leaders, articulating their national tastes and priorities. of course, the agent, the european commission as an executive arm of the eu, also sometimes has this temptation to define or steal the voice of the eu. needless to say, the risk that proper integration will be derailed is particularly high when the two effects mentioned above are combined – when the eu administration ceases to behave as an agent of the less powerful principals but remains under the spell of a few very strong principals. it is fairly understandable that certain eu member states support the current, rather non - transparent way of modifying the institutional set - up : it is the only way for them to maintain or even strengthen the draconian mix i just described. given that european integration is taking place in this “ european ” way ( in the bad sense of the word ), it is no wonder that standard democratic politics has not left the national level : all formally eu - wide ideas are always translated in each individual member state into the local political context ; there are no true eu - wide political parties, no true eu - wide politicians, no true eu - wide media. the debate in eu institutions rarely follows the lines that we are used to in standard political debates, such as whether we want more freedom or more redistribution. instead, most time is spent, as i said, on procedures and institutions. the official efforts at gradual political integration thus give the impression of squaring the circle. these awkward traits in politics at the eu level then lead to some perverse implications. on the one hand, measures which would help europe to retain a strong economic position – and here i mean especially liberalisation of markets and trade – take years or even decades to implement : the single market for services still does not exist and even the single market for labour still has fundamental exemptions. the celebrated lisbon strategy has turned into a farce ; many of the structural reforms that it outlined would be beneficial economically, but few of them have been realised or at least enforced by the agent, the european commission. on the other hand, the eu institutions have repeatedly shown an ability to produce bizarre pieces of legislation that would hardly ever be passed at the national level in any given member state. the famous czech writer milan kundera would probably call it the “ unbearable lightness of legislating ”. so my suspicion is that the eu is now in a position where it is easier to integrate than to liberalise. and these are two different things in terms of

from the us and later from the eurozone. the emerging markets were hit as well, some of them very strongly, but by and large their financial sectors have shown stronger resilience than in many developed countries. this was also the case of my country – the czech republic – as we have had no bankruptcy of any more significant financial institution and consequently no state aid in the financial industry for many years now. however, this is no reason for complacency. the market economy has always developed in more or less deep cycles and it seems this will be the case in the future as well. it is our duty to assess the measures critically at present, as some of them may have adverse side effects and may in fact exacerbate potential crises. your contributions are concerned with emerging market and smaller economies, i. e. emses. this group of countries is a rather heterogeneous one. under this heading one can subsume china and countries from southeast asia as well as latin america and the caribbean, countries which were formerly centrally planned economies as well as small island economies with huge financial sectors. some of the countries have their own currencies, some are members of currency unions and some, as is the case of the czech republic, are members of the european union, which implies a tremendous amount of regulatory measures created to a large extent out of their control. furthermore, it is obvious that jurisdictions within this group differ substantially and will continue to do so. despite all these differences, i think the emerging and smaller economies have some common features other than the already mentioned most profound difference of relatively smaller sizes of their financial sectors and institutions. for example : • their financial markets are typically more volatile than those in advanced economies, and so is their gdp growth, which at the same time is higher on average than in advanced economies ; • these countries are also typically experiencing stronger credit growth, as their financial sectors are in the process of catch - up ; • they usually have lower credit ratings and shallower government bond markets, which in some cases implies a lack of high quality liquid assets, a lack of adequate collateral etc. saying that, i must stress that this difference does not apply to some ; my country is a testimony to this ; • the countries face a whole range of home - host issues, as many globally significant financial institutions operate branches or subsidiaries in those countries. these are just examples of features which could possibly interact with the basel iii framework in emerging economies in a way that was