workers'association. in the same year, finland became the first country in europe to grant universal suffrage to all women and men. finland became independent in 1917. independence was followed by three months of tragic civil war. however, the democratic institutions survived and did not cease to function, even during the second world war. this building has played a role in many events in our political history. it was severely damaged during the civil war, because it served as headquarters of the insurgent reds. later, landmark meetings took place here in the struggle between the social democrats and the communists over control of trade unions. now this wonderful art nouveau house is a major conference centre, where dinner is served by a french multinational company. quite symbolic. and this even before the proposal for the services directive! the second finnish presidency takes place at a time when many say that europe is in a crisis, due to the rejection of the constitutional treaty in two referenda. let us put things into perspective. only two years ago ten new countries joined the eu. and only four years ago euro notes and coins replaced national currencies in 12 member states. these are remarkable historic achievements. so crisis, what crisis? but of course, there is a lot of work ahead of us. our challenge is to revitalize the european economy. we should not allow the current recovery to make us forget that reforming product and labour markets is vital to increasing our growth potential. europe needs to increase productivity growth and to be better in innovation. the integration of financial markets can have significant positive effects on employment and growth. it can also reinforce the resilience of the european economy by sharing risks between regions. an integrated financial market needs a modern payments system. therefore, the single euro payment area project deserves our full support. and we need a truly unified securities market without excessive costs for cross - border trading. we should therefore remove any obstacles to its consolidation and streamlining. our financial supervision structure is also too fragmented. eu has often been criticized for over - regulation. actually the existence of 25 different sets of regulations with 25 different administrative and supervisory practices can be the worst kind of overregulation. dear friends during the war, jean monnet often repeated that there could be no peace in europe, if the nation states continued to be structured around the sort of sovereignty that leads to politics of national privilege and economic protectionism. coincidentally, j. k. paasikivi, our post - war president also wrote during the war that

##bearance not become institutionalized, but be tied directly to actions by both bankers and supervisors to address underlying problems. • governments are not good long - term asset managers. prolonged government holding of impaired assets is not likely to enhance their value, nor aid in the restoration of market liquidity. • governments are not good commercial bankers. delayed privatization of nationalized banks always means higher future costs, and usually inhibits fundamental reform. • government - directed lending means future fiscal losses. similarly, efforts to stimulate credit growth by nonmarket forces in the context of a banking crisis at best buy additional time, and usually dig a deeper hole. • foreign investment in domestic financial sectors can yield important benefits. foreign direct investment in the banking sector can provide much - needed capital resources, technology and knowledge transfer, and a more diversified capital and funding base in the event of future economic instability. • financial sectors are only as healthy as their borrowers. without corresponding corporate sector restructuring, financial sector rescue efforts are likely to be necessary in the future. • strong financial systems depend on a reliable and credible legal system. in the absence of a strong legal system, borrowers lack appropriate incentives to repay. • there are no " quick fixes " to financial sector problems. remedial actions need to be evaluated in terms of their short - term efficacy as well as their longer - term implications. • unbalanced financial systems create vulnerabilities. financial systems that are unduly reliant on banks for financial intermediation are likely to be more vulnerable and slower to recover from the onset of weakness. shallow capital markets limit lending alternatives and delay the recovery of financing to the real sector. the challenges can be daunting, but recent experience both within and beyond asia confirms that a dedicated commitment to financial reform contributes to sustainable recoveries and greater crisisresilience. just as strong financial systems act as stabilizers when a domestic economy is battered, weak financial systems amplify the scope and reach of the problems, making bad situations worse. longer - term financial stability while financial sector rehabilitation will remain a key priority for authorities in asia, longer - term measures need to be put in place to deal adequately with the increasingly complex and dynamic international financial marketplace of the twenty - first century. the threats to financial stability are many, and no one set of measures can be expected to ensure against the recurrence of future problems. financial intermediation is a constantly evolving activity, involving new risks, instruments,