demand elsewhere in the world, we cannot expect the us to continue to be the engine of growth to the extent that it has been over the past decade ; the likelihood is, rather, that its balance of payments deficit, which is currently around 5 per cent of gdp, will have to be corrected. which means that europe will have to generate its own growth to a much greater extent than in the past. this should be possible with such a large, relatively closed, economy, but it will entail a significant degree of structural reform. i know that sounds like a rather jaded mantra coming form a central banker, but there is no getting away from it. structural reforms inevitably involves short - term pain in pursuit of longer - term benefits. such reforms are essential if the euro area is to raise its potential to generate non - inflationary growth and to reduce its high level of unemployment. monetary policy implementation turning my attention to the area of monetary policy implementation, i would like, first of all, to refer briefly to the target system and the correspondent central banking model – the so - called ccbm. target has played a significant role both in monetary policy implementation and in the integration of the money markets in the euro area. the system has also helped to significantly reduce systemic risks associated with large value payments. daily transactions are over €1½ trillion involving around 250, 000 payments. the corresponding figures for ireland are about €19 billion and 2, 300. the governing council recently decided on the strategic direction of target over the medium - term. this will involve the development of target2, which will comprise a multiple platform system, including one shared platform to be used by central banks on a voluntary basis. the ccbm is also an important component of the eurosystem ’ s operational framework. the ccbm is used for the transfer of cross border collateral in respect of borrowings by escb counterparties. at end - 2002, just over €200 billion was held under the ccbm. at a level of about €15 billion, ireland ’ s share was disproportionately large, reflecting our importance as an international financial services centre. in terms of how markets have functioned, i would like to start off by reminding you of just how much has been achieved. the market in dublin was fully prepared for emu in that the bank had adapted its monetary policy instruments and procedures to the ecb model well in advance of emu. we ’ re four years into emu now and we have

and shift risk, so that, for example, the banks are seen to be well - capitalized and sufficiently de - risked in terms of their loan portfolios. it also requires market participants to be convinced that this action has been effective and sufficient. so far, not least because of the rest of the fiscal burden remaining such a challenging problem, investors are not yet fully convinced. important steps in the process are still under way but nearing completion, namely ( i ) the purchases by nama of the big property - backed loans and ( ii ) the achievement – despite the very sizable loan losses crystallized by these purchases – of much higher capital ratios. these capital ratios are calibrated to ensure that core tier 1 capital remains above 8 per cent through to 2012 ( 7 per cent equity ) for the main irish - controlled banks, taking into account the inevitability that the non - nama book will incur additional losses not yet brought to book during that time. ( the new capital injected would keep the banks above 4 per cent core tier 1 even in a severe stress scenario contemplated by the central bank and involving much higher loan losses across the loan book than are currently expected by the banks. ) the higher capital ratios have been achieved partly through the sale of sizable non - core assets at prices above book as well as by the acquisition of equity stakes by the national pension reserve fund and ( in the case of bank of ireland ) by the private sector. scale of losses dealt with by the capital injections i ’ m not sure that it is widely recognized just how big the actual and prospective loan - losses taken account of in the recapitalization of retail banks in ireland has been. in fact, if we include the losses of the 6 main foreign owned banks active in the domestic market, of which the largest have been ulster ( an rbs subsidiary ) and bosi ( a subsidiary of lloyds ) as well as all six of the banks that were guaranteed at the end of september 2008, and if we include all loan losses that have been provided for in the accounts of the banks since 2007, as well and this is the steady state cost, which would be true even if there were no interest free period. as the central bank ’ s base case of the prospective losses through to 2012 ( against the expectation of which the current capital requirements have been set ), the total loan losses come to no less than €85 billion, or about 55 per cent of this year ’ s gdp.