not addressed, then problems stemming from structural deficiencies are bound to reappear. concluding remarks in a nutshell, the past global growth model proved unsustainable. the lessons from this and previous crises suggest that failure to address long overdue reform challenges promptly might result in a “ lost decade ” for the global economy. these reform challenges include : achieving a balanced global growth trajectory ; implementing stability - oriented macroeconomic policies ; carrying out structural reforms ; putting in place more flexible exchange rate arrangements ; appropriate financial sector regulation and oversight. only partial progress has been made so far, and the distortions that led to global imbalances are still present. if reform challenges are not met, there is a major risk that global economic activity will remain subdued, high public debt will become more persistent and unemployment will remain high. it is therefore crucial to make headway with our reform agenda, while taking care to ensure that our response to the crisis does not sow the seeds for renewed economic imbalances and financial excesses. thank you for your attention.

; addressing cross - border regulation of systemically important financial institutions ; the need for a ‘ ‘ holistic ” approach to regulation, which should extend to the shadow banking system. to this end, a timely finalisation of the basel committee ’ s proposals on capital and liquidity regulations is critical to strengthen the resilience of the banking sector. initiatives to safeguard financial stability are being coordinated at the global level by the financial stability board ( fsb ). at the european level, a new body, the european systemic risk board, is expected to contribute to the global effort to enhance system - wide risk assessment and develop a consistent macro - prudential framework. the establishment of the european systemic risk board will give the ecb a more prominent role in macro - prudential supervision, quite separate from its monetary policy responsibilities. the initiatives undertaken at the global and european level should address the transparency and risk - taking behaviour of financial institutions, and thus be consistent with general principles such as : i ) correct risk - taking incentives and avoid moral hazard ; ii ) minimise distortion in the banking sector ; iii ) ensure a global level - playing field. we must ensure that governments remain vigilant on safeguarding financial stability and financial market participants accountable for their decisions. in this context, i believe we should avoid creating new incentives for moral hazard for instance by creating an “ emergency fund ” for banks financed or co - financed by taxpayers ’ money. is the global economy headed for a lost decade? given the challenging reform agenda and the possible obstacles to global growth that i have outlined earlier, what are the chances of the global economy heading for a lost decade? i feel that there is a widely shared view today that global activity and trade are unlikely to exhibit the same strength in the years ahead as in the past decade. indeed, returning to precrisis economic activity levels is likely to take time. on the one hand, some emerging economies, notably in asia, have not experienced declines in output, yet still remain dependent upon advanced economies for future growth. evidence of decoupling is at best mixed and export oriented strategies in those countries still prevail. on the other hand, advanced economies may be faced with the prospect of a protracted period of sluggish growth, given that the financial crisis is likely to have adversely affected their growth potential. according to a recent oecd study, financial crises in oecd countries are estimated to lower potential output by 1. 5 to 2.