financial markets and intense competition both within europe and from the us banks. the lesson i draw is that with the help of their natural interlocutor, the central banks, the private sector has become more adept in dealing with risks and the supervisors have learned from the mistakes of the past and improved their vigilance. looking ahead, the new prudential practices to be introduced under basel ii will further improve our ability to deal with financial risks and better tailor our prudential requirements to each market's special needs. another positive development is the diminishing danger of contagion, as we have seen after argentina's default, which did not lead to widespread withdrawal of funds from emerging markets. this is particularly significant for the emerging market economies in southeastern europe, which look to a greater integration in the world economy without the fear of being hit by a crisis that originates elsewhere. all this of course, provided they maintain healthy fundamentals. turning now to the developments in the southeastern balkans themselves, the present situation is a far cry from the bleak picture at the early stages of transition, more than a decade ago. apart from often - bloody conflicts, hyperinflation and financial stability seemed endemic in the region only a few years ago. regarding the financial sector, starting from an initial position with practically no commercial banks, the countries in the region faced problems that were often beyond

and within the next year the growth rate should gradually approach its potential, estimated at around 2? % per annum. the us, on the other hand, is growing fast, maybe too fast. certainly, i do not wish to belittle the achievements of the american economy, especially its high productivity growth, but the continuation of the twin deficits are certainly a cause for concern, in that a sudden correction could have far - reaching implications for the international financial system. the us sees with benign neglect its twin deficits. on the one hand, it expects that continuing fast rate of growth would generate sufficient tax revenues over the medium term, which, in combination with the gradual phasing out of some tax relief measures, will reduce the deficit and, on the other hand, they expect the current balanced of payments correction to be realized via a devaluation of the us dollar, which would help the sustainability of the us recovery and generate higher profits in dollar terms from the us investments abroad. in summary, they don't expect an abrupt and substantial rise in interest rates, which would have had adverse effects both on the fiscal deficit and on consumer demand, thus precipitating a cyclical downturn. however, the european point of view, if i am allowed to summarize, is that an unsustainably fast growth rate, based on private and public borrowing is not good for anyone and the us cannot be an exception. the eu, and especially the eurozone, has played a constructive role in promoting a stable financial environment. the recent appreciation of the euro is an indication of the markets'confidence in our economies. i believe that a strong euro is good for europe and the world, as it helps fight inflationary pressures and supports the confidence of consumers and producers. it is also clear that the eurozone cannot solve all the imbalances that threaten the stability of the international economy. i do not wish to enter the debate on whether the fiscal stimulus in the us was necessary two years ago, at the onset of the economic slowdown, but certainly it has to be reversed now as the us is growing at an unsustainable rate. at the same time, third countries, especially those in asia, should contribute themselves by allowing market forces to play a greater role in the determination of their exchange rate, and by abandoning their mercantilistic attitudes. however i should mention that, there is an open debate whether a revaluation of the chinese renminbi