include the range and quality of the products a country exports. in this regard, countries in the euro area can take advantage of their high technological advancement and well - educated labour forces. they should be producing higher quality and more sophisticated goods, and redirecting their exports towards strongly growing markets. against this background, the domestic environment in which firms operate is central to fostering competitiveness. countries whose firms compete successfully in international markets are in general those with better technology, a higher degree of openness and greater domestic market competition. a growing body of cross - country evidence confirms that policies to promote competition in europe ’ s markets for goods and services clearly raise the potential for growth and job creation at little or no cost to the public purse. continued efforts to promote stronger competition and further market integration within europe are important tools for enhancing the global competitiveness of european firms. in this vein, supportive national economic environments – including well - conceived physical and social infrastructures, sound public finances and, i should emphasise, stable financial systems – will all contribute to the competitiveness of the euro area. let me go a little deeper into the challenges of competitiveness for europe ’ s economy. for the euro area, we have to distinguish between two distinct concepts : the external competitiveness of the euro area as a whole in the global economy ; and the internal competitiveness of the various countries within the euro area. bis central bankers ’ speeches external competitiveness let me start with external competitiveness. the euro area has actively contributed to the rise in international trade that is one of the defining features of globalisation. in the last two decades, the openness of the euro area has increased markedly. in the mid - 1990s, exports of goods and services from the euro area as a whole to the rest of the world were equivalent to 15 % or less than one sixth of gdp ; now they amount to 23 % or nearly a quarter of gdp. even though we are roughly comparable in size to the united states, the euro area is about ten percentage points more open, and we are much more open than japan despite our larger size. this also means that we have ample evidence that any fears of a “ fortress europe ” were completely unfounded. on the contrary, we are the most open of the largest economies. external performance in terms of the current account shows that the euro area as a whole has performed well, and that external imbalances have been kept in check. the euro area ’ s current account has traditionally been

profitability of euro area lcbgs is likely to strengthen further in the short term, underpinned by a favourable economic outlook and benign credit conditions. [ see slide 12 ] forward - looking market indicators for the credit risk of euro area lcbgs reflect this broadly positive assessment. for instance, the distance - to - default indicator continued to rise, including for the weakest banks. while this may reflect the low probability assigned by market participants to the materialisation of the risks and vulnerabilities identified by our analysis, it could also signify a favourable assessment of the shock - absorbing capacity of the banking system, supported by comfortable solvency ratios and improved risk management. euro area insurance firms have placed greater focus on risk management, risk - adjusted pricing and core profitability, all of which have continued to support a positive outlook for the sector, especially for large firms. ongoing improvements in asset liability management, together with an overall optimisation of the capital structure have underpinned a generally positive assessment by market participants, as witnessed by the recent moderate over - performance of the insurance index relative to the broad stock index. [ see slide 13 ] however, there are a number of risks facing the industry in the period ahead. for the non - life insurance sub - sector, increased competition is likely to weigh further on underwriting income, which could drive further consolidation within the sub - sector. for the life insurance sub - sector, ongoing challenges include the closing of balance sheet mismatches in an environment of persistently low long - term interest rates and the effective management of longevity risk. iv. overall assessment let me now turn to the overall assessment. [ see slide 14 ] the central scenario for euro area financial stability remains broadly favourable. this is assessment is based on the following four factors : first, the resilience of the system was confirmed by its ability to comfortably absorb some adverse disturbances ; second, global economic activity is becoming more evenly balanced and the gradual shift to less accommodative monetary policies is proceeding smoothly ; third, the credit quality of the key counterparties of banks – households and firms – generally remains high and ; fourth, euro area banks ( lcbgs ) are very profitable, their solvency ratios are comfortable and risk management continues to improve. nevertheless, some previously identified sources of risk and vulnerability have grown, and their relative likelihood could have changed. [ see slide 15 ] first, a global source of medium - term risk for the stability of the financial system