euro has coincided with a remarkable deepening of financial integration. the financial landscape has already changed enormously in most market segments. well - integrated financial markets and diversified portfolios reduce the extent to which firms ’ and households ’ saving and spending decisions are dependent on economic and financial developments in a specific country, region or sector. as a result, credit and risk - sharing channels are increasingly helping to attenuate the impact of shocks in a specific euro area country or sector. this financial market - based mechanism essentially means that consumption does not need to follow movements in regional output. there are two reasons for this : first, consumers can borrow from abroad ; and second, their financial wealth is less dependent on local conditions thanks to well - diversified international portfolio allocation. this also gives rise to greater competition, resulting in more favourable financing conditions for consumers and firms. in this regard, there is a very interesting study looking at the united states that i like to cite. according to this study, the us capital markets smooth out 39 % of shocks to gross state product ( equivalent to our gdp ), the credit channel smooths out 23 % of such shocks, and the federal budget smooths out 13 %. 25 % of the shock is not smoothed out. thus, according to this study, financial markets and financial institutions absorb 62 % of idiosyncratic shocks in the united states : an effect much larger than that of the federal budget. the euro area is moving in this direction, and i am sure that financial market - based risk - sharing will become increasingly important over the coming years. c ) the third area of strength is the fact that the euro area as a whole has become more resilient to external developments than its individual member countries ever were before the launch of the euro. national economic policies have become better coordinated, and of course the risk of possible speculative attacks on national currencies has been removed. not so long ago, the impact of movements of the us dollar vis - a - vis major european currencies was significantly aggravated by big tensions inside the exchange rate mechanism namely between the currencies that have now merged to form the euro. this can no longer happen. this increasing resilience is illustrated by the fact that the major shocks of the last ten years have not played a significant role in the dispersion of output growth and have not contributed to economic divergence. * * * ladies and gentlemen, let me now conclude. although there is still some persistent diversity across euro area

dispersion of annual real gdp growth over the period between 1999 and 2006 ( measured as unweighted standard deviation ) was around 2 percentage points. this figure is close to the average dispersion of real growth rates since the 1980s. by comparison, if we look across all 50 us states, the dispersion of real growth has averaged approximately 2. 5 percentage points over the last 15 years. when the united states is divided into the eight statistical regions, the average dispersion is around 1. 5 percentage points. one important issue of concern, however, is the fact that within the euro area there is also a relatively high degree of persistence regarding output growth differentials. this is less the case in the united states. however, taking the united states for comparison only helps up to a certain point. on the one hand, the us economy is more flexible than the euro area, which means that the effects of asymmetric shocks can be absorbed more easily and more quickly. on the other hand, the united states exhibits stronger regional specialisation than the euro area, making its regions more susceptible to specific asymmetric shocks. let me now turn to the two main drivers of growth differentials for the euro area : differentials in cycles and differentials in trends. differentials in cycles have steadily declined since the early 1990s. there is also evidence of a stronger common euro area cycle accounting for a large part of the business cycle fluctuations across euro area countries. since 1999 several shocks have spread in similar ways across euro area countries. for example, the euro area has successfully weathered a number of shocks, including the bursting of the dotcom bubble, the ripple effects of the terrorist attacks of 11 september, the surge in global commodity prices – particularly energy prices – and the persistence of sizeable global imbalances. the high degree of synchronisation in the business cycles of euro area countries is a feature unique to the euro area. this suggests that eu integration and the launch of the euro – rather than global forces – have led to smaller differences in output gaps among euro area countries. the picture for the second driver of dispersion – i. e., differentials in trends – shows lasting differences, with a gradual increase in trend growth dispersion. this picture also differs across euro area countries, some of which persistently exhibit trend output growth either above or below the euro area average. it is here that the various sources of diversity that i have just mentioned play a role.