public expenditure in total national income and enhancing the quality of public finances should receive greater attention. over the past decade, structural reforms in product and labour markets have paid off, contributing to a strong and steady increase in employment in the euro area. lower taxes on labour, greater labour market flexibility and increased product market competition have supported job creation and potential output growth. further progress with structural reforms, economic integration and cross - border competition are needed to address some countries ’ diverging competitiveness positions and support the smooth functioning of the euro area economy. financial stability and supervision since last summer, the global financial system has been undergoing a process of risk repricing and balance - sheet deleveraging. this process, which is still ongoing, did not come as a total surprise to us. indeed, the ecb, in particular in its financial stability review, as well as other central banks and international institutions, had issued repeated warnings about the potential underpricing of risks in a number of markets, including the us sub - prime mortgage markets. for instance, in my speech before this committee last year, i noted that the unabated growth in the volume and complexity of new financial instruments could have made these markets vulnerable to disruptive adjustments, as it was not always clear where the risk exposures ultimately lay. but although we had pointed to the risks associated with the accumulation of imbalances and had identified several vulnerabilities in the financial system, it was difficult to foresee the specific nature and all the propagation channels of the market turmoil, as well as its intensity and duration. at the current juncture, the outlook for financial stability in the euro area continues to be characterised by considerable uncertainty. the magnitude of the total valuation and income losses facing the global financial system and their distribution across individual financial institutions is uncertain, although several estimates have been made. it is also unclear what the impact will be on the intermediation of credit to the household and corporate sectors. moreover, further tensions in structured credit markets cannot be excluded in view of the ongoing weakness in the us housing market, and there is a risk of adverse developments in the credit cycle. all in all, the risks to euro area financial system stability have materially increased over the past eight months. looking ahead, the ongoing adjustment of global financial markets is likely to last for some time, its interaction with the real economy could prove more wideranging and the shock - absorption capacity of the euro area financial system could be further tested. however,

often begins with a chart like this one ( chart 1 ). this plots the path of global economic growth, measured by gross domestic product ( gdp ) per head, over the past 1000 years. and what a story it tells. it is a tale of two halves – or, more accurately, a tale of three - quarters and a quarter. for the first three - quarters of the past 1000 years, the global economy stood still in growth terms. gdp growth per head of population averaged less than 0. 1 % per year. just try and imagine those rates of growth. they meant it took more than a millennium for living standards to double. stiglitz, sen and fitoussi ( 2009 ). for example, coyle ( 2014 ). two recent excellent books ( pinker ( 2018 ), rosling ( 2018 ) ) chart this and other dramatic improvements in societal well - being over time. de long ( 1998 ). all speeches are available online at www. bankofengland. co. uk / speeches this growth experience is likely to have had an important psychological, as well as financial, impact. the average person would not see any improvement in living standards over their lifetime. their lived experience was imperceptibly different than their parents, grandparents or indeed great, great grandparents. people ’ s lives were lived on a travellator. rising living standards was not a social norm. secular stagnation was. you could argue, with some justification, that measures of gdp at this time might have been missing a trick. we did not have any formal, statistical means of measuring incomes and outputs in the economy until well th into the 20 century, with the development of the national accounts. and gdp anyway underplays important factors shaping people ’ s well - being, such as levels of nutrition, infant mortality and longevity. yet, as best we can tell, alternative well - being metrics tell broadly the same story. rates of infant mortality were unchanged over this period. life expectancy flat - lined at 30 to 40 years. levels of calorific intake stood still. and the global population scarcely budged, held in check by unchanged food supplies, as th predicted by thomas malthus in the late 18 century. not for nothing was this called the malthusian era. another example of this secular stagnation, a favourite of mine, is provided by plotting heights from excavated skeletons records. these are a diagnostic on levels of health and nutrition. male