and domestic demand in recent years, mostly great britain, spain and ireland, but also estonia. on the other hand, the crisis has not spared countries that have been focusing on industrial production exports, primarily germany, but also sweden and finland. thus, the political choices of the member states vary as well. different conditions for countries borrowing from financial markets make up an additional problem in the eu. general distrust in the global financial markets as well as growing fiscal deficits, expanding government debts and insecure growth prospects have caused investors to become more risk - averse. as a result, the spread between the yields of government bods in the eu has notably widened. some member states must pay higher interest compared to a couple of years ago when they wish to borrow. this makes it harder to finance state expenditures. based on the above, the eu's economic policy measures to exit the crisis can be divided into three large categories that were agreed upon in the european economic recovery plan at end - 2008. the shorter - term goal is to stop the downturn and to stabilise the economy. in longer term, it is necessary to restore the confidence of enterprises, households and financial markets in the growth potential of the european economy. the short - term economic policy objective to reinforce aggregate demand by monetary and fiscal policy measures belongs to the first category. the ecb has lowered interest rates and considerably increased money market operations, i. e., the total volume of shortterm loans to banks. in addition, eu countries have agreed to support the economy in 2009 and 2010 by raising fiscal expenditure in the total amount of 1. 8 % of gdp. however, this is constrained by rapidly expanding deficits and external debts. therefore it is important that eu member states make already plans for reducing fiscal deficit in the next years. the european commission stresses that in the current complicated economic environment the stability and growth pact is still relevant. the longer - term objective in the eu is to achieve fiscal balance or surplus. second of all, it is extremely important to restore confidence in the financial sector. the minimum rate of guaranteed deposits in the eu was raised to 50, 000 euro already in 2008. thereafter member states have agreed upon common principles to support the banking system. at the end of 2008 member states put the main focus on the banks'liabilities side to ensure banks would be able to finance their operations also in a more adverse market situation. to this end many countries have offered collaterals to loans taken by banks,

. 8. on this, i am very pleased to see that an amendment bill has been introduced into the legislative council earlier this year. the bill adopts a prescriptive and religion - neutral approach, and covers five of the most common types of sukuk globally. products that can meet the key features and qualifying conditions specified in the bill will be given tax treatments similar to those currently afforded to conventional bonds. this means that sukuk issuers and investors alike will no longer be subject to additional tax and stamp duty charges over and above what they would need to pay for conventional bonds. so, passage of the bill will be a very positive step forward in furthering the development of islamic finance in hong kong. synergy between hong kong and malaysia 9. with the legal infrastructure to be in place soon, the next important step will be to develop the islamic financial markets here. we definitely have a lot to learn from malaysia in respect of product development and market operation. as i see it, hong kong and malaysia each has different edges in the financial services industry, and the potential synergy between the two places in developing the islamic financial markets is tremendous. 10. malaysia is undoubtedly an important leading centre in the global islamic finance industry that has accumulated vast experiences and invaluable expertise over the past three decades. it has developed a well - diversified islamic financial market, offering a full suite of products covering sukuk, islamic equities, islamic funds, islamic etfs, etc. its sukuk market is by far the largest in the world, accounting for more than 70 % of global sukuk issuances last year. 4 it has also put in place well - developed financial infrastructure which can facilitate local and overseas market players alike in conducting islamic financial transactions. 11. on the other hand, hong kong as an international financial centre has developed a deep and highly liquid capital market with a diverse base of investors coming from all around the world. more importantly, with hong kong ’ s unique role as a gateway to mainland china and a leading hub for offshore rmb business, hong kong can offer an ideal platform to link islamic and rmb financing together by developing financial products that are shariah - zawya. bis central bankers ’ speeches compliant and, at the same time, denominated in rmb. through hong kong ’ s platform, international investors in the islamic world can easily tap the appealing growth story of the mainland. this is especially given the fact that