. their subsequent bursting could hit the real economy to such an extent that it would have repercussions for the financial system. here i come back to the issue of euro adoption, which may be a very relevant factor in this debate for several reasons. first, by providing easier access to external financing for banks, adoption of the euro may amplify a credit boom. second, it may be associated with a wave of optimism about the future economic prospects of the acceding countries, given the positive net benefits expected from euro area entry. third, euro adoption requires nominal convergence, including a reduction in nominal interest rates to the euro area level. this may support a credit expansion to some economic sectors. finally, in a currency union a national credit boom cannot be addressed by monetary policy actions. to take the current euro area members as an example, the ratios of private credit to gdp a decade ago in ireland, portugal and spain ranged between 45 and 75 percent. at present, this ratio exceeds 100 percent in all these three cases. the trend has been also growing fast in greece, albeit from a lower base. in portugal, for instance, domestic banks took the opportunity to issue eurodenominated bonds in euro area markets to increase rapidly the volume of domestic loans both to the corporate sector and to households. capital inflows through banks financed a mounting current account deficit. it also fuelled fast growth of domestic demand and gdp in 1998 - 2000. this experience could in principle be viewed as a manifestation of the expected potential benefits of monetary integration. in fact, it has been argued that euro area membership has enabled the participating countries to overcome the famous feldstein - horioka puzzle, i. e. the traditional strong link between domestic savings and investment. in other words, the current account constraint may become non - binding after euro adoption, which should lead to a more efficient allocation of capital in the long run. however, it might be also questioned whether such a fast credit expansion will lead to a build - up of vulnerabilities in the balance sheets of financial institutions, firms or households. in the case of portugal, for example, the debt burden of the household sector has exceeded 100 percent of yearly disposable income, even though a decade ago this ratio was comparable to the current situation of some acceding countries. as a result, one can think of adverse scenarios in which the repayment capacities of the banks ’ clients would deteriorate substantially, with adverse consequences for financial

s potential, and the economy will grow in a non - inflationary way. above all, if there is less debt, the quantity of money in the economy won't grow too much. this is an important condition for reducing inflation. ultimately, such an economy should attract foreign direct investment and its exports should thrive. the result will be a strong koruna. 1 zeman, m. ( 2016 ). speech at the festival exportu 2016 conference, czechinno, prague. 2 see https : / / www. cnb. cz / cs / verejnost / servis - pro - media / autorske - clanky - rozhovory - s - predstaviteli - cnb / covid - a - socialismus - nebezpecny - saci - reflex - naroda / and https : / / www. cnb. cz / cs / verejnost / servis - pro - media / autorske - clanky - rozhovory - s - predstaviteli - cnb / klausova - draha - permanentka / 3 https : / / www. cnb. cz / cs / o _ cnb / cnblog / inflace - v - cr - cyklicky - ci - acyklicky - pribeh / 4 https : / / www. cnb. cz / cs / verejnost / servis - pro - media / autorske - clanky - rozhovory - s - predstaviteli - cnb / krotitele - nakladove - inflace / 5 for details, see https : / / www. cnb. cz / cs / o _ cnb / cnblog / jak - dlouhy - je - spravny - horizont - menove - politiky /. 3 / 4 bis - central bankers'speeches 6 https : / / www. cnb. cz / cs / verejnost / servis - pro - media / autorske - clanky - rozhovory - s - predstaviteli - cnb / zapisky - z - jackson - hole - 1 - 00001. - dil / 7 https : / / www. cnb. cz / cs / verejnost / servis - pro - media /