eu presidency, it isn ’ t able to have a substantial impact on the discussion. the most logical thing to do would be to pool european representation in the imf and thereby obtain a power of veto like that of the united states so as to play a greater role. this would of course require some organisation within europe to define a common policy, as is done for trade issues for instance. as the imf has become an institution focused primarily on surveillance of the world economy, i see no reason for european countries, especially those with a common currency, to have differing positions on the major issues discussed at the imf. for example, i see no reason for a country such as ireland to have positions more similar to those of canada and the caribbean countries than to those of other members of the eu. if europe had a single seat at the table, the national representatives that currently have a seat would have to leave it. and they seem to be very attached to their seats, because they believe – or want to believe – that from this position they have been able to substantially influence decisions. they often don ’ t understand – or don ’ t want to understand – that as long as they are seated at the table, while others who matter more are not, that table is not really worth sitting at. the main decisions will be taken elsewhere. again, to give an example, the recent reform of the voting shares of the imf, which by the way reduced the overall voting power of europe, wasn ’ t really decided in the imf executive board itself but agreed in other fora, most notably the g7 and the g20. those who would have to leave their seat at the table are obviously in a state of denial, advancing quite absurd arguments. the oddest of all arguments against a single european seat is that it would create a polarisation in the governance of the fund, with two major shareholders – the us and europe – which would undermine its functioning. as if a unipolar governance, with only one major shareholder ( the united states ), is better from the perspective of any european country. * * * i have talked enough today about symptoms and syndromes. let me conclude. like anyone over 50, europe needs to make sure it doesn ’ t become a hypochondriac. as i mentioned at the start of my speech, europe might need to go on a diet. and maybe get a new look. the diet consists in streamlining activities. the eu

us bond market appears to have been very long, based on the assumption that the federal reserve would have to cut interest rates below 1 % because of deflationary risks. long positions were further encouraged by market speculation that convexity hedgers such as fannie mae, freddie mac would eventually be forced to buy more duration and therefore drive interest rates lower. ten - year treasury yields promptly rallied more than 80 basis points until mid - june. this strongly trending market helped a number of hedge fund strategies generate exceptional returns during the month of may 2003. the combination of a smaller - than - expected 25 basis point interest rate cut by the federal reserve on 24 june 2003, together with a discernible turn in language in the accompanying fomc statement, took the market by surprise. a sharp sell off in the bond market followed immediately. generally negative hedge fund performance figures during the month of june are testimony to the gapping nature of the price movements following the fed ’ s interest rate decision. there is no definitive source for hedge fund data. most vendor databases collect data that hedge funds voluntarily disclose. many large hedge funds that are closed to new investors do not report to the data vendors. in addition, hedge funds that perform poorly often stop reporting to the vendor databases as their performance deteriorates, leaving the series exposed to the problem of ‘ survivor ’ bias. it is important to point out that extreme care needs to be exercised when interpreting such examples. first of all, any number of factors can cause markets to move to new equilibrium points. second, price action is often shaped by overall liquidity conditions in a specific market segment. sharp price movements are more likely to occur in markets where trading activity is light. third, the nature of market participants engaged at any particular time will impact the nature of price movements. analyzing price action is not a precise science. indeed, i strongly suspect it never will be. nonetheless, the previous example suggests that in some specific cases, it is at least plausible that large asset pools have recently been deployed in related strategies which have contributed to cases of heightened market volatility. performance correlation figures in some hedge fund market segments lend some support to such a hypothesis. the obvious counter - argument is that despite recent inflows, no hedge fund segment is large enough to materially affect price action in today ’ s vast global market place. this argument may be too simplistic for two reasons : first, hedge funds across different strategy segments are often involved in similar trades.