has declined by more than 40 % in the past five years and fell considerably by 7 % in 1999. 17 a significant increase in cross - border interbank loans and deposits allowed a smooth transfer of liquidity. 18 next to the overall increase in cross - border interbank activities, a shift from claims on banks outside the euro area to banks inside the euro area could be noticed. the latter came close to 50 % of the outstanding amount of nearly 2 trillion euros of interbank claims of emu member countries banks in 1999. 19 by contrast, the repo markets have largely remained segmented due to collateral settlement problems. 20 foreign demand for short - term securities such as treasury bills and commercial paper tends to be low, because they are more commonly used as cash substitutes than for investment purposes. short - term securities holders therefore have no strong need for international diversification. corporate bond issues are sold on a european scale and government bonds are becoming more easy accessible throughout europe as a result of integrated trading platforms. 21 however, the boom in diversification is limited to large - volume issues of big internationally known companies in the private bond market and to the liquid benchmark bonds in the government bond market. 22 although alliances and mergers are under way equity markets are not fully integrated to date. securities settlement and trading platforms differ among european countries. there are still significant differences in the legal, regulatory and taxation environment of equity markets which investors have to take into account when diversifying their portfolios. 23 in the “ new markets ”, investor protection has been assigned equally high importance throughout europe and therefore ipos in this field appear to have attracted more foreign investors than small and mid - cap stocks in regular markets. the introduction of the euro has helped to foster the integration of some markets, but it seems that the share of international securities in total security holdings of domestic investors remains small when compared with optimal diversification proposed by portfolio theory. 24 whereas the elimination of exchange risk and, accordingly, of currency matching restrictions for institutional investors has facilitated cross - border investments, transaction costs arising from differences in payment and settlement systems, varying accounting standards, differences in taxation and in investor protection, as see bis ( 2000a ), p 124, and detken, c and p hartman ( 2000 ), p 17. see imf ( 1999 ), table a1. 1. see bis ( 2000a ), p 125. see, eg santillan, m bayle and c thygesen ( 2000 ), p 17

also seen a marked improvement. the interim conclusion we can make, therefore, is this : extensive measures have already been taken in the wake of the financial and debt crisis, most of which have suitable potential to restore greater validity to the liability principle. 5. what remains to be done but is everything thus resolved? i would argue : no, not yet. to return immediately to my last point : the extensive reform efforts in the former crisis - hit countries mustn ’ t obscure the fact that local conditions in those places should be improved further. the fact that youth unemployment is still very high in a number of countries, say, highlights the need to continue dismantling barriers to employment. low productivity in many countries is also an argument to invest more in education and training. and public administration and the legal system must become more efficient in some countries. it certainly is not as if all other countries still have homework to do while we in germany can just lean back and rest on the laurels of the successful labour market and social reforms implemented in the first half of the last decade. these measures helped germany - christened the “ sick man of europe ” by the economist back in 1999 - to now post one of the lowest unemployment rates in the euro area. the eurogroup president jeroen dijsselbloem hit the nail on the head when he said, “ structural reform isn ’ t something that is undertaken every ten or twenty years ". oecd forecasts predict that, of all 42 oecd countries, germany will see the second - slowest growth rate up to 2030 and the slowest until 2060. the reason for these weak growth prospects is unfavourable demographic developments, which will squeeze the potential labour force considerably in the coming years. added to this are other challenges, such as providing a speedy digital infrastructure and affordable energy given a changed energy mix, and integrating refugees into the labour market. so there is a need for economic policy action here in germany, too. we have to invest more in education and training so that the opportunities presented by globalisation and technological progress can be better harnessed for all. ladies and gentlemen 9 / 13 bis central bankers'speeches the principle of individual national responsibility and the liability principle are enshrined in the framework of the monetary union. member states have retained responsibility for their fiscal and economic policy. but as i have already noted, for all practical purposes elements of joint liability were established while we were combatting the crisis