3 ). the reforms also meant we were in a better position to face the current financial crisis. while png may not be directly affected by the global financial crisis, we will be if and when the financial crisis turns into a recession. already, the major industrialized countries are experiencing negative growth in economic activity. these countries include the united states ( us ), united kingdom ( uk ), germany, and japan. there is lower growth here in australia. besides china, these are the major markets for many of our exports. a slowdown in these countries would mean less demand for our export commodities, resulting in lower export revenue, and a reduction in government tax revenue. a lower reserve level means less funds available for the central bank to invest in and loss of income to the government ( see chart 10 ). in the private sector, lower export demand would mean companies would hold back on any expansion plans, save costs by reducing employment and may have difficulties servicing their loans. furthermore, foreign investors would delay any new investments in the country given the uncertainties. generally speaking, economic activity in the country would be lower ( see chart 4 ). for 2009, the government forecasted a growth in economic activity ( gdp ) of 6 percent. all this does not augur well for poverty reduction in png. less government revenue would mean the government has to reduce its expenditure ( see chart 5 ). this is the prudent fiscal response to a reduction in revenue. the alternative would be to borrow, domestically or externally, to make up for the revenue shortfall. this would however mean increasing the government ’ s indebtedness. so far, the government has succeeded in reducing its debt. the government ’ s debt to gdp ratio declined from 71 percent in 2001 to around 30 percent in 2008 ( see chart 6 ). a return to borrowing ( deficit financing ) would reverse this achievement, as well as passing on the burden of servicing the debt to future generations of papua new guineans. tying down financial resources for debt servicing means there is less money available to fund the provision of much - needed goods and services to the populace. if the government decides to reduce expenditure, this may mean cutting back on essential social services of health and education, and important infrastructure projects that would improve the livelihood of our people. the government has set aside the windfall gains from high commodity prices in 2007 and the first half of 2008 in various trust accounts for spending in the key priority areas of infrastructure, health, education

the size and liquidity of domestic financial markets as crucial. in this regard, efforts currently undertaken to further promote integration of financial markets ( with more than 40 measures to be adopted by eu institutions ) are likely to further attract international financial operators. larger and more liquid financial markets imply lower transaction costs, and make it more efficient for foreign agents to trade euro - denominated financial instruments, as well as to resort to the euro in the foreign exchange market. it is not the task of the ecb to try to influence directly the international investors ’ decisions regarding the currency in which they want to invest, borrow or lend. the international role of the euro will ultimately depend upon the market ’ s judgement. however, this neutral stance of the ecb should not be misinterpreted, as the increasing use of the euro is an issue of policy relevance to the ecb, and requires continuous monitoring. to sum up, the creation of the euro facilitates the deepening of the financial integration inside europe. moreover, the single currency has already had consequences outside the euro area, as the euro has rapidly become the second most used currency in the world. conclusions to conclude my speech, i will pre - empt the q and a session by first telling you “ what will happen after february? ” from 1 march 2002, not only will the euro be the sole legal tender in the euro area, but it will also become one of the main channels that should facilitate the future co - operation between the ecb and the pbc. while china will manage to sustain strong growth and to open further its internal market as part of the wto membership process, we expect the trade and financial ties between china and the eu to grow even stronger. i attach great importance to the relations between the ecb and the pbc, and i am very confident that such relations will flourish over time. “ xie xie ”