. average per capita gdp stands at somewhat more than € 20, 000 ( roughly y 2. 2 million ), a third less than in japan. differences between individual countries are considerable. the public sector share in the euro - area economy accounts for nearly fifty per cent of gdp, and the aggregate budget shows a small deficit. aggregate gross public sector debt stands at 70 per cent of gdp. individual country figures, however, differ. for instance, gross public sector debt ranges from four per cent of gdp ( luxembourg ) to 100 per cent of gdp ( belgium, italy ). heterogeneity is a fact of life in the euro area. but homogeneity far outweighs heterogeneity in one crucial respect : we are united by our intention to form an integrated europe with a common market as a strong and reliable partner for the world economy. germany has 82 million inhabitants or about 28 per cent of the euro area ’ s combined population. germany ’ s share in domestic product is about a third of the euro area. in terms of foreign direct investment and trade, the german economy is even more intertwined with the world economy than the euro area. about a third of our national income is generated by exports. this share may even rise after the integration of the central and eastern european states. within the foreseeable future, some of our neighbouring countries will join the european union and maybe also the monetary union. germany, at the moment still a border territory of the euro area, will become the geographical centre of the union. since these countries are in the midst of a catching - up process, we will clearly benefit from their dynamic economies. iii i am well aware that the most important effect that the currency union will have on markets is by its performance – mainly through the degree of price stability achieved. at its start, the eurosystem saw a period of hitherto unprecedented price stability. in 1998 and 1999, consumer prices rose by only 1. 1 per cent ; in the year 2000, the inflation rate, at 2. 3 per cent, ran a little above the two - per cent ceiling in the wake of the sharp increase in oil prices. this year, after peaking in may at 3. 4 per cent, the inflation rate has been decreasing. in october, prices were 2. 4 per cent higher than a year before. in the current environment of a weak world economy, the ecb governing council is expecting a further moderation of price increases.

those banks that cannot adapt swiftly enough to changing conditions should exit the market. now, when discussing the issue of profitability, it is often held that regulation increases banks ’ costs and reduces their earnings. it is certainly true that regulatory requirements do entail some costs for banks. however, i would take a more balanced view on the costs of regulation. banks tend to overlook the costs of crises, as these are usually borne by taxpayers. taking these costs into account puts the banks ’ criticism in perspective. at the social level regulation still generates a net benefit. 2. 3 good governance having said that, let us turn to the third pillar of a resilient bank. a resilient bank has a sound governance structure and is committed to high ethical standards. investors and customers need confidence that banks are managed prudently. these aspects have gained a lot of attention in the aftermath of recent scandals, such as the manipulation of libor and similar financial benchmarks. these cases of misconduct spoil confidence in a twofold way. firstly, the trustworthiness of banks involved is impaired. and this has negative consequences for the banking sector as a whole. banks will have to work hard in order to heal the wounds. secondly, the reliability, robustness and representativeness of financial benchmarks have been called into question. without doubt, the integrity and credibility of benchmark - setting processes are in urgent need of a general overhaul. we all know : trust is gained only over a long period of time but may be shattered quickly. in a sense, trust is similar to humpty dumpty : it is very fragile and, once it has been shattered, all the king ’ s horses and all the king ’ s men will not be able to put it back together. in that vein, all efforts to strengthen banks ’ resilience can be undone instantly if banks cannot avoid severe cases of misconduct in future. bis central bankers ’ speeches this also applies to banks ’ risk management capacities. on this issue, however, much progress has been made. the requirements for adequate internal control systems and appropriate governance structures have been tightened substantially. let me elaborate on this by referring to reforms of banks ’ compensation schemes. in the run - up to the crisis, asymmetries in compensation in terms of risk and reward led to shorttermism and excessive risk - taking by some employees. inadequate pay and reward systems contributed to large – and in some cases extreme – absolute levels of compensation. that in turn left firms