and eastern europe and 25 per cent per annum in western balkan economies. this experience now sounds very much as something that belongs to the past, but we have all learned the hard way that complacency is the best recipe for future disasters. 2. impaired lending channels and bank deleveraging complicate the recovery second, the pre - crisis credit booms turned into post - crisis credit busts. the resulting impairment of the bank lending channel has been a stumbling block for the economic recovery ever since. double - digit npl ratios are now more the norm than the exception across the region. banks have responded by setting aside provisions to cover expected losses and tightening credit eligibility standards to prevent new loans from going bad. these developments have limited banks ’ ability and willingness to lend. the post - crisis behaviour of euro area banks in central, eastern and south - eastern europe has been generally cautious, but also responsible. the vienna initiative played an important role in preventing a “ run for the exits ” scenario. on the one hand, euro area parent banks kept their local subsidiaries sufficiently capitalised to avoid bank failures. on the other hand, they have been unwinding in an orderly fashion their creditor positions towards the region. this deleveraging has contributed to the tightening of credit conditions in many countries in the region. local subsidiaries were gradually weaned off cheap parent bank funding and forced to compete for the more limited pool of domestic deposits. a new banking business model is emerging in response to these developments, but it will still take some time before we can clearly identify a new “ steady state ”. 3. when real convergence grinds to a halt finally, the most worrying development is that real convergence has come to a virtual halt in the wake of the global financial crisis in many countries in the region. the average annual growth rate of real per capita gdp, adjusted for differences in purchasing power, slowed from around 4 per cent per annum before the crisis to 0. 6 per cent in its aftermath in central and eastern european countries – and half that in the western balkans. unemployment has soared throughout the region, at times to unacceptably high levels of close to 30 per cent in bosnia and herzegovina and 17 per cent in croatia. iii. some policy lessons let me now draw two broad policy lessons from the good and bad experiences which i briefly outlined. 1. first, the need for more – and, even more importantly, better – european integration is for me the core policy lesson. let

manuel sanchez : emerging markets amid heightened uncertainty remarks by mr manuel sanchez, deputy governor of the bank of mexico, at the credit agricole central bank seminar, rome, 23 october 2014. * * * i am honored to join you here today in the magnificent city of rome, a cradle of western civilization, one of europe ’ s great cultural centers, and a muse for poets and artists throughout the centuries. thank you for the invitation to share a few words with you on the topic of emerging markets. emerging economies now confront a new reality, one in which some apparent certainties have disappeared, and different challenges have arisen. i would like to touch on three subjects in this context, starting with the performance of emerging economies, moving on to financial market conditions, and concluding with a brief overview of mexico in particular. as always, my views are entirely my own and do not necessarily reflect those of the bank of mexico or its governing board. developments and the outlook for emerging economies two distinctive trends characterize developments in emerging economies during the last few years. the first is higher growth since the beginning of this century, relative to the previous decade. economic expansion has surpassed that of developed nations substantially, with china and india playing prominent roles. what forces have driven this phenomenon? although emerging economies are not all alike, as a group they seem to have benefited from generally sound policies implemented in the 1980s and 1990s. these include the strengthening of macroeconomic and financial frameworks and the liberalization of markets, reduced regulations, and greater openness to international trade. additionally, high and rising commodity prices and ample access to external credit during the 2000s have helped. by and large, better policy and institutional settings seem to be responsible for the fact that emerging economies were relatively resilient to the shocks of the great recession. indeed, in 2009, while the advanced economies contracted more than 3 percent, the emerging economies grew slightly above 1 percent. 1 nonetheless, since 2011, growth in emerging economies has been declining, the second notable trend for the group as a whole. although still above that of advanced nations, average output change in the last four years has been less than that observed prior to the crisis in this century. several factors may contribute toward an explanation of the slowdown. one possibility is structural. some emerging economies such as china may be reaching the production frontier derived from their reforms. they cannot grow at constant extraordinarily high rates indefinitely. another possibility, which could be complementary to the first, is that