rules, which are currently being addressed by the us authorities. latin america over the last two years, growth in most latin american countries has been weak. this year, however, there are signs of a modest upturn, with confidence slowly returning. this has been due, in part, to the direction of the structural reform agendas of many countries in the region. to strengthen the foundations for growth, policy - makers must remain committed to implementing structural reforms. countries that have made the greatest strides in reform are already reaping the benefits. both mexico and chile, which are at the most advanced stage of reform in the region, have proven remarkably resilient to turmoil in regional economies and have weathered the period of weak global growth well, considering their exposure to sluggish mature economies. other countries in the region have embarked on reform agendas and should be encouraged by the international community to see them through as swiftly as conditions allow. east asia as for the crisis - hit countries in asia, economic performance has been positively correlated with progress in reforms. stronger average growth potential in countries such as korea and malaysia reflects partly the authorities'determination in pushing through corporate reforms, reforming the financial sector and strengthening insolvency laws. in china, the authorities have repeatedly emphasised that banking reform, if coupled with the restructuring and privatisation of state - owned enterprises, is key to strong growth and financial stability in the medium term. the situation in the japanese economy calls for urgent structural reforms. authorities have made some progress in addressing the fundamental weaknesses and a reform strategy has been set out. first, banking sector reform has been appropriately focused on strengthening loan classification practices and accelerating the disposal of non - performing loans ( npls ). however, while progress has been made on the former issue, financial institutions still hold large amounts of npls in their portfolios and more progress would be desirable. second, a strategy to promote deregulation in the product and labour markets has been set up. the successful implementation of structural measures in the japanese product and labour markets would have the benefit of not only increasing potential output and employment, but also decreasing the vulnerability of the japanese economy to economic shocks. concluding remarks let me conclude by first addressing the economic policy - makers in the euro area. i am convinced that economic activity in the euro area can only be lifted to a new, structurally higher, level by far - reaching and progressive structural reforms. in this respect, the major contribution that monetary and fiscal policy can make is

willem f duisenberg : changing fortunes - financing world growth speech by dr willem f duisenberg, president of the european central bank, at the 2003 spruce meadows round table, calgary, 5 september 2003. * * * it is a great pleasure for me to be part of this round table discussion today and i would like to thank the organisers for inviting me to share some thoughts with you on the topic of financing world growth. since 2000, we have witnessed terrorism, war and declines in world equity markets, all of which contributed to increasing an already ongoing deterioration in confidence in most countries. now with the end of the major hostilities in iraq, the reduction in geopolitical uncertainties and lower oil prices, a gradual upturn in world economic activity is expected and it is important that policy - makers do all they can to support it. given the breadth of this topic and therefore the strong temptation to overrun on my time allocation, i will focus on just two points. first, i would like to say a few general words about the roles and, may i add, limitations of monetary and fiscal policy in reviving global demand, and the importance of microeconomic policies in this respect, in particular the role of structural reform in increasing potential growth. second, with the help of regional - specific examples, i would like to present some future challenges with respect to microeconomic policies and structural reforms in the world. monetary and fiscal policy, and structural reform the achievement and maintenance of strong growth implies a perspective that extends beyond shorter - term cyclical developments. indeed, over the medium term, economic growth tends to be negatively affected by the considerable costs associated with inflation, and the prospect of stable prices is therefore a key factor of growth. by being strictly geared towards maintaining price stability in a credible and lasting manner, monetary policy makes an important contribution to achieving a high level of output and employment, and to sustaining growth. confidence in lasting price stability removes the inflation risk premium on interest rates, ensuring low real interest rates, which in turn foster investment, growth and employment. theoretical and empirical evidence clearly confirm that there is no long - term trade off between price stability and economic growth. trying to use monetary policy to fine - tune economic activity or to gear it above a sustainable level will, in the long run, simply lead to rising inflation - not to faster economic growth. fiscal policy also plays a key role in contributing to macroeconomic stability. stable, sustainable and efficient fiscal policies exert a favourable effect on long