yves mersch : current challenges in the sovereign debt crisis speech by mr yves mersch, governor of the central bank of luxembourg, at the swf ( sovereign wealth fund ) forum, montreux, switzerland, 24 october 2011. * * * ladies and gentlemen, it is my pleasure and privilege to talk in front of this audience of experts and practitioners. i do thank the swf forum for this opportunity to share my thoughts on the current challenges of the sovereign debt crisis in europe. montreux seems to be the perfect setting for a central banker to speak. is there a better symbol for stability and long - term nature than the surrounding alps? and lake geneva represents a perfectly balanced level of liquidity – while central bankers have to deal with the contradiction of abundant global monetary liquidity and a shortage of market liquidity in certain asset classes. but without further ado, let me embark in today ’ s topic. need for clarification : the often forgotten strengths of the euro area some countries in the euro area face a combination of high levels of indebtedness, budget deficits and weak or absent growth. amid growing market turmoil and the risk of contagion an increasing number of economists call for debt restructuring in the affected countries. these proposals often share an anti - euro sentiment and seem to be in accordance with the naysayers who were taking potshots at the euro even before its inception in 1999. however, many critics ignore the euro area ’ s strengths. there is a need for clarification. let me start by stressing some facts : 1. since its inception almost 13 years ago, the euro area has experienced an unprecedented level of price stability. 2. the euro area has logged real per - capita income growth of around 1 percent a year since 1999, just below the u. s. ’ s 1. 1 percent. observers often look only at headline growth figures, where the difference is bigger. but the figures match once adjusted for population growth. 3. during the same period of time, the euro area has created 14 million jobs, six million more than the usa. 4. contrary to common belief, the heterogeneity within the euro area is not significantly bigger than between u. s. states. 5. on a consolidated base public finances are in a much better shape than those of other major currency areas. the euro area as a whole will run a budget deficit of about 4. 5 percent of gross domestic product this year.

, ultra - orthodox jews and women. inflation – the main policy variable with which the bank of israel is entrusted – has been within the target range for a long time, which provides monetary policy the required degrees of freedom to support growth and employment in the short term, thus moderating the effects of the global slowdown which is still a restraining force on activity here as well. from a long - term view, the israeli economy suffers from a low rate of increase in productivity ( product per hour of work ). the average israeli worker produces lower output per given work hour than his peers in most oecd countries. not only is the increase in productivity not closing the gap with the other developed countries, the gap is growing. for instance, the ratio between product per work hour in israel and that in the us has been declining over the years. in the bank of israel annual report for 2012, the research department analyzed the phenomenon and noted a number of reasons for the low productivity. one major reason is a low rate of investment, which leads to lower stock of capital for production available to the israeli worker than what is available to a worker in other oecd countries. a further issue is bureaucratic impediments, or in broader terms, the business environment, which impede accelerated development of the business sector. returning to employment : despite the significant improvement that has taken place in recent years, and which has led to the fact that our employment rates are no longer low when compared internationally, there are still two groups that stand out for their particularly low bis central bankers ’ speeches rates : ultra - orthodox jewish men and arab women, each with their own characteristics and specific reasons. in these two sectors, even those who are integrated into the labor market generally earn a relatively low salary, which indicates relatively low productivity. this is mainly the result of a level of education and training that does not earn a high return in the labor market. the incidence of discrimination must also not be ignored, and we know that the arab public has difficulty integrating into certain industries, even if the appropriate training is provided. one such example is the high tech industry where, for various reasons, few arabs successfully integrate. since this industry has one of the highest levels of productivity and salary in the economy, that fact has far - reaching effects on the ability to fulfill economic potential with given talent such that it will be reflected in an appropriate standard of living. in the long term, demographics are expected to have far - reaching ramification