in the treaty. if all policy areas concerned respect the aforementioned allocation of objectives and responsibilities and act accordingly, they will already be making the best possible contribution to the community objectives. 3. a sound institutional arrangement a clear allocation of responsibilities is essential for well - designed policy - making, especially in a complex institutional set - up as the one governing monetary union in europe. at the same time, a continuous dialogue between different policy actors on the basis of the allocation of tasks is also important for effective governance. an open exchange of views and information between individual policy actors - without any commitment or mandate to take and implement joint decisions - will strengthen economic governance if it manages to improve the common understanding of the objectives and responsibilities of the respective policy areas and does not dilute accountability. the central legal basis for economic policy co - ordination among member states within monetary union is specified in article 99 ( ex 103 ) of the maastricht treaty, which states that “ member states shall regard their economic policies as a matter of common concern and shall co - ordinate them within the council. ” on the basis of this principle, the framework for the definition of economic policy priorities is provided by the “ broad economic policy guidelines ” adopted by the council each year. these channels for policy co - ordination among member states do not involve the independent monetary policy of the ecb. any form of exchange of views and information, however, should clearly be distinguished from an attempt to co - ordinate macro - economic policies ex ante, which would give rise to serious information, incentive and enforcement problems. ex ante co - ordination among different policy actors would blur the fundamental responsibilities of the respective policy areas under the treaty. this, in turn would reduce accountability of individual policy actors and ultimately increase uncertainty about the policy framework. given the eurosystem ’ s monetary policy strategy, there should be no ambiguity how the single monetary policy will respond to developments in fiscal policies and wage settlements to the extent that they will affect the maintenance of price stability. as a result, national governments and wage setters alike should be able to design and implement the policies under their responsibility in a manner that allows for the interdependencies of these policies with the single monetary policy. obviously, if they take the single monetary policy ’ s credible commitment to maintain price stability as given, this will help to align expectations and condition their behaviour in a favourable way. national governments and wage setters, in turn, are reassured that monetary policy will respond

in 2001, at over 60 per cent. this share has since declined by more than 8 percentage points, as exports to partners outside the euro area have grown faster than those destined to the euro area. 3. facilitating finance for growth third, country experiences with the process of eu accession suggest that new or prospective members not only benefit from an economic and institutional anchor. over time, they have also benefited from sizeable capital inflows from the euro area that have helped finance the transformation of their economies. true, the same capital flows were a key ingredient in the credit booms and busts in most countries of the region. while i will return to this aspect in a moment, we should not overlook the importance of financial interconnectedness between the euro area and central, eastern and south - eastern europe. around three quarters of bank assets in the region are foreignowned, mostly by banks from other eu countries. their subsidiaries and branches have played and will continue to play a central role in improving the efficiency of financial intermediation across the region and contributing to credit availability. ii. the bad experiences with economic convergence moving now from the good to the bad experiences with economic convergence, we are probably all on the same ground in this room. let me stress those aspects which, in my view, policy - makers should never forget in the future. 1. when growth models become prone to boom - bust cycles first, in the run - up to the crisis the growth models in many central, eastern, and southeastern european countries became dominated by credit - fuelled domestic demand booms. for example, between 2003 and 2008 the average contribution of domestic demand to economic growth in central and eastern europe increased by more than 2 percentage points per year. bis central bankers ’ speeches we now all agree that this was an unsustainable development, fuelled by overly optimistic income expectations and excessive ease of financing. it led to large and persistent current account deficits. the median current account deficit peaked in 2008 at around 9 per cent of gdp across central and eastern european countries and 15 per cent of gdp across western balkan economies. across the region, the domestic demand booms were mainly financed by euro area banks through funding of their local subsidiaries and direct cross - border lending. the ready availability of such external financing was a contributing factor to the credit frenzy that gripped most economies in the region. the median growth rate of real bank credit to the private sector over the period 2003 – 2008 averaged 20 per cent per annum across central