bundesbank, in its current forecast for 2012, is expecting germany ’ s economy to grow by 0. 6 %. however, since the domestic factors for an upswing remain intact, we expect germany to turn onto a recovery path before the end of next year. supported by an expansionary monetary policy and a growing global economy, growth in 2013 should then return to 1. 8 %. this means that, in the next two years, the german economy ’ s capacity utilisation would therefore be normal. a probable average increase of 2. 5 % for this year is likely to be followed by a return to a much lower cost of living in the coming two years, which the bundesbank currently expects to be 1. 8 % in 2012 and 1. 5 % in 2013. bis central bankers ’ speeches this forecast, of course, is based on the assumption that the sovereign debt crisis will be gradually overcome and will not continue to escalate. this crisis is, and will remain, the single greatest risk to the financial system and the real economy. for this reason, i would now like to take a closer look at the sovereign debt crisis, focusing on three questions. first, what actually caused the crisis? second, how do we contain the crisis? third, where do we want to go with monetary union in the long run? the causes of the sovereign debt crisis unsound economic developments had apparently been brewing in several euro - area countries for many years. these include, in particular, excessive lending, asset price bubbles and a loss of competitiveness. these structural deficits were the breeding ground for the sovereign debt crisis. the actual weak link at the launch of monetary union, however, was the combination of a single monetary policy and decentralised fiscal policy. monetary policy is set at the european level – by the european central bank. by contrast, responsibility for fiscal policy rests with the individual member states, ie at national level. this severance of responsibilities was already at the centre of the debate when monetary union was being established. in a currency area with a decentralised fiscal policy, the member states have an increased incentive to borrow. any country that goes deeper into debt does not face the consequences by itself, as these are spread across the entire currency area – for example, through every country ’ s interest rates increasing. the founding fathers of monetary union therefore created a framework of rules to prevent, or at least correct, such unsound developments : the stability and

a very strong resolve to do something this time round. there is at present a long list of reform agenda items being debated internationally : these include strengthening financial institutions by requiring them to hold more capital and liquidity ; changing compensation practices to discourage excessive risk taking by bankers and reforming regulatory structures to ensure more effective supervision, especially of large and complex firms that have systemic implications. 5. it is therefore very timely today that we have five very distinguished speakers joining this panel to share with us their insights into this complex and important question of how we should go about reforming the international financial architecture and regulatory regimes in different jurisdictions. they are, by order of their appearance in the programme : ( i ) mr rintaro tamaki, vice minister of finance for international affairs of japan ; ( ii ) dr jong - goo yi, standing commissioner of the financial services commission of korea ; ( iii ) the honourable chris bowen, minister for financial services of australia ; ( iv ) the honourable mr ahmad husni hanadzlah, minister of finance two of malaysia ; and ( v ) professor kc chan, secretary for financial services and the treasury, hksar. i understand from the organiser that we will invite professor chan to speak first as he may need to leave earlier for the legislative council meeting. the order of other speakers will follow the programme. professor chan, please.