one country to another affected by an outflow of short - term debt finance. there remains an urgent need for the international financial community to raise its game in both preventing and resolving such crises. on prevention, much has been achieved, built around the overriding principle of transparency. in itself, transparency will not prevent financial crises. but it can help reduce the frequency of crises - by alerting both markets and policy makers to problems on the horizon - and their severity - by minimising the surprises about the scale of any liquidity problems. on the resolution of crises, the past year has seen a significant change in practice with more weight given to the involvement of private sector creditors. the key to progress is the recognition that official finance from the imf is strictly limited. large bailouts from the imf are undesirable - partly because they reduce the incentive for private sector investors to appraise carefully the risks they take, and partly because the funds available to the imf are wholly inadequate for it to play the role of an international lender of last resort. once it is recognised that official finance is limited, then it is clear that countries need to work closely with their own private sector creditors. debt obligations must be honoured, although in some circumstances it may be necessary to restructure those obligations. the relationship between debtor countries and their private sector creditors is one that must be nurtured at all stages. and many emerging market economies have provided excellent examples of good relationships with their creditors, thus enabling them to raise new money or lengthen debt maturities at times of stress. the choice is not between large bailouts and no official finance. it is between an orderly framework, which recognises the complementary roles of private and official finance, and a disorderly process of default. the combination of transparency to prevent crises and private sector involvement to resolve crises, follows naturally from the view that markets require information to work efficiently but that investors should take responsibility for the risks they choose to bear. this sentiment is remarkably close to views expressed recently by the new us treasury secretary. now is the time to put in place a more systematic framework for the prevention and resolution of financial crises so that emerging market economies can take their rightful place in the international economy. what do these clouds mean for the uk economy? fortunately, our own imbalances are on a much smaller scale than those in the us. but here too, final domestic demand growth, which has averaged 4 % a year for four years

mervyn king : no country is an island speech by mervyn king, deputy governor of the bank of england, at the institute of petroleum annual dinner, london, 21 february 2001. * * * no country is an island - in terms of economics, if not geography. trade and capital flows link all the economies of the world. since 1970 the volume of world trade has increased more than five - fold. globalisation is not a slogan ; it is a fact. the economic winds can rapidly alter direction bringing significant changes in the economic weather. what happens in the world economy is of great importance to your industry. but no business in a country, such as the united kingdom, which exports and imports almost a third of its national output each year, can ignore global economic developments. recent events have reminded us of just how volatile that economic weather can be. only a few short months ago, the united states was experiencing rapid economic growth at a rate which surprised us all. the new frontier had become the new economy, and some had forgotten that economic downturns are a regular feature of a market economy. share prices had reached levels four times that of a decade earlier, and the price earnings ratio of america's top 500 companies was over forty, an unprecedented level. now, after a swift and sharp fall of business and consumer confidence, the business cycle appears to be alive and well, and living in the united states. share prices have fallen by around 20 % since their peak in march 2000 ; and technology stock prices have fallen even more, by 50 %. forecasts for economic growth in the united states for the coming year are still being revised down and are only one half of their levels of a few months ago. equally, only a few months ago, some currency traders were openly deriding the euro. the euro reached a low of 0. 82 to the dollar - the lowest level for the euro or its antecedents for over 15 years. since then, however, the euro has recovered, and the euro economy itself appears to be relatively stable. in the other major industrialised part of the world economy, japan, output has barely risen in recent years. real gdp in japan has grown by only just over 1 % a year over the past decade, compared with over 4 % a year over the previous ten years. unexpected changes in the economic weather have also had a significant impact on the oil market. oil prices rose from below $ 10 a barrel ( for brent crude ) in