to pure winds. ” today, the bank of mauritius has become accustomed to the distortions of political speak. people who wear victimhood as a badge of courage get lots of attention. there are interpersonal and sociological components to this that run very deep in our society. perhaps our society merits ecclesiastical review by common sense. three of the five banks whose banking licences the bank of mauritius has revoked in its history have a common thread that runs through to their demise. like a piece of an indian classical bis central bankers ’ speeches raga, a theme plays throughout in different variations, tempos and pitch. in small, heavily politicized, clan - based societies, relations between politics, banking and business tend to become too cozy, not to say incestuous. the politically well - connected ceos or the politically well - connected biggest shareholders have had a domineering influence in their respective banks. they found it difficult to imagine that anything bad could happen – a phenomenon known as ‘ disaster myopia ” – which makes them develop an infallible instinct to self - destroy and ruin their own banks. another striking feature of the three defunct banks under reference is specific management weakness, particularly in the lending area, a frequent initial cause of financial distress known even to the most stupid external auditor of banks. by the way, external auditors generally have the right nose. tragedy! they pretend to have sniffing deficiency. bad lending practices, often motivated by considerations other than normal, opened the door to credit weaknesses and left the banks vulnerable to adverse economic cycles. one of our latest discoveries was massive lending to sister companies having fantasy science fiction balance sheets or no balance sheet at all. the tantalized regulator wondered whether he or she should believe in astrologists or physicists in astronomy. non - performing loans and associated problems accumulated rapidly. the attitude and behaviour of top management permeated middle management and other organizational layers. a bad management culture is very difficult to change. the change for the better may take as long as the change for the worse. the regulator finds himself in an impossible position. from technical mismanagement, the defunct banks shifted to cosmetic management and then to desperate management. and finally, to fraud. it ’ s a sobering reminder of man ’ s capacity for folly. ladies and gentlemen, this year a distressed insurance group involved in shadow banking fell tragically. at least rs25 billion, that is, as big as 6 per cent of our 2014 gdp, passed through the

information on activity in the third quarter – coming from various confidence surveys and indicatorbased estimates – continues to support the assessment that economic activity will grow robustly while possibly moderating somewhat. looking ahead to the remainder of 2006 and 2007, the conditions remain in place for the euro area economy to grow at solid rates around potential, with some volatility in the quarterly growth rates likely to emerge around the turn of the year. global economic activity has become more balanced across regions and is still robust, thereby providing ongoing support for euro area exports. investment is expected to remain strong, benefiting from an extended period of very favourable financing conditions, balance sheet restructuring, accumulated and ongoing strong earnings, and gains in business efficiency. consumption growth in the euro area should also strengthen further over time, in line with developments in real disposable income, as employment conditions continue to improve. risks to the outlook for economic growth are broadly balanced over the shorter term, although the recent fall in oil prices – if it were to prove lasting – has the potential to lead to somewhat stronger demand and output growth than embodied in our baseline scenario for activity in the coming quarters. over the longer term, risks to growth lie on balance on the downside, and relate mainly to the possibility of a renewed increase in oil prices, fears of a rise in protectionist pressures, especially after the suspension of the doha round of trade talks, and possible disorderly developments owing to global imbalances. as regards price developments, according to eurostat ’ s flash estimate, annual hicp inflation fell to 1. 8 % in september 2006, from 2. 3 % in august. although no detailed breakdown is available as yet, this relatively sharp decline seems to be the combined result of favourable base effects, given in particular the strong rise in oil prices a year ago, and the recent significant fall in oil prices. while the outlook for energy prices is uncertain, on the basis of current energy prices and the higher quotations on futures markets, overall inflation rates are likely to increase again towards the end of the year and in early 2007. as a consequence, we expect a considerable degree of short - term volatility in the annual hicp inflation rate, while the overall inflation rate will remain elevated at levels above 2 % on average in 2006 and is likely to remain so in 2007. in addition, risks to the outlook for price developments remain clearly on the upside. they continue to include a stronger pass - through of past oil price rises into