economic governance and establishing the european stability mechanism, the single supervisory mechanism and the single resolution mechanism. these are important first steps in improving our toolkit for crisis prevention and crisis management, but further progress is needed. in the nearer term, we should move towards completing europe ’ s banking union through a common backstop for the single resolution fund as well as a roadmap towards a european deposit insurance scheme. both are essential for creating a truly single banking system to mirror our single currency. both are also crucial for underpinning the credibility of the banking union and achieving its initial promise of breaking the bank - sovereign nexus, making the financial system more resilient and protecting taxpayers ’ interests. in addition, we must look beyond the banking sector and make progress in developing a capital markets union to enhance further the scope for cross - border private risk - sharing. it is also essential to prevent imbalances from developing into future crises. we need a new convergence process based on the capacity of our economies to withstand shocks and recover from them quickly. this implies not only establishing a more robust financial system ; it also requires stronger governance of structural reforms and tighter control of national fiscal policies. to ensure that member states can adjust to economic shocks, whatever their size, once we achieve greater convergence we will also need to add a layer of fiscal stabilisation at the european level. taken together, these steps towards completing europe ’ s economic and monetary union would help the euro area not only to survive, but also to thrive and prosper. bis central bankers ’ speeches

well. recent estimates of international institutions point out a prolonged period of recession in developed economies and a sharp slow down in growth rates of developing economies. addressing these challenges, g - 20 summit held in brazil on 8 - 9 november 2008, issued a communique that included the following statement : “ we affirmed our determination to take all necessary steps to foster non - inflationary growth in a stable and sustainable manner according to the needs and available instruments in our respective countries, including through monetary and fiscal policy. ” distinguished guests, as concerns over inflationary pressures have subsided all over the world, maintaining the smooth functioning of financial system and efficiency of credit markets has become the main priority of policy makers. it will be proper to evaluate the recent developments in turkish economy in this perspective. in turkey, the banking system has been relatively prepared for the current crisis in terms of foreign exchange liquidity. its foreign exchange short position is also well contained. foreign exchange position of the public sector is almost negligible. the household sector is net creditor in terms of foreign exchange, while real sector is net debtor. since securitized products are rarely used in the turkish banking sector, the ongoing financial turmoil has not put a marked pressure on local banks through that channel. current account deficit, historically a source of vulnerability for the turkish economy, is likely to experience a sharp drop in the upcoming period due to correction in commodity prices, slow down in economic activity and depreciation in new turkish lira. still, extraordinary fluctuations in global liquidity conditions have adversely affected turkey like other countries, which are sensitive to international financial developments. at this point, i would like to emphasize that we will continue to take the necessary measures to contain the adverse effects of the global financial turmoil on the domestic economy, provided that they do not conflict with the price stability objective. the general framework of the central bank ’ s liquidity management is fairly flexible and wellstructured to fulfill its lender - of - last resort role and meet both new turkish lira and foreign exchange liquidity requirement of the banking system effectively. we will not allow any setback in new turkish lira money markets and will ensure smooth operation of payment system. in this context, judging that inflation will display a more rapid fall than envisaged before, the monetary policy committee has decided to lower the borrowing rates by 50 basis points on november 19, 2008. in addition, the margin between the lending and borrowing rates was reduced by a further 50 basis points