has been insufficient and the european co - ordination mechanisms have proven too weak to encourage the adoption of the appropriate measures at the national level. the council has sought to re - launch this strategy, focusing on growth and employment, and altering the co - ordination arrangements between the council, the member states and the commission, so as to ease the way for the adoption and monitoring of reforms at the national level. this new direction is appropriate, although more specific measures giving a more determined political impulse to the process would have been desirable. such determination will be needed, in particular, to overcome the obstacles hindering completion of the single market. indeed, these were manifest in the european council ’ s request that the commission revise its draft directive on liberalising the provision of services in the union. the challenges facing the european economy are considerable and set in an institutional context that has been disrupted by the “ no ” votes in the recently held french and dutch referendums on the ratification of the constitutional treaty. the difficulties of entrenching growth that is sufficient and consistent with the european model and with the general public ’ s expectations may have influenced the disappointing results returned by these referendums. but this is something which is closely related to the difficulties at the national level in pushing through the necessary reforms and explaining them convincingly. the significance and implications of these results should not be underestimated. but they need not check european integration. rather, they should act as a spur to further integration by means of european and national policies that respond to the demands of the public. in any event, european integration has not been a linear process in the past and i am fully confident that the european union will be capable of overcoming these difficulties just as it always has when obstacles have stood in its way. on the plus side in the current circumstances is the fact that it has a currency shared by a large number of countries and a federally organised central bank which are a focal point of stability and exemplify europeans ’ ability to embark on and co - ordinate ambitious undertakings that contribute effectively to the collective well - being. the spanish economy spain, as i said earlier, has been one of the euro area economies that has continued to post high growth rates, compared with the relative slackness of the area as a whole. the new base - year 2000 national accounts estimates for spain, released a few weeks ago, indicate that its gdp grew in 2004 at a significantly higher rate than the previous estimate ( 3. 1 % against 2

a sharp change in conditions on financial markets, which might induce exaggerated reactions. in particular, although long - term interest rates should no doubt resume a level more in keeping with past experience and with the current cyclical phase, this process should be orderly and without excessive propagation towards credit risk premiums on the corporate - debt and emerging sovereign - debt markets, or on foreign - exchange markets. another source of vulnerability of the international economy lies, as discussed, in the global disequilibria. broad international consensus has it that the correction of these imbalances requires an increase in public and private saving in the united states, structural reforms to invigorate the euro area economies and japan, and greater flexibility in asian exchange rates, especially in china. these policies would gradually correct the present current - account mismatches and would have to be accompanied by exchange - rate movements tending to bring positions closer to long - term equilibrium levels. the correction of these current - account imbalances would also ideally re - establish a more natural direction of capital flows between developed and emerging countries. compared with the anomalous situation at present, in which these flows are from the latter countries to the former ones, owing to the combined impact of the absorption exerted by the us economy and the exchange - rate policies in asia, a smoother working of the world economy should channel surplus saving from the more mature economies to those where the return on capital is higher, as they are at a more incipient phase of development. it should be recalled that many of the achievements of the world economy in recent years, such as moving on to a high, inflation - free growth path and infusing the emerging areas with greater dynamism so as to allow them to achieve standards of living closer to those of the richer countries, are a direct or indirect consequence of growing worldwide integration. globalisation has thus given most countries more fluid access to foreign markets while offering them incentives to concentrate on those industries in which their comparative advantage lies, and it has provided consumers with a wider range of products at more favourable prices. but it should not be forgotten that the rigidity of certain countries ’ exchange - rate policies has ultimately triggered protectionist threats in others that see themselves as adversely affected. it is thus vital not to succumb to these protectionist temptations and to persevere with the liberalisation of international trade so that the trends which have allowed the world economy to achieve its recent favourable results may become entre