hunt for yield before the crisis, there has been a major repricing of risk. this has led to a marked tightening of borrowing conditions, initially for financial corporations and subsequently for sovereigns. some of the most severely affected sovereigns were euro area member states that had enjoyed relatively benign financing conditions before 2008. but they had not taken sufficient advantage of these conditions to put public finances on a sustainable path, or implement structural reforms that would have improved their economic competitiveness and smoothed their adjustment. a sometimes painful, but necessary, rebalancing process has started within the euro area. some fundamental progress has already been made in tackling intra - euro area imbalances : • budgetary deficits are being reduced. the imf expects the euro area to have a primary budget deficit of 0. 5 % of gdp this year, well below the average of the g20 advanced economies ( 4. 8 % of gdp ). moreover, it is those countries most in need that are making the largest structural adjustments ; • competitiveness in programme and vulnerable countries is being restored. in the countries most affected by the crisis, noticeable progress is being made in the correction of unit labour costs and current account imbalances. in full eu - imf programme countries ( greece, ireland and portugal ), unit labour costs have improved by around 10 % since 2008, relative to the euro area average. this has translated into current account deficits that are on average more than five percentage points of gdp lower than they were then ; • thanks to the ecb ’ s non - standard measures, which have given european banks the breathing space needed to implement their restructuring plans in an orderly fashion, those banks have substantially increased their capital buffers. there has been no disorderly deleveraging, which was perceived as a major concern at the end of last year. this process of rebalancing within the euro area is coupled with sluggish growth and slower euro area import growth, which is arguably not without cyclical implications for the rest of the world. in particular, trade between the euro area and china has recently declined. in the first half of 2012 china ’ s exports to euro area countries contracted by around 3 % in nominal terms, compared with growth of about 30 % between 2002, when china joined the wto, and 2008, when the crisis erupted. in 2008 more than 15 % of chinese goods exports were destined for the euro area, a share which was also rising relative to that of the united

of multi - currency liquidity support to ccps established in the uk and euro area, but again, there is no pre - commitment and the provision of liquidity remains at the full discretion of the central bank issuing the respective currency. bis central bankers ’ speeches however, even enhanced recovery tools may not be enough to prevent the ccp from being resolved, first of all because it is impossible to estimate ex ante the size of potential uncovered exposures, secondly because under certain circumstances it might be preferable to resolve a ccp – especially if the market has lost confidence in this ccp as a going concern. effective ccp resolution as an ultimate tool. lastly, we need to assess whether more assurances are needed so that a ccp can be effectively resolved and can re - launch its viable operations, and whether the measures discussed before are either ineffective or out of line with market preferences. much like recovery frameworks, ccp resolution frameworks are currently being designed and implemented across jurisdictions. the fsb is reviewing ccp resolution regimes and resolution planning arrangements. based on this review, it may develop minimum standards for ccp resolution planning, strategies and tools without resorting to a government bailout, and without resulting in contagion to other parts of the financial system. meanwhile, the european commission is preparing specific eu legislation. if, after an in - depth assessment, authorities come to the conclusion that an additional source of financial resources is needed, what form should these extra funds take? let me first reiterate that any bailout of ccps with public money should be categorically excluded. resolution plans should fully allocate losses to ccps and their participants. having clarified this point, i can potentially see four main ways of increasing resolution capacity : the first would be to increase the amount of regulatory capital held by ccps, and explicitly ring - fence a share of this capital as a means to recapitalise a new entity in a resolution scenario. in the eu, ccps are required to hold sufficient own resources to cover operating costs over a six - month period – this requirement could be strengthened, not only in order to cover for a potential wind - down, but also to meet the funding costs of a new entity. for the reasons described above, i believe there would be important drawbacks in relying only on ccps to increase their regulatory capital. ccps should provide a proportional contribution to the resolution process, but should not bear all the costs. a second policy