evidence about their causes and their consequences, and about what can be done to address them. take the case of germany : the adjustment to re - unification has been painful and protracted. but over the past years a combination of strong productivity growth, wage moderation, corporate restructuring and the successful implementation of structural reforms has generated an impressive export performance and renewed job creation and has led this country back on the path to sustained economic growth. it can be done. and not only in germany. there are other examples of european countries, both within and outside the euro area, that have also succeeded in simultaneously achieving higher productivity growth and non - inflationary employment creation through the implementation of appropriate reforms, prudent wagesetting and sound fiscal policies. the euro area as a whole will emerge as a stronger and more dynamic economy if the lessons from these success stories are heeded also elsewhere. thank you very much for your attention.

the financial system and the banking sector in particular. although household debt, as a percentage of disposable income, has been improving consistently since reaching a peak in the first quarter of 2009 and the ability of households to service their debt has remained strong given an extended period of low interest rates, the household sector is now faced by a rising interest rate cycle and higher cost of living. household wealth has increased strongly, however this was mainly as a result of a significant increase in the valuations of financial assets, possibly leaving consumers in a financially vulnerable position. house prices in south africa are fairly valued at present and do not present any risks to financial stability. equity market valuations, on the other hand, are currently at fairly elevated levels and a sudden and sharp correction in equity markets could reveal vulnerabilities that could have certain indirect negative effects on the financial system. south africa has been participating in the fsb ’ s monitoring exercise of non - bank financial intermediation activities, or shadow banking as it is commonly known, since 2012. although their share of total financial assets increased to about 18 per cent in the fourth quarter of 2013, non - bank financial intermediaries currently provide only about 11 per cent of total credit extension in the south african financial system. the optimistic outlook for some advanced economies continues to diverge from the more subdued growth outlook for emes amid persistent concerns over country - specific weaknesses. while leading indicators are pointing to the global recovery gaining strength in the second half of 2014, some constraints from both the fiscal and the monetary sides, as well as slow progress with structural reforms in some instances, remain a risk to a sustainable global recovery. a prominent exogenous risk to domestic financial stability is the effect that monetary policy normalisation in advanced economies and the us in particular could have on emes, including south africa. although normalisation has been discounted to an extent and forward guidance allows markets to anticipate policy moves better, the timing and magnitude of interest rate increases and their effects on capital flows and financial markets remain uncertain. another important global development, not reported on in the fsr, is the results of the european central bank ’ s comprehensive assessment of bank balance sheets and stress testing announced recently. twenty five banks failed the assessment and need to raise bis central bankers ’ speeches €25 billion of new capital. twelve banks have already covered their shortfalls in the year to september. the ecb expects the in - depth review of the largest banks to boost public confidence