summer, the diagnosis of the economic situation in the eurozone was bright. the outlook was seen as favourable, supported by both the external and internal pillars of demand. according to the june 2007 eurosystem staff projections, gdp growth in the euro area was projected to be close to 2. 6 % in 2007 and 2. 3 % in 2008. obviously the turbulence in financial markets has clouded the prospects to some extent. the potential impact of this turmoil on the real economy is still difficult to assess. so far the effects have been limited. while euro area consumer and business confidence indicators declined in september, and most of the early indicators available fell slightly in october too, they were still above their historical averages and continued to point to ongoing sustained growth during the second half of 2007. very recently, the imf staff forecasted real gdp growth in the euro area at 2. 5 % in 2007 and 2. 1 % in 2008 and most private sector forecasts are close to these numbers. as regards the short – and medium – term outlook, i would make a distinction between the main scenario, which is the most likely outcome, and the risk assessment. the most likely scenario remains favourable with growth still close to our potential but it is now surrounded by much more uncertainty than usual. and that applies to other regions of the world. world economic growth is expected to remain robust over the medium term, despite the slowdown of the us economy, because the emerging market economies should continue to expand at a rapid pace. as the recent imf world economic outlook points out, china, india and russia have together accounted for half of global growth over the past year, and further strong expansion is also expected in other emerging markets and developing countries. this trend should improve living conditions and income for a large part of the world's population. it is also a source of continued support for euro area exports and investment. however the slowdown in the us economy could be more pronounced and the us dollar exchange rate could come under renewed downward pressure. in these conditions, it remains to be seen whether the recent signs of emerging economies de - coupling from us developments will usher in a sustainable process. another crucial question is whether the euro will continue to bear more than its share in the resorption of global imbalances. here i refer to the continuous strengthening of the exchange rate of the euro not only vis - a - vis the us dollar but also vis - a - vis the currencies of countries recording year after year

more than it had in the prior 45 years. 1 and both household debt - to - income and household debt - to - assets ratios reached their highest points since 1950. beginning in 2008, in the face of rising unemployment and falling home values, households reduced spending and increased saving. although many households have suffered tremendous financial hardship, in the aggregate, u. s. consumers have moved from a near - zero savings rate in 2005 to a savings rate that is currently running around 5 percent. in addition, household debt levels have contracted notably : mortgage debt and consumer debt have declined 7 percent and 5 percent, respectively, since mid - 2008. this decline partly reflects the weakness in the economy : tight underwriting standards have damped new loan pence, karen m. 2011. “ comment on ‘ financially fragile households : evidence and implications. ’ ” brookings papers on economic activity. spring : 141 – 145 bis central bankers ’ speeches originations, and a sizeable amount of debt has been discharged through bankruptcies or foreclosures. but households also appear to have a greater aversion to debt than in the past, and a renewed interest in paying down debt more aggressively. because of smaller debt balances and lower interest rates, the share of aggregate household income devoted to debt payments is at its lowest level since 1994. going forward, as income and asset values recover, these improvements in the aggregate household position should be felt by more and more u. s. households. the statistics may show that the consumer sector of our economy is improving, but i know that financial instability remains a reality for many families and i am quite aware of the difficult questions and painful decisions many of them face every day. questions like : how can i plan for my children ’ s higher education, my own retirement, and even emergency situations when i ’ m struggling with today ’ s expenses? yet, today, that type of planning is even more important, as is gaining a basic understanding of savings, investing, and financing options for these life events. more and more often, americans are finding they have to be active in ensuring their financial security. but as they wade into financial decisionmaking, they are faced with more complex decisions and numerous and complicated financial products from which to choose. in fact, federal reserve chairman bernanke has said, “ buying a home, saving for retirement or for children ’ s education or even effectively managing the family budget now requires more financial sophistication than ever before. ” 2 he