recently that “ the euro is a done deal ”. the euro area has in fact been a zone of stability in turbulent currency markets - and that performance puts in proper perspective earlier excited talk about spectators waiting to rip the euro apart. that never was in my view a serious issue, given the political commitment to the process - the economic issue has, as i say, been about the sort of regional tensions that might subsequently emerge. the big questions now - for all of us, not just for the euro countries - are, first, and most immediately whether we can avoid new financial shocks ; and, secondly, how we should manage the economic fall out from the financial shocks that have already occurred. developments since the imf / ibrd meetings in washington have in my view been quite encouraging. the japanese financial package is reassuring, and the strengthening of the yen has brought welcome relief to much of the rest of asia. united states congressional approval of the imf quota increase and of the new arrangements to borrow ( nab ) has paved the way to a vitally necessary increase in imf resources. brazil - which has been widely seen as the next potential emerging market domino - is clearly committed to taking strong corrective domestic policy action, which would command broad international support. and while there evidently has been a sharp contraction of wholesale market lending, within the financial sector in particular, in the united states, and suggestions there of a possible wider credit crunch, no new problems on anything like the scale of ltcm have in fact been uncovered. we are certainly not yet out of the wood, but the financial situation looks rather better than might have been expected two or three weeks ago. if we can avoid a new financial shock - and i am hopeful that we will - we still have to manage the global economic slowdown already underway. in that context there has been a good deal of talk about concerted interest rate cuts in europe and the united states to stimulate domestic demand and offset the effects of recession elsewhere. and it is true that those effects - both lower world commodity prices and falling external demand - do mean that interest rates in the industrial countries generally can be lower than they would otherwise be, which in turn will help to sustain global demand. but we do not all start from the same point. rates have in fact been cut in the united states and the united kingdom, where underlying domestic demand growth also shows signs of slowing. in continental europe, on the other hand, domestic demand growth has, as i say,

mr. sherwin reviews economic prospects and challenges for asia and the pacific region address by the deputy governor of the reserve bank of new zealand, mr. murray sherwin, to the new zealand institute of international affairs in wellington on 15 / 10 / 98. i was asked to discuss the economic prospects for asia and the pacific. i ’ m going to take a fairly liberal interpretation of the topic. you will not be surprised that my comments are framed within a high degree of uncertainty about the direction of the global economy. events of the past year or more have been dominated by a growing sense of contagion spreading from the initial thai problems, and now affecting most parts of the world. even over the last couple of months, we have seen russia and latin america faltering, and a substantial re - rating of corporate profit prospects in the usa and europe. as we look forward to 1999 and 2000, we can do no better than guess at when these downward influences will run their course, and when robust, sustainable, recovery will commence within the asian region. however, i will offer a few guesses on asia ’ s prospects. i will also offer some observations on the nature of the adjustments and transitions now being worked through in asia, especially within the financial sectors of the affected countries. the asian growth story the asian growth story, over three decades or more, has been extraordinary, with sustained annual expansions of the order of 7 to 10 percent. that is more than just a statistical nicety. not only has asian economic success supported growth in the rest of the world, it has been the driving force in the most profound process of poverty alleviation in human history. by world bank estimates, where 60 percent of east asians lived in absolute poverty ( i. e. less than us $ 1 per day ) in 1975, 20 percent were living in absolute poverty in 1995. the numbers living in poverty have declined, the severity of poverty has declined, life expectancy has climbed, infant mortality rates and literacy indicators have all improved in tandem with economic growth. growth created jobs for the poor, and provided opportunities to expand their productivity. the asian miracle was real and tangible. of course, paul krugman made himself famous, and unpopular in some parts, by arguing that while asia had generated extraordinary growth over an extended period, there was no magic formula that the rest of us could borrow in order to imitate that growth performance. to use krugman ’ s now - famous line