of the past. it also provides the necessary flexibility to allow budgets to be adjusted in line with economic fluctuations. but the pact does not provide for governments to attempt to fine - tune the economy by means of fiscal policies. the experience of the first 10 years of the pact shows that some governments found it challenging to comply with the rules they had set for themselves. but the pact did help correcting very high deficits and reversing the increase in debt ratios. it is essential that the public ’ s confidence in the soundness of fiscal policies is preserved. this requires that fiscal sustainability is guaranteed. the stability and growth pact must be fully applied and its integrity preserved. the automatic fiscal stabilizers in the euro area amount to about 1 % of gdp. they provide a powerful source of fiscal support for a weakening economy. and this type of stimulus is automatically reversed when economic conditions improve. only a few countries have the scope to take additional action. where such room for manoeuvre exists, additional budgetary measures have to be targeted, timely and temporary ( “ three t ’ s ” ) in order to be effective. in the current circumstances, we cannot, and should not, risk adding a fiscal crisis to the financial turmoil and economic downturn. v. lessons to be learned from the current financial turmoil there is no need for a new global financial system ( bretton - woods ii ) or for creating new international institutions from scratch. rather, there is a need for strengthening the existing institutional framework by enhancing those general principles that ensure a smooth functioning of market economies : stability - oriented macroeconomic policies ; high competition on all markets ; the protection of property rights ; freedom of contract ; and unlimited liability. as regards macroeconomic policies, they have to be medium term oriented and geared towards price stability and sound public finances. the commitment to price stability and sound public finances is the best contribution monetary and fiscal policies in the euro area can make to financial stability. there is no trade - off between price stability and financial stability and there is also no trade - off between sound public finances and financial stability. as regards the institutional framework for the financial sector, we have to accept that even the tightest regulation cannot prevent a financial crisis. however, it is clear that the benefits of tighter regulation are larger than thought some quarters ago. hence, there is a need for a realistic assessment of the costs and benefits of tighter regulation. new regulation should set general principles rather than drawing up long lists of discretionary measures,

there is a chinese saying : “ [UNK] 水 行 [UNK] ， 不 [UNK] [UNK] [UNK] ” or in english : “ excel and advance ” or “ stay put and be left behind ”! 14. hong kong has already built a world class platform for the private wealth and asset management industry. however, there is no room for complacency. we will need to do more to further enhance the platform and to reach out to the overseas asset managers and owners to market hong kong ’ s platform. we will continue to look to the tma and all the stakeholders in the financial services industry for support and collaboration to build “ hong kong ” as the brand name that represents quality, trust and confidence to asset owners and managers. this is an ongoing task and i have no doubt that hong kong, in line of our “ can do ” spirit, can live up to the challenges ahead of us. thank you very much. bis central bankers ’ speeches