flexible and market - oriented. fourth, significant steps have been taken to improve economic policy coordination. these measures included the strengthening of the stability and growth pact, the establishment of the european semester, stronger emphasis on macroeconomic imbalances and the fiscal compact. last but not least, crucial steps have been agreed to move towards the creation of a banking union. the single supervisory mechanism will start operating in november 2014 and agreement on the single resolution mechanism has been reached. these measures will bis central bankers ’ speeches work to reinforce the european banking system, reduce the negative feedback loops between banks and sovereigns and overcome fragmentation in eu financial markets, promoting growth. results and challenges ahead the european strategy to deal with the crisis is delivering results, as interest rate differences between core and periphery countries have been reduced, programme countries have regained market access and the banking sector has been strengthened. however, many challenges remain. a key characteristic of the euro area economic recovery is the continuing decline in loans to the private sector. the recovery is so far “ creditless ” at both the euro area as a whole and, in many cases, in individual countries. because the euro area economy is bank - based, bank lending is especially significant for companies and, in particular, for smes, which produce the bulk of goods and services and account for a large share of employment. consequently, the on - going credit contraction raises the question : can the recovery be sustained in the presence of negative loan growth? personally, i doubt it. looking ahead, there is a need to deal with limited potential growth in the euro area. to this end, euro area members are increasingly recognizing the need for joint efforts and coordinating national structural policies for growth and jobs, as reflected in the recent conclusions of the european council. today ’ s speaker klaus regling, as the first managing director of the european stability mechanism and chief executive officer of the european financial stability fund, has been at the centre of the euro area crisis. his career has spanned 35 years in senior positions mainly in the public sector. he worked at the imf in washington and jakarta ; he spent around 10 years at the german ministry of finance, working on preparations for monetary union ; he then moved to the european commission where he was director general for economic and financial affairs from 2001 to 2008. he is thus perfectly suited to address the issue of how we overcome the euro area crisis. bis central bankers ’ speeches

in partnership with greek firms penetrate these markets. thessaloniki, the second biggest greek port is expected to play a pivotal role in the economic integration of the southern - eastern european countries. the border of bulgaria, and of landlocked fyrom are about 80 kms from thessaloniki and for their respective capitals, sofia and skopje, thessaloniki is the natural outlet to the mediterranean sea. likewise, the southern provinces of serbia and parts of romania can equally be served efficiently by the port of thessaloniki, which, in addition has an interesting cultural life and a pleasant life style. the advantageous location of thessaloniki will become even more evident after the completion of the planned and partly financed by the eu of the north - south eu road and railway axes. the renewed optimism about the greek economy is now reflected in many areas. i wish to refer to the example of construction and housing. there was a widespread belief that construction would be the main victim of a slowdown in the post - olympics period. there was talk of a housing bubble and of a supply glut. indeed there was a construction slowdown in the immediate aftermath of the olympics and a levelling off of housing prices, but since last year we are seeing a renewed dynamism in this sector, unexpected in its degree. in addition to greeks, many more foreigners than in the past are building secondary residences in the greek islands and in the mainland. total credit growth at around 20 % annually and 30 % for credit to households since 2001 has been one factor underpinning strong private demand in recent years and has been fuelled by the low euro area interest rates. i fully accept that we should monitor developments in this area but we are far from becoming alarmed. greece is a country with a still relatively low household debt - to - gdp ratio – 38 % compared with 56 % for the euro area. the rapid credit expansion in this area reflects fundamental changes in the greek economy and has underpinned the transformation of a fragmented stagnant inward - looking banking sector into a dynamic modern banking sector with strong international competitive presence. the lifting of foreign exchange controls in the mid - 1990s and of household credit restrictions in 2001 as well as privatisations and the mergers between a large number of smaller banks since 1997 has created greek champions ( up to the second half of the 1990s almost 2 / 3 of greek banks were controlled by the state and were moreover, badly run, compared with about 15 % presently, which are managed by professionals ). the biggest 5 banks