dominating global milk powder export production for many years, we should expect competitors to more aggressively target the chinese market. this reinforces the need for further diversification in export products and markets, including positioning for the opportunities that are expected to open up in the indian market. iii ) dairy farmer indebtedness dairy debt almost trebled over the past decade, and currently stands at $ 32 billion. it is concentrated among a small proportion of highly leveraged farms with around half of the dairy debt being held by only 10 percent of dairy farmers. strong export earnings saw the sector ’ s debt to income ratio improve between 2010 and 2012, although for the decade as a whole this ratio tracked steadily upward ( figure 10 ). figure 10 : dairy debt ( june years ) source : statistics new zealand, rbnz. the elevated debt level means that some farmers are potentially highly exposed if there are substantial declines in the milk price pay - out, or if land prices fall. with dairy production techniques becoming more intensive and with a higher cost structure, the implied ‘ breakeven ’ pay - out for individual farm profitability has increased over time. a significant decline in the milk pay - out, for example, could place some highly indebted farmers under financial strain, particularly with the market for farmland being more illiquid in times of stress. higher debt levels mean that farmers are also exposed to rising interest rates, especially with close to 70 percent of dairy debt comprising floating rate mortgages. many dairy farmers however, are being cautious in the current cycle and are using their higher net incomes to acquire additional property and undertake farm improvements without taking on new debt – and in many cases are repaying debt. farm building consents have bis central bankers ’ speeches been rising steadily and dairy conversions are increasing, while dairy farm prices remain well below 2008 levels and farm credit growth remains moderate ( figure 11 ). dairy farmers are therefore generally taking a cautious approach in the knowledge that the current high prices can turn around quickly. this is encouraging to see given the vulnerability of the sector and its already high debt load. figure 11 : value of farm sales and credit growth source : reinz, rbnz. conclusion i began with a quote from charles wilson about what ’ s good for general motors. he could not have imagined 56 years later that the us government would have a 60 percent ownership stake in the company. but it does illustrate how even the most dynamic enterprises can lose competitiveness and suffer major losses in market share. the new

andreas dombret : europe ’ s way forward speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, on the occasion of the change of the head of the bundesbank ’ s new york representative office, new york, 2 july 2013 * * * introduction governor powell excellencies distinguished guests ladies and gentlemen it is a pleasure for me to welcome you to the bundesbank ’ s reception in new york. many thanks for taking the time to attend tonight. today is a special day for two reasons : first, today is a good day for international financial stability. this morning the fed board approved a final rule implementing basel iii in the united states. this demonstrates the joint determination of the global regulatory community to deliver on the financial reform agenda. as i have said numerous times before, i have never doubted the fed ’ s commitment to basel iii. second, on a more local scale, we bid farewell to our chief representative mr joerg stephan. he did an excellent job for which i wish to thank him on behalf of the executive board of the bundesbank. and today, we inaugurate his successor ms claudia stirbock. but before doing so, let me make a few remarks on the current situation on the european side of the atlantic. forging a banking union europe is currently very busy. busy forging a banking union. this banking union represents the largest integration step since the euro came into being in 1999. a single market for banking is the logical complement to the single currency. and a highly integrated banking system is positive news for the real economy. thus, a banking union is an excellent project and it is actively supported by the bundesbank. of course, we need to get it right. to be successful, any banking union needs strong institutions. this is why we need a thorough asset quality review as soon as possible with credible national backstops. joint supervision of banks and resolution of insolvent institutions are both critical in this respect. the planning for a joint banking supervision, for the so - called single supervisory mechanism – or ssm for short – is taking shape. it will be established under the roof of the european central bank and will operate in close cooperation with the national central banks of the euro area, including the bundesbank. a clear separation within the ecb between the monetary policy function and the banking supervision function will be needed to ensure that the independence of monetary policy is properly protected and conflicts of interests