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

32 per cent in 2011. the rising living standards across the region have been a by - product of remarkable economic and institutional transformation, which has shaken off the heavy burden of half a century of central planning. 2. offering a platform for the integration into the global economy the second good experience i would like to highlight is the global success of pan - european production chains. this can be a win - win story for everybody in our continent. exports from central and eastern europe grew at an average pace of over 10 per cent per year in the decade prior to the global financial crisis. even thereafter, in many of these countries export growth has been led by significant competitiveness gains. bis central bankers ’ speeches this export performance can to a large extent be attributed to the integration of local exporters into cross - border production chains, which at present account for half of all of their exports. what this means in practice is that local exporters typically use components sourced from the euro area to assemble intermediate goods and final products that are then sent down the value chain en route to final consumers around the globe. local exporters are often owned outright or operated as joint ventures by companies based in the euro area. in fact, more than two out of three euros invested in central and eastern europe come from the euro area. the win - win proposition of vertical specialisation in international trade is most visible in the european automobile industry. a recent imf report highlights the fact that the german automobile industry embrace of this trend has allowed it to remain a leading producer and exporter of passenger cars with a global market share of around 20 per cent as of 2012. while domestic production has remained relatively constant at around 5. 5 million vehicles per year between 1992 and 2011, foreign production, particularly in czech republic, hungary, poland and slovakia, increased more than threefold, reaching 7. 1 million vehicles. another example is that of renault, which became the majority stakeholder in the romanian automobile firm dacia in 1999. in the space of a few years, renault turned the ailing company into a driving force for the renault group. specializing in robust, economical models, dacia produces vehicles primarily for new markets. a remarkable aspect of this production model is that, while real linkages with the euro area remain substantial, the economic prospects of countries in the region have become relatively less dependent on euro area than on world demand. i was indeed surprised when i learned that the share of central and eastern european exports destined to the euro area peaked already