domestic economic performance than gdp measures because they exclude the substantial profit outflows of foreign - owned firms. a number of factors contributed to high productivity growth in this country during the 1990s including inward fdi flows in high - technology sectors and past investments in education and physical capital, which boosted the technological and innovative capacity of the irish economy. while, at a sectoral level, productivity growth over the past 15 years has been particularly strong in the manufacturing sector, this finding needs to be interpreted with caution for a number of reasons. first, high productivity in irish industry is largely a result of extremely high productivity levels in a small number of foreign - owned firms, mainly in the pharmaceuticals and ict sectors. these high productivity levels largely reflect rewards for r & d effort and marketing by the parent company and should more correctly be attributed as a return to factors of production in the country of ownership. productivity growth and levels have been much weaker in many other sectors of the economy, including the more traditional manufacturing sectors and many parts of the services sector. second, productivity growth in the manufacturing sector has slowed quite significantly over the past two years – from over 14 per cent in 2002 to around 3½ per cent last year. indeed, on a year - on - year basis, productivity growth in manufacturing was actually negative during the first half of 2005. turning to the economy as a whole, productivity levels, measured as gnp per worker, are now only slightly ahead of the eu - 15 average which means that we lag behind the us and many of the higher productivity european economies. as a result, there is still plenty of scope for productivity improvements relative to these countries. the latest data produced by the cso show that in the first half of this year, economy - wide productivity growth was negative. this partly reflects weaker productivity growth in manufacturing and also partly the changing composition of irish output growth towards a higher concentration of output in services and construction – which are generally associated with quite low productivity. having said that, the extent of the productivity slowdown during the first half, as revealed in the preliminary cso estimates, was surprising and is being analysed by the bank. as more data for this year become available, we will get a clearer picture of what ’ s happening. given that ireland is now one of the higher - wage economies, productivity improvements across all sectors, including services, will be essential if ireland is to be competitive in the global economy. empirical studies carried out by the oecd and other international

- financial corporates index ( series 10 ) at the beginning of the time series in this chart. but this is no time for complacency. uk bank funding costs, as proxied by their cds premia, remain elevated – both relative to their historical average, and relative to european non - financial corporations ’ cds premia ( chart 10 ). and there remain significant risks going forward. sovereign strains, and their potential impact on the european banking sector in particular, represent the most immediate and material threat to markets generally and to uk financial stability. as a result, the interim fpc have recommended that the major uk banks provide improved and more comprehensive disclosure of their sovereign and banking sector exposures. there is also event risk associated with the forthcoming publication of the eba stress test results, if the results are markedly different from market expectations. market intelligence suggests that the major uk banks have raised around £25bn in private markets in the year - to - date 2011. bis central bankers ’ speeches the search for yield / assets the significant recovery in many global financial markets reflects, in part, the actions of policymakers around the world. in the united kingdom, the bank of england responded to the collapse in economic activity and the risk of deflation by cutting official interest rates and embarking on a programme of asset purchases financed by the creation of central bank reserves ( known as quantitative easing ). it also separately sought to stimulate markets for corporate debt and commercial paper, and put in place a special liquidity scheme for banks to swap their illiquid collateral for highly liquid t - bills. other central banks took a variety of similar actions. for example, the federal reserve began purchasing a range of private and public sector securities in large scale. and in europe, the ecb responded by offering its counterparty banks unlimited refinancing operations at maturities of up to 12 months. despite these differences in policy, one end result was common – they led to a massive expansion of central bank balance sheets ( chart 11 ) and a significant injection of liquidity into the global financial system. that in turn pushed down yields on “ safe ” assets, encouraging portfolio rebalancing ( one of the key channels through which asset purchases work ) and a “ reach for yield ”. 7 more recently contacts, especially those in the united states, have reported that the reach for yield has been exacerbated by a perceived reduction in the universe of acceptable assets for real money investors. 8 for example major