pensions. germany is moving in the same direction after its recent pension reform. in finland, a part of the social security contributions is channelled into a publicly administered fund. france has decided to create a fund equivalent to 10 % of gdp by 2020. ireland's public national reserve fund has assets of 7. 5 % of gdp, and the irish government is committed to setting aside contributions equal to 1 % of gdp up to 2025. belgium has set aside revenues from umts licenses for such a fund. sweden is obviously well advanced in this respect with a pension trust fund equivalent to 25 % of gdp. we should not be afraid of a stronger role for privately managed funded systems. such systems have the advantage of efficient administration and an absence of political interference. they may also induce increased private savings. but suitable regulation must deter risky investment strategies that could jeopardise living standards at a vulnerable stage in people's lives and would discredit an increased role for the private sector. the ageing of the population will also have a profound impact on budgetary policies, not only because of the consequences of population ageing on pension arrangements. expenditure on healthcare is also expected to increase markedly. the potential impact of population ageing on the fiscal position of countries is an important reason why european countries should not only pursue balanced budgets, but also a surplus. this would allow them either to reduce their public debt, which would lead to lower interest payments and more scope for an increase in expenditure relating to population ageing, or to establish special funds to be used to finance this additional expenditure. as a final remark on this particular issue, i would like to mention that population ageing is one of the broad economic trends shaping the future of financial markets in the euro area. over the coming years, together with the liberalisation of financial markets, population ageing will lead to further demand for long - term investment instruments on the part of pension funds. in addition, the need for portfolio diversification may drive up the volume of cross - border investments, including investments in emerging markets with a more favourable demographic structure. these trends are likely to provide further impetus to the development of suitable financial instruments for pension funds, and more generally for savers at the end of the intermediation chain. developments in euro capital markets from a global perspective i will now try to describe recent developments in euro capital markets from a global perspective. the launch of the euro on 1 january 1999 was an historic event. eleven national currencies

issuers across the euro area have privileged access to a large number of investors in a large and open market place. this has paved the way for new firms and relatively small firms to obtain finance from stock markets that have specialised in providing funds to young and innovative firms. we have seen an astonishingly large number of new listings in recent years. oversight of financial markets and recent institutional and regulatory developments let me now turn to the issue of the oversight of financial markets and recent institutional and regulatory developments. the internationalisation of markets is posing new challenges for supervision. the new challenges posed by recent market developments come mainly from two sources, technological advances and the increased competition and market integration triggered by the introduction of the euro. until the 1980s, financial activity was conducted within heterogeneous frameworks. each financial system was characterised by a different currency, legislation and supervisory structure. in general, each sector of the financial industry – banking, securities and insurance – had its own supervisory agency. financial innovation has significantly blurred the distinction between products supplied by different intermediaries, and technological advances have had a major impact on the importance of the physical location of the market players, since the two sides of the transaction and the intermediary need not be close geographically. the concept of the market itself has drastically changed, since it has become an entity not clearly identified by a physical location. for example, a large part of the regulation relates to the definition of a market as a physical entity. in today's financial systems it is possible to have markets, like the foreign exchange market, that do not a have a geographical location. public policies have progressively adapted to the new market environment, increasing cross - border and cross - sectoral co - operation between competent authorities and shaping new, less cumbersome and intrusive regulatory and supervisory tools. the introduction of the euro has further eroded sectoral and geographic segmentation, thus initiating debates in many countries on the most efficient institutional arrangements for prudential supervision and financial stability. the single agency approach has recently gained ground as a response to the breakdown of sectoral distinctions in the financial industry. sweden and denmark within the european union and canada and norway outside it were the first countries to adopt such a model. this solution attracted even more attention with the reforms in the united kingdom establishing the financial services authority. the developments which have occurred in the market seem to favour the single supervisor approach. in fact, financial products are now mixed and the same economic function is performed by contracts supplied by