fall ), pp. 47 – 68. chen n., j. imbs, and a. scott ( 2007 ), “ the dynamics of trade and competition, ” paper presented at ecb conference “ globalisation and the macroeconomy ”, july. rogoff, k. ( 2006 ), “ impact of globalization on monetary policy, ” in federal reserve bank of kansas city, the new economic geography : effects and policy implications, pp. 265 - 305.. the cyclical impact of globalisation on euro area prices and wages here, i will discuss the impact of globalisation on manufacturing and commodity prices and ultimately consumer price inflation in the euro area, arguing that there is evidence of only a small overall net dampening effect in last 5 - 10 years, reflecting the balance of opposite relative price shocks. 13 import prices as i argued before, intra - euro area imports have been growing strongly, but euro area imports from low - cost countries such as china and the new eu member states ( henceforth nms ) have been growing even more rapidly. based on highly detailed data disaggregated both by sectors and countries over the period 1995 - 2004, chart 4a shows that the level of import prices ( proxied by absolute unit value indices ) from china and the nms are estimated to be approximately one - quarter the import price of total euro area import prices, and about one - fifth the price of imports from high - cost countries. 14 since the start of the 2000s, the share of low - cost countries in extra - euro area manufacturing imports has increased from just over one - third to almost a half ( chart 4b ). 15 rising imports from low - cost countries are putting downward pressure on extra - euro area manufacturing import prices. overall, it is estimated that the increase in import penetration from low - cost countries over this period may have dampened euro area import price inflation by an average of 2. 1 percentage points each year, an effect almost equally accounted for by china and the nms. 16 the overall impact could be decomposed into two components ( table 1 ) : the first is the “ share effect ”, which captures the downward impact on import prices of the rising import share of low - cost countries combined with the relatively lower price level of lowcost import suppliers ( 1. 6 percentage points per year ) ; and the second due to differentials in the growth of import prices ( the “ price effect ” ), which captures the

been a little bit overstated, because the security figures are quite low in the budgets, and it is not prohibitively expensive to strengthen security. of course, it is relevant from a fiscal bis central bankers ’ speeches point of view, but the amounts are not very high. by contrast, if we include the cost of national defence under security, then the figures are potentially higher. however, it should be emphasised that this is not the source of france ’ s fiscal woes : it also has a well - known structural problem. how can we counter the surge in nationalist and populist currents in europe from an economic perspective? by delivering the prosperity and economic security that was promised when we created the euro area. today, we have the same level of economic output as we had eight years ago. the crisis caused significant economic and social pain, notably in the countries that experienced a drop in their living standards. inequality has risen as a result of unemployment. this is unacceptable socially and has political consequences. there is no obvious willingness to integrate the euro area further. we are at a turning point. integration at the financial level is progressing, but the european project as a whole needs to be further deepened. we must resist the temptation to go into reverse ; we shouldn ’ t agree to stand still : we must forge ahead towards more integration. as a central banker, i am more of an observer than an actor in this area. monetary policy is only one part of this. but even the harshest critics acknowledge that the ecb is an institution that functions well and has the capacity to take decisions and to avoid catastrophes. the same effectiveness would be required at the political level, even if, admittedly, it is more difficult. and, as i said earlier, the crisis did not reveal the weaknesses of monetary union, but rather the weaknesses of an incomplete monetary union. bis central bankers ’ speeches