relatively smoothly. different players contributed to this, but it was mainly the banks themselves which supported one another with creative flexibility in the interest of the situation as a whole. secondly, our repo system enabled us to take the necessary steps without problems. had we still been dependent on foreign exchange swaps with us dollars, conducting monetary policy under the given conditions would have been eminently more difficult. thirdly, these experiences prove how vulnerable the highly integrated global financial system really is. they clearly underscore that securing the stability of the financial system must constitute an important part of the role of central banks. the swiss franc on the foreign exchange and capital markets we do not expect that the introduction of euro cash, which is upon us in a little less than a month, will have any significant impact on the financial markets. however, it will be interesting to see if, to what extent, and in what areas people in switzerland will use the euro as a means of payment. certain structural effects of the euro have already become evident for quite a while, for example on the primary bond market, where the swiss franc is losing in weight while the euro capital market is enjoying growing popularity due mainly to its excellent liquidity. according to the survey conducted by the bank for international settlements ( bis ) for the trading days of the month of april, the trading volume in international foreign exchange transactions dropped by nearly 20 % within three years. another contributing factor to this development was the advance of electronic trading and the discontinuation of trading between the euro's predecessor currencies. roughly 6 % of all global foreign exchange transactions include the swiss franc. this share still amounted to 7 % three years ago and to just over 8 % nine years back. the fact that the swiss franc has lost relative significance in foreign exchange trading is probably largely attributable to institutional conditions for trading in additional currencies having improved. by far most of the swiss franc transactions were effected against the us dollar. this currency pair was traded approximately five times as frequently as the swiss franc - euro pair. this volume ratio, however, is likely to be subject to strong fluctuations depending on specific exchange rate developments. at any rate, the national bank will be pleased to see the historic, special role played by the swiss franc as a foreign exchange trading currency continuing to diminish.

german unification. the residual productivity growth gap lies at the heart of the question of why european potential growth has been so weak. to understand the gap, we need to focus on different relative conditions in input as well as output markets. strongly diverging labour market conditions between the eu and the united states over the decades up to 1995 have led to a massive reduction in eu overall labour input. rigid labour regulations in europe restricted labour input and thereby increased the capital - labour ratio which helps explain the higher productivity growth rates in europe until 1995. from an employment perspective, labour market reforms deserve the high priority they now get by refocusing the lisbon agenda on “ growth and jobs ”. see e. g. nadim ahmad, francois lequiller et al., ” comparing labour productivity growth in the oecd area : the role of measurement ”, oecd statistics working paper nr. 5, paris, 2003. ; philipp m. hildebrand, “ wo bleibt das produktivitatswachstum in europa? ”, speech at the „ vereinigung basler okonomen “, 28 october 2004. edward c. prescott, „ why do americans work so much more than europeans? “, nber working paper 10316, cambridge, 2004. beside the labour market reforms, other reforms should not be neglected. different conditions in other input markets, for example capital markets, have probably contributed to lower potential growth in europe. frictions between national eu capital markets and payment systems render financing more costly. this pushes the capital - labour ratio down, resulting in relative undercapitalization and lower labour productivity. the same line of argument of inefficient allocation of capital applies to non - economic restrictions on corporate mergers and acquisitions as well as on profit transfers. if firms are not allowed to transfer profits from investments ex post the same disincentive to invest ex ante leads to undercapitalization. as in labour markets, the same dynamic is relevant here : exit barriers are entry barriers. different regulations in the product markets represent another important obstacle to an augmented growth performance in europe. modern information and communication technologies ( ict ) in essence provide leverage to an economy. product market restrictions on the scope of the use of the technologies lead to undercapitalization and underinnovation ex ante. the potential of these growth dynamics may be grossly underestimated as the costs of the regulations are not easily visible. in the united states