wealth, thereby establishing a close link between the financial transactions and productive flows. thus, in the islamic finance business model, financing or equity participation can only be extended to activities in the real sector that have economic values. hence, islamic financial assets are expected to grow in tandem with the growth of underlying economic activities. secondly, that it is based on profit sharing in which there is a mutual risk sharing. islamic finance, therefore, impels the islamic financial institutions to undertake the appropriate due diligence on the viability of business proposals and by enforcing the requirement for transparency and disclosure. the role of the shariah board in ensuring that all aspects of business operation of islamic financial institutions are in accordance with the shariah principles, adds another level of oversight which inherently safeguards against irresponsible practices. embraced in its entirety, these in - built dimensions of governance and risk management contributes to safeguarding islamic finance from the potential risks of financial stress arising from excessive leverage or speculative activities. despite the uncertainties and challenging environment posed by the current crisis, the expansion and development of islamic financial services industry in global financial system have continued unabated. the dynamic nature of the islamic financial system is reflected by its solid growth, the increased range of financial products and services and the establishment of new islamic financial service providers from the different parts of the world including from the non - muslim world. this increased participation is particularly pronounced in the sukuk market whereby funds have been raised by issuers from various parts of the world. recent sukuk issuances both in domestic and in foreign currency have attracted interest from a wide investor base from asia, europe and the middle east. these positive developments have been achieved despite the more challenging global financial market environment. as islamic finance evolves to meet the changing requirements of businesses and consumers, innovation is integral to the development of new islamic financial products and services. it is also recognised, however, that unfettered financial innovation can become a major source of instability in the financial system. in islamic finance, financial innovation must be tested against the “ maqasid al - shariah ” ( objectives of the shariah ), where the primary objective is the realisation of benefit to the people. this demands the internalisation of shariah principles in islamic financial transactions, both in form and substance. indeed, the move to embrace shariah - based innovation brings with it a strong shariah - compliant culture in islamic financial institutions. this in

reforms to address the structural weaknesses of the european economy. policy - makers in europe know what their “ to do list ” is in this respect. it includes : 1. reforms to strengthen competition in goods and especially in services markets ; 2. reforms to increase flexibility and adaptability in labour markets ; 3. reforms to improve education ( including on - the - job training and lifelong learning ), boost research and development, enhance innovation and facilitate the diffusion of technological advances, so as to fully exploit the potential of an increasingly knowledge - based economy ; 4. policies and institutions to create a more favourable business climate ; 5. reforms to foster integration, competition and innovation in european financial markets, with a special emphasis on venture capital : and 6. reforms to enhance the quality and efficiency of public expenditure and of tax and benefit systems, and of the sustainability of public finances. to carry out these reforms, the eu governments have set targets and made commitments within a rules - based framework. what is needed now is to honour these commitments and to actually implement what has been agreed. and the current economic upswing in europe certainly provides a propitious opportunity to press ahead with the necessary reforms, as well as with further fiscal consolidation. after all, there is no better time to reinforce the roof than when the sun is shining! moreover, it is also important for the economies of the member states in the monetary union – where the single monetary policy is geared towards maintaining price stability for the euro area as a whole – to preserve and enhance their competitiveness position. diverging inflation and competitiveness developments in individual member countries can have an undesirable impact on the performance of the national economies. given that the single monetary policy cannot – and therefore should not – be used to alleviate the effects of such regional divergences, structural reforms and economic policies in individual countries should be employed to address any country - specific persistent adverse inflation developments or losses of competitiveness. iv. concluding remarks let me come to a conclusion : we have gathered here in delphi, the seat of the delphic oracle. what would the oracle predict for europe ’ s future? i will not try to guess. incidentally, jean monnet was equally cautious in forecasting the future of the european construction, when he stated that “ nobody can say today what will be exactly tomorrow ’ s european structure, because tomorrow ’ s changes, which will be triggered by today ’ s changes, are unpredictable. ” as was often the case in the past,