low rate of unemployment. secondly, productivity increases over the past decade or so were boosted by structural changes in the economy which involved transferring labour from low to high productivity sectors, notably in the high - technology areas. the scale of this cannot be continued in the future. this would suggest that growth potential in the medium - term would be at the lower end of the 4 to 5 per cent range. it is important that expectations are adapted to this somewhat lower, but still very satisfactory, rate of potential growth over the medium - term. credit growth continues to be a worry. in may, ireland ’ s adjusted private sector credit growth rate of 23 per cent was four times the euro - area rate of 5. 8 per cent. if such divergent rates of increase were to persist, ireland would become one of the most indebted countries in the euro area within a few years. this increase in credit has mainly been accounted for by mortgage credit. the bank remains concerned at the continuing large increases in house prices - currently running at 12 to 13 per cent especially in the light of the substantial increase in housing supply. if the increase in prices were to continue, the risk of a significant correction would increase. monetary policy and the euro area economy current prospects for the euro area economy are reasonably positive. with external demand remaining strong, growth is expected to average 1. 7 per cent this year and 2. 1 per cent in 2005. largely due to higher oil prices, inflation will be above 2 per cent this year and into the early part of 2005. i feel however, that on balance, the current evidence points to inflation in the euro area being in line with price stability over the medium - term. supervision this annual report contains a review of financial supervision issues covering the period from the 1st of january to the 30th april 2003, with a short summary of activities from may to december 2003. in accordance with the new legislation, the financial services regulator will publish its own report covering the 20 - month period from the 1st of may 2003 to the 31st of december 2004 in mid - 2005. in the meantime, the financial services regulator published a progress report in june of this year outlining its first year of operation. in addition to supervising financial institutions from a safety and soundness viewpoint, a comprehensive regulatory structure for consumer issues was put in place during 2003 with the appointment of a consumer director as provided for in the legislation. financial results the surplus income paid by the bank to the exchequer in respect of 2003 is €32

report on financial integration and structure in the euro area outlined that total euro area early - stage equity financing including business angel, venture capital and growth equity investments grew from €10. 7bn in 2016 to just under €14bn in 2020. venture capital accounting for almost all of the increase and nearly doubled over this period. nevertheless, the gap with the us widened. euro - area activity was less than 5 percent of us venture capital. 3 globally, the scale of private financing activities varies considerably by jurisdiction. according to one industry report, the us accounts for over 54 % of the private market assets under management. asian markets account for 22 % of aum and europe accounts for only 20 %. 4 clearly, more needs to be done to stimulate european capital markets. there are significant economic arguments which support the emergence of private finance supporting the real economy. firstly, publically listing a company is expensive and as such generally not an available option for small or medium sized enterprises. these costs range from the extensive public disclosure obligations on issuers as part of the initial public offering process. 5 but the costs also relate to the fees associated with the participants involved, including analysts, advisors, and brokers. as a result, private equity may offer a less expensive form of equity - based financing, particularly for smaller companies. secondly, reliance on bank funding imposes costs in terms of the increased cost of finance, hampering innovation and reducing resilience during periods of stress. private finance, including direct lending activities by 2 / 5 bis - central bankers'speeches investment funds, offers an alternative to bank funding which may address some of these challenges. reliance on bank funding in europe has been an acute issue for some time. but, remembering the theme of constant change i started with, who would have predicted that the first failure since the global financial crisis of a systemically important bank would have taken place earlier this year. that event and the other recent challenges with us banks have pushed banking regulation back onto the international regulatory agenda. 6 but those issues also serve as an important reminder to europe to diversify funding sources and continue to address the prevailing bank dominance. in that regard, it is positive that aifmd 2, on which the eu institutions reached a provisional agreement in july. the proposed changes are quite targeted and that is because since enacted following the financial crisis, the aifmd has largely been successful at increasing the transparency of the alternative investment fund sector in europe. though it was not without its challenges when