institutions, responsible for the processing of all financial market transactions, including a crucial role in the control of risk. professionals constantly have to re - tool, re - equip and fully update themselves to meet the exigencies of the marketplace. with so much of innovation and technological progress taking place in the world of finance, there is no place for players having limited skills and knowledge in treasury management. the market punishes those who lag behind. one of the challenges in treasury management is to keep abreast of latest techniques and trends in the marketplace and make the most out of them. the biggest challenge for most of our market participants remains the interpretation of economic indicators, changes in policy signals and predicting the course of economic events that affect financial markets. it ’ s tantamount to becoming good crystal ball readers in the money and foreign exchange markets. treasury management is also the management of risks. with the globalization of financial markets, financial institutions around the world are exposed to a multiplicity of risks. movements in the rates of interests and volatility of exchange rates in an increasingly complex environment have made the process of managing risks a critical aspect of treasury management. may i however state that my recent experience in the domestic financial market tends to suggest that our treasury managers seem to be acquiring expertise in predicting changes in the interest rate policy stance of the bank of mauritius. but a very limited number of treasury managers seem to be able to foresee at times movements in exchange rates. this is quite understandable ; it is not in the realm of mortals like us to accurately predict exchange rate movements. credit risks, market risks, exchange risks, payment and settlement risks and so on and so forth are all risks that textbooks teach us how to mathematically measure. textbooks also teach us the various ways and means of protecting against risks. operational risk however is a type of risk that no financial institution has ever been able to guard itself against. no financial institution or any other enterprises, in particular treasury management units in any of these organizations, should ever dare to overlook operational risks. it is worth stating that many of the lessons learned from those headlines cases cited violations of the fundamental tenets of internal control, particularly those pertaining to operational risks. lately we have observed that some institutions have been reviewing their treasury operations. the bank of mauritius views these undertakings as positive moves towards improving efficiency in management. in any treasury management unit it is essential to have a modularly flexible treasury system, which can adapt to the conditions of a

. on the fiscal front, effectively balancing the social contract between generations means creating room for stabilising policies in future downturns and protecting the coming generations by forcing the distributional debate to take place in the present. this balancing act focuses on the quality of public expenditures and implies that deficits are justified only to the extent that they deliver sufficient returns in terms of future fiscal revenues ( through public investment supporting total factor productivity, for instance, or through the countercyclical impact of automatic stabilisers ). on the financial front, redefining the social contract between generations means realigning today ’ s incentives so that tomorrow ’ s fiscal policy is not threatened by financial dominance. bailing out banks with taxpayers ’ money is indeed both unfair and a factor of moral hazard. a closer link therefore needs to be restored between the responsibility that arises out of excessive leverage and the costs associated with deleveraging. the social contract also needs to be rebalanced between the generations alive today. there is ample room for a debate on the distributional impact of fiscal and economic decisions. fairness, a concept which has a particular resonance in this university thanks to john rawls6, is a legitimate objective : solidarity can help to ensure that economic progress for the many is not achieved at the expense of impoverishing the least fortunate households or depriving them of their right to equal opportunities. a reduction of rents and entry barriers, which notably disadvantage younger men and women on the labour market, is in that sense fully consistent with the objective of fairness, while also making the economy more competitive by setting the right incentives. national social contracts will continue to differ depending on the distributional choices made by each constituency. but europeans now have to recognise that such choices need to be fully in line with the sustainability imperative. across countries what does the social contract mean at european level? here again, there are two dimensions to consider : a horizontal and a vertical dimension. the horizontal dimension concerns the rights held and responsibilities borne by each member state vis - a - vis its partners. the vertical dimension concerns the contract that exists between individual citizens and the european union. both need to be redefined in the light of the crisis. the european social contract primarily binds all member states of the european union in the pursuit of the eu ’ s objectives, as laid down in the treaties. i will focus here on another and even more demanding contract, the one that binds the euro area countries. sharing a single j. rawls,