maintaining the integrity of the eu single market. i wanted to open this up to everyone in the audience because it ’ s rare to get an opportunity to speak to him directly, so philip is here. if you have a question, please raise your hand. we ’ ll get the mics to you. do let me know. otherwise, i have plenty of questions to go on with. we ’ ll come back at some point to check in and see if the folks here do want to ask you a question. but it brings back a question of the number of risks. i know that there are risks within europe of banks and banking profitability. there are trade wars. brexit is one of those risks. when you look at the eurozone overall, if this was a pyramid, what are you going to put at the top of your worry list for 2020 and the next decade that is to come? there are a lot of medium - term challenges. there ’ s a medium - term challenge for the world economy ; as a very important part of the world economy – most importantly, china – is 2 / 5 bis central bankers'speeches undergoing its own transition, undergoing a transition towards being focused on the domestic economy, focused on boosting consumption and services, then that transition has a mirror image. because, of course, europe benefited so much for many years from being able to be the supplier of capital goods, the supplier of so much to the chinese economy. that ’ s an obvious structural transformation. another one is the climate change agenda : how is the world going to move along in terms of the carbon transition? then also, and connected to those points : in terms of the mix of activity in the european economy, one thing the ecb has been highlighting is that, essentially, at this point after a very difficult period of rebuilding public finances, in terms of the support that could be provided by fiscal policy to a more balanced european economy, that this requires a big conversation among fiscal policymakers and, by extension, among the electorates about the role of fiscal policy in the european economy. it has been said quite a bit by a number of central bank governors and within the ecb, there ’ s a limitation to what monetary policy can accomplish when you have slowing growth. what would you say are those limitations? because at some point, qe has to end. is there a plan for that? that ’ s not going to go on indefinitely, is it? let me

exchange problems and the currency board will be unable to protect the country from those shocks. indeed, it could become one of the victims of those shocks as politicians look for scapegoats to explain the country ’ s economic problems to the people. foreign investment is increasing. in 1999 for example, direct foreign investment was 50 % higher than in 1998 and though we do not yet have figures for 2000, i am sure it has risen strongly again. but while this growth rate sounds spectacular, it is from a very low base. direct foreign investment into bh in 1999 is estimated to have been km 170 million. the current account deficit for that year was km 1. 4 billion. so private foreign investment financed just 12 % of the current account deficit in that year. bh needs to be increasing private foreign investment by around 200 % a year over the next two years rather than 50 % a year if the current economic growth rates are to be sustainable when the official aid flows slow down. this target is possible. the arrival here of foreign banks from austria and croatia shows that there is increased interest from foreign investors. but the climate for private investment in bh is still far from supportive. this applies to local investment as well as foreign investment. there are still problems in the legal system, which is incomplete, the licensing and regulatory systems, which are far too bureaucratic, intrusive and multi - level, and in the financial system, which is still relatively weak. improving the environment for private investment, both local and foreign, is the key economic issue facing this country. it is this that will determine whether bh has a sustainable economy – and whether it is a country in which good students like yourselves should stay to be a part of its future. the banking sector as i said in the last section, a weak financial sector is one of the factors that hampers private investment in bh. the good news is that this gloomy picture finally began to change in 2000. i will mention just a few of the highlights. · first, the payments system underwent fundamental reform. the old state - owned centralised system that had a monopoly was closed. it has been replaced with a modern european - type system with two clearing houses, a rtgs one and a giro one, owned and operated by the central bank and payments are being conducted by the commercial banks. the suppliers we used had put similar systems into place in nine other european countries. but it was done more quickly in bh than anywhere