current dispute between politicians and the european central bank over interest rate policy might be a foretaste of what is to come. a break - up of monetary union seems highly unlikely, but the potential for internal wrangling is clearly there and that could be disruptive to world financial markets. there must also be at least a possibility that closer integration of the eu could make it more self - contained and inward - looking. intra - eu trade could increase, while that with the rest of the world and hong kong could diminish. moreover, will the enlarged eu capital market suck in capital from asia to europe? in the first four months of this year, for example, japanese net purchases of european securities totalled us $ 9. 9 billion, while net sales of bonds and stocks in asia totalled us $ 2. 1 billion. extended diversion of capital to europe would undermine asia ’ s growth prospects as well as hong kong ’ s position as an international financial centre. this could also happen if the european banks are tempted to consolidate their business in asia to focus their efforts on their enlarged home market. this is not the occasion to be pessimistic. overall, i believe that the euro will be a good thing for europe and for the world economy. but as with any major change in the world financial architecture, hong kong will need to monitor developments closely and respond quickly to emerging threats as well as opportunities. let me now turn to the hkma ’ s regulatory response to the euro in hong kong. first, banks in hong kong need to be prepared to handle and account for the euro, particularly during the awkward transitional period before the legacy currencies disappear entirely. if they are not ready, many of the potential benefits of the euro for hong kong will simply not materialize. we have therefore issued advice to the banks on the steps that they need to take, such as : review of business strategies and business processes that might be affected by the euro ; review of nostro accounts in the legacy currencies ; adaptation of information systems ; and review of contracts that might be affected by introduction of the euro. secondly, we have thought it sensible to introduce legislation that will provide for continuity of contracts in relation to the introduction of the euro. in doing so, we are following the example of the eu itself as well as some other jurisdictions. in theory, such legislation may be unnecessary since the well - established “ lex monetae ” or “ law of the currency ” principle means that

of science and technology is responsible for the network in trøndelag county and conducts contact meetings. official statistics and current market information will continue to be the main basis for our assessments, but due to the time lag and revisions of statistics, supplementary information is useful. the regional network provides up - to - date information on the state of the norwegian economy. regular communication with local contacts in norway's business and community life provides us with information that supplements available official statistics. it also provides us with additional information on areas not covered by official statistical sources, and we learn which issues are of particular interest to enterprises. information received from the regional network supported the picture presented in the june inflation report : enterprises are reducing costs while households ’ financial position is strong. we are waiting to see if the results of the current round of talks will point to increased optimism in the business sector and in public entities or if the prospects for the future continue to be regarded as somewhat negative. inflation is low in norway. the rise in consumer prices adjusted for taxes and excluding energy products ( cpi - ate ) has slowed primarily due to developments in prices for imported consumer goods. low inflation is due to the appreciation of the krone throughout last year and low inflation abroad. the rise in prices for domestically produced goods and services has also slowed. this is particularly the case for domestically produced goods influenced by world market prices. domestic price inflation has nevertheless remained close to 3 per cent, due to high wage growth over several years. in july, the year - on - year rise in the cpi - ate was 0. 7 per cent, which is lower than projected in the june inflation report and substantially lower than the inflation target. there are also prospects that inflation will be low for some time ahead. the analysis in the june inflation report showed that a reduction in the sight deposit rate towards 3 per cent, combined with some depreciation of the krone, could bring inflation up towards the target two years ahead. more moderate wage settlements in the future would provide a basis for even further monetary policy easing and a weaker krone. without considerable monetary policy easing, inflation might have remained too low for an extensive period. the short - term nominal interest rate in norway has now reached a historically very low level. interest rates have not been lower since the first nine to ten years following the second world war. the real interest rate is also low, although by no means as low as it was when inflation plagued norwegian savers in the 1970s and 1980s