situation is severe. chile is a small economy, commercially and financially open, bis central bankers ’ speeches so it will not be immune to global developments. the probability of extreme events has not diminished, and their materialization could have very severe consequences on output around the world, including chile. on the other hand, the strength of domestic demand and output, together with recent increases in some commodity prices, means that medium - term inflationary risks remain present. the mpr is within a range of values that are considered neutral, providing flexibility to wait for the concrete effects of such scenarios on the chilean economy to become visible. the board monitors closely the evolution of the external and internal macroeconomic scenario and its implications on inflation, and reiterates its commitment to conduct monetary policy so that projected inflation stands at 3 % over the policy horizon. allow me some final remarks. final remarks our latest presentations to the senate have been marked by periods of high volatility or relative calm in international financial markets. but at yearend 2011 and last june we brought our monetary policy report to you in the midst of heavy external turbulence, with market expectations that did not rule out the occurrence of worst - case scenarios in the near future. today, as in last march, we are presenting our report in a calmer environment, but where the risks are still there. our baseline scenario assumes that stress episodes will be repeated in the world markets. why is that? simply because the situation in developed economies with their complex macroeconomic, financial and fiscal problems is far from being resolved. there is a long road ahead. the classical economic policy conundrum is time consistency, as the costs are paid upfront for promised benefits for the future. plus, in the case of the eurozone, a difficult collective action problem, due to difficulties in spreading the cost among those involved. thus, policy decisions are pushed back while the problems needing resolution only aggravate over time. we may add that the bigger emerging economies, including china, brazil and india, are showing signs of a sharper than expected deceleration. their weight in world trade, and particularly with chile, makes us worry about their evolution. although the copper price has been fairly stable, a further deceleration of the chinese economy could have significant effects on the rest of the world and drive us to a complex situation, especially if it triggers a reduction in our terms of trade. let us stop for a moment to examine the current account of the balance of payments.

lucas papademos : interview with il sole 24 ore interview with mr lucas papademos, vice president of the european central bank, conducted on 19 february 2007 by mr beda romano, il sole 24 ore. * * * what type of recovery are we seeing? according to the latest estimates, growth in the euro area was 2. 8 % in 2006 almost double the growth rate recorded in 2005. the economic recovery was mainly driven by aggregate demand – both domestic and international. private investment – both business and residential – rose strongly and private consumption growth also strengthened. gross exports increased substantially and played an important role in stimulating domestic demand, but the contribution of net exports to gdp growth in the euro area as a whole was marginal, as imports also rose at a fast pace. on the supply side, there were positive signs of structural improvements in the labour market and these are reflected in a further rise in employment. over the past eight years, the average annual increase of employment was 1. 2 %, four times higher than the corresponding figure in the eight years before the start of monetary union. in this context, it is encouraging that productivity growth also increased. is the increase in productivity structural or cyclical? it is still too early to say with certainty. however, it seems to me that the increase in productivity mainly reflects cyclical factors, although there is evidence, including suggestive anecdotal evidence, that in some sectors of the european economy and in some countries of the euro area gains in efficiency have been achieved that are of a structural or permanent nature. these gains are the result of the introduction of economic reforms, for example the deregulation of markets, and of the efforts of companies to be more competitive in the increasingly globalised economy. why such caution in assessing the increase in productivity growth? several facts suggest caution : first, labour productivity in the euro area increased at an annual rate of 1. 2 % in the first three quarters of 2006, which is approximately equal to the average annual rate recorded during the past fifteen years. second, much of the increase occurred in industry, primarily for cyclical reasons, while in the services sector – which today represents 70 % of the european economy – productivity growth remained sluggish. indeed, in the third quarter of 2006, it declined to just 0. 3 %, year - on - year. what explains this divergence? it is mainly due to the fact that in services competition is relatively limited, unlike in industry, which is much