the region. it would also be conducive to the stability and integrity of the financial system. i would emphasise the word “ international ” as there is no reason to develop regional standards different from those that have already been developed by international financial institutions and professional bodies, together with supervisory agencies. 17. the fourth element concerns the strengthening of co - operative efforts in financial system development. as i have already noted, in asia we have been making good progress in our efforts to develop the domestic and regional debt markets through various regional forums and involving the international financial institutions. in the context of developing asian bond fund 2, for example, we have achieved a few firsts, including the introduction of the first exchange - traded bond index fund in asia, arranging for two asian markets to allow exchange - traded funds for the first time, and opening up the renminbi inter - bank bond market for the first time to foreign investors. 18. the final, and probably most difficult, step towards creating an integrated asian financial market involves the relaxation of statutory restrictions on cross - border capital flows. it is likely to be the most difficult, in part because it depends on the ability of the financial system in individual jurisdictions to cope with the ensuing risks. 19. this last point brings me to the next issue i wish to touch upon in my remarks, namely, the need for a strong and efficient regulatory framework that is adapted to the integration of the domestic financial system with that of other jurisdictions. 20. greater financial integration across jurisdictions brings about at least two new sources of risk facing domestic financial institutions. the first and most obvious is the risk of currency mismatches when cross - border transactions involve the use of different currencies, as they are likely to do in asia for the foreseeable future. although monetary integration is a topic that is often mentioned in the region, its realisation, if indeed it occurs, is almost certainly going to take considerably more time than it will take for financial markets to become more closely linked. in the meantime, financial systems will have to be robust with respect to fluctuations in exchange rates that may impact assets and liabilities of financial institutions differentially. of course, the financial turbulence in 1997 and 1998 has already alerted both regulators and the private sector to these risks, but if financial integration leads to increased cross - border financial commitments for domestic financial institutions, the size of the risks may become larger. 21. if integration has the desired effect of increasing cross - jurisdiction intermediation

, it has to be admitted that food and energy prices affect the cost of the consumer basket more than in older euro area member states. thus, consumer prices accelerated to 5 % in estonia. 3. estonia stands strong, compared to the eu average. in the midst of a crisis, we demonstrated our ability to quickly fix the balance in times of trouble. we now need to make plans for regulating our behaviour at times of joy. 4. our state budget strategy has set out a budget policy framework for the medium perspective. unfortunately, we have yet to see the binding nature of the document in the decision - making process. for example, the budget strategy prepared in the spring of 2011 set its sights on restoring the consolidated budget surplus. as at 2012, the attainment of the objective has been postponed. this is worrying. it shows that the current framework enables to change long - term goals too easily. the current framework also provides no solutions to managing the cost increase at times of growth. it would thus be reasonable to establish rules for restricting expenditure alongside the established rules for ensuring a balance. these rules would reduce the volatility of the cost increase, prevent unjustified expectations and alleviate the pains of cost - cutting. 5. at the beginning of 2012, the euro area heads of state and government resolved to launch the european stability mechanism sooner than initially planned. 6. in public relations, eesti pank has repeatedly emphasised that central banks are being forced to take on a role that does not suit them. functions that are alien to the eurosystem are best left to the european stability mechanism. there are two advantages to such a solution. firstly, establishing conditions for the award of financial support allows guiding the recipient country ’ s economic policy in the desired direction. as we all know, monetary policy measures cannot be used for eliminating the causes of the sovereign debt crisis. secondly, this will tighten the control of the member states ’ governments and parliaments over crisis measures and ensure a better overview of the costs of the crisis measures. [ to sum up ] 1. the right decisions can only be made when we understand the economy. it does not serve our interests to monitor just our own activities – we also need to monitor the development plans and objectives of other euro area countries ( and not only greece or portugal ). the european economic and monetary union already has all the good characteristics for the achievement of which the union was established to begin with. we now need to enhance the union ’ s efficiency,