strengthen the existing framework with a final objective to have comprehensive framework for the restructuring of sovereign debt. technical assistance the imf has unique competence through its ability to combine scientific knowledge and institutional skills with longstanding experience of work in individual countries. this competence often applies to'narrow'areas that a particular country ( normally ) only seldom requires help with. this includes advice and support regarding how to build up a functioning supervisory authority or how to manage a banking crisis. it is crucial to make the utmost use of this competence. the imf has untapped potential what i have said so far, that the fund ’ s mandate and main instruments for achieving it are essentially appropriate, is hardly controversial. most people agree on this in theory. in practice, however, it is more difficult. when it comes to the crunch, we member countries do not always allow the imf to effectively carry out the functions that we have given it a mandate to perform. in my opinion, the imf could play a more important role than it does today. but that is not principally due to its mandate and instruments as such but because we as members do not allow it to fulfil its potential. wherein lies the untapped potential? in which of the imf's main fields could the organisation play an even stronger part? the problems are not a consequence of shortcomings in the borrowing instruments. i do not see any immediate need for new types of lending instruments, such as non - borrowing programs or a reintroduction of contingency credit lines. there are already surveillance methods in place to deal with such situations, and today's borrowing instruments are sufficiently flexible to meet the existing requirements ( and demand ). nor do i believe that the problems to any great extent are due to incorrect analysis or erroneous assessments, even though the situations faced by the fund are often difficult and the advice given has been open to question from time to time. nonetheless, there are a number of things that can be done in this area. shortcomings still exist, as i mentioned earlier, as regards the fund's participation in crisis resolution. there is scope for further development of those instruments that exist today. the reason why this has not happened is because some countries oppose it for political reasons. this brings me into the role that “ political considerations ” play for the imf to work well. in my view, the central problems of the imf are often political in nature. these problems exist at several different

deteriorated significantly over the past two years or so. the virtual shutdown of the subprime mortgage market and a widening of spreads on jumbo mortgage loans have further reduced the demand for housing, while foreclosures are adding to the already - elevated inventory of unsold homes. new home sales and housing starts have both fallen by about half from their respective peaks. the number of homes in inventory has begun to edge down, but at the current sales pace the months'supply of new homes has continued to climb, and home prices are falling in many parts of the country. the slowing in residential construction, which subtracted about 1 percentage point from the growth rate of real gross domestic product in the third quarter of 2007, likely curtailed growth even more in the fourth quarter, and it may continue to be a drag on growth for a good part of this year as well. recently, incoming information has suggested that the baseline outlook for real activity in 2008 has worsened and that the downside risks to growth have become more pronounced. in particular, a number of factors, including continuing increases in energy prices, lower equity prices, and softening home values, seem likely to weigh on consumer spending as we move into 2008. consumer spending also depends importantly on the state of the labor market, as wages and salaries are the primary source of income for most households. labor market conditions in december were disappointing ; the unemployment rate increased 0. 3 percentage point, to 5. 0 percent from 4. 7 percent in november, and private payroll employment declined. employment in residential construction posted another substantial reduction, and employment in manufacturing and retail trade also decreased significantly. employment in services continued to grow, but at a slower pace in december than in earlier months. it would be a mistake to read too much into one month's data. however, developments in the labor market will bear close attention. in the business sector, investment in equipment and software appears to have been sluggish in the fourth quarter, while nonresidential construction grew briskly. in light of the softening in economic activity and the adverse developments in credit markets, growth in both types of investment spending seems likely to slow in coming months. outside the united states, however, economic activity in our major trading partners has continued to expand vigorously. u. s. exports will likely continue to grow at a healthy pace in coming quarters, providing some impetus to the domestic economy. financial conditions continue to pose a downside risk to the outlook. market