ensure that there are effective mechanisms to ensure that these criteria are sustained. the growth and stability pact failed because there was no real sanction involved for countries that transgressed the rules. this points to the need for a single fiscal authority. while this was previously recognised, the political difficulties of achieving agreement on this, and to allow politically sensitive issues such as tax policies, expenditure requirements, and fiscal transfers to be made by a supranational body, would have significantly delayed or even perhaps stymied the implementation of the single currency. it is increasingly apparent that a further weakness in the design of the eurozone was the lack of a lender of last resort. while in principle the ecb can, and has been in bis central bankers ’ speeches effect playing this role and taking a large amount of risky assets onto its balance sheet, it is questionable whether it can continue to do so without intense political pressure from some of the member states who feel that the ecb is operating outside of its mandate. at present it is the individual central banks that stand behind the ecb. there is no unified fiscal authority that guarantees its activities. it would be wrong to think that sorting out the fiscal issues would have prevented the crisis. these issues are a manifestation of a deeper problem of divergent levels of competitiveness. the underlying assumption of a monetary union is that competitiveness will remain constant, i. e. the internal real exchange rates will be unchanged. in the past ten years the peripheral countries have lost competitiveness to varying degrees, in the case of greece by about 30 per cent. there is no internal mechanism to prevent this, and in fact the single currency allowed for automatic and continuous financing of these divergent trends at low rates of interest. italy ’ s problem is not only fiscal in nature. italy is after all running a primary surplus. in the absence of an exchange rate adjustment mechanism, the only way to adjust is through an internal devaluation, implying falling nominal and real wages, and fiscal austerity. this is the classic expenditure reduction case under fixed exchange rates. the inability to change the nominal exchange rate imposes severe adjustment costs. while exchange rate flexibility would ease the burden of adjustment, countries that find themselves with appreciating currencies in response to developments elsewhere find it extremely uncomfortable as well. countries with stable macroeconomic environments are better placed to shield themselves, but it is almost a truism that no country can actually escape the fall out of the global

at the risks from potential concentration of market power and financial instability stemming from disorderly competition and exits. last but not least is better governance to bring about better risk management. for the central bank, there will be more checks and balance with a separate chairman from the governor under the new bot act. in the private sector, the roles of boards of directors in providing oversights and setting guidelines for business decisions, and having in place the proper risk management systems are essential to deal with market excesses. the ultimate aim is to enable the economy to adjust flexibly in keeping with changes in the financial environment. to facilitate this, key policies and regulations should focus on promoting market efficiency, as well as reducing distortions and unproductive risk - taking behaviours in the economy. ladies and gentlemen, the risks on growth and inflation make 2008 a very challenging year but we will be able to weather it because there is room for the right policy mix and we can capitalize on the economy ’ s resiliency. but we cannot be complacent about the medium - term challenges of improving and maintaining our competitiveness. fortunately, the government has already committed to a number of important investment projects to address infrastructure deficiencies. its investment plans for 2008 - 2012 focus on the entire spectrum of infrastructure, including the modernization of public transportation, housing and water resource management, as well as health and education spending. let me share my thought, in particular, on thailand ’ s education system which has immense implications on labor productivity and labour market efficiency, hence competitiveness. today, more than half of the thai labour force is in the non - agricultural sector ( including services ), which is more averse to changes in global competition for trade and investment. moreover, to maintain competitiveness, our economy needs the labour force that possesses higher and more flexible skill sets to move up the valued added chain of production and trade. in reality, thailand, just like other countries, has weakness in the mismatch of skills produced through formal schooling from those which firms find useful. government policies need to address this weakness quickly, by finding ways to align formal education with training through vocational schools and apprenticeship programs organized by private businesses. key questions will be on designing appropriate incentive structures for players in the education and business sectors, while being mindful of social safety net considerations when businesses close. this is especially important because the agricultural sector now accounts for about 10 percent of the overall economy and cannot provide social - safety support for the non - agricultural