period i have developed a strong admiration for germany and its people, and also for the way that germany conducts its economic policies. the german economy has often been thought of as the engine of the european economy. but less than 10 years ago, germany was seen by some observers as the “ sick man of europe ”. let me cite some books and newspaper articles from that time : “ can germany be saved? ”, asked one of this country ’ s most well - known economists in 2003, noting that “ germany provides something of a case study of what not to do in designing a prosperous future ”. “ how the mighty are fallen ”, said a major international magazine also in 2003, well representing the mainstream economic analysis. “ after the german economy was seen as an exemplary model of successful capitalism for decades, ” the magazine went on, “ today it is germany that economists point to with a mixture of contempt and alarm. ” “ vom meister zum mittelmaß ”, wrote a major german newspaper in 2005, speaking of “ absteigende staaten wie deutschland, die in ihrer bedeutung schrumpften und ihren haushalt nicht in den griff bekamen. ” thankfully, these gloomy forecasts proved mistaken, and today, germany is in the lead in rebounding from the crisis. bis central bankers ’ speeches since the trough of mid - 2009, german real gdp has grown by 6. 9 % compared with the euro area as a whole by 3. 8 %. employment in germany has increased by 2. 1 %. exports have grown by 25. 6 %. this performance is no accident. neither is it based on cyclical, unsustainable factors. it is the result of sound fiscal policies, permanent attention to unit labour costs, and bold reforms that have been rigorously implemented over a prolonged period. and it sets an example that is very important for the current situation. first, it demonstrates how sound policies can lead to prosperity within economic and monetary union. by encouraging industries to embrace the opportunities of globalisation. by maintaining technological excellence. by prioritising cost and price competitiveness. and by ensuring flexibility in the labour market. second, it proves that it is possible to regain competitiveness within monetary union. germany after the post - unification boom had a very serious competitiveness problem itself. it took a sustained effort to become competitive again. this gives encouragement to euro area countries that have

, largely shared with other euro area banking systems. overcoming these challenges is vital if spanish banks are to build up a sufficiently strong position to contribute to economic growth and job creation. the first of these challenges is to reduce the assets impaired by the crisis. chart 17 shows that in june 2018 the volume of non - performing assets had decreased by 60 % from its peak, although it remained at still - high levels. foreclosed assets had fallen by 40 %. economic growth will continue contributing to the ongoing reduction of impaired assets. however, banks need to press ahead with applying active management policies to their impaired assets. in this respect, it should be kept in mind that continued high levels of impaired assets have deleterious effects on banks themselves and on the economy as a whole, which is why the economic and supervisory authorities have a special interest in banks taking appropriate measures in this area. recouping profitability is another of the challenges facing the spanish banking sector. although spanish bank profitability has returned to positive levels and stands somewhat above the eu average ( as shown by chart 18 ), it is still below its pre - crisis levels and below those of the banking systems of some developed economies which have performed better in this respect. this current low profitability is concentrated in banks ’ business in spain, although their activity abroad, which provided them with a valuable source of risk diversification during the crisis, is not plain sailing, particularly at present when some of the economies to which spanish banks are exposed ( such as turkey and argentina ) are going through notable difficulties. in any event, as they deal with the low profitability of their domestic business, spanish banks will have to guard against overly relaxing their loan approval and selection criteria. the third challenge facing the banking sector is that associated with the process of adapting to a more stringent regulatory framework with higher own funds and liquid assets requirements and other additional requirements derived from the new resolution regulations. spanish banks have already largely adapted to the new requirements, and their liquidity and solvency ratios stand above the minimum requirements, although as can be seen in chart 19 their cet1 capital ratios are low compared with those of the other euro area banking systems, underscoring the need for banks to strengthen their capital levels. it should be noted that although most of the regulatory changes have already taken place, some reforms 11 / 14 have yet to be applied in full, such as the basel iii review and the mrel requirements, which will involve further adaptation by banks. lastly