mario draghi : remarks at the annual reception of the association of german banks speech by mr mario draghi, president of the european central bank, at the annual reception of the association of german banks, berlin, 26 march 2012. * * * sehr geehrter herr schmitz, vielen dank fur ihre freundliche einfuhrung und vielen dank fur ihre einladung nach berlin. ich freue mich, heute hier zu sein. ladies and gentlemen, i would like to take this opportunity to provide you with my assessment of the current situation in the euro area and shed light on recent signs of improvements in the overall outlook. i would particularly like to draw your attention to the effectiveness of the policy measures implemented by the eurosystem, the eu institutions and national authorities. and to remind you of the measures that we all must continue to pursue over the coming months and years with great diligence in order to continue on this path of stabilisation. the current economic situation as this audience knows very well, in november last year, the prospects for the euro area financial sector were very bleak. banks were experiencing a period of heightened stress. the inter - bank market was closed except to the strongest institutions in the safest countries, and funding markets were impaired. unable to raise funds beyond short maturities, many banks were reducing mediumterm lending to the real economy. at the same time came the requirement to increase capital ratios to 9 %. this increased the risks of substantial deleveraging, including the risk of banks cutting back on loans, notably those to small and medium - sized enterprises. we could see the intensity of the deleveraging pressures in bank lending surveys and other data. in the fourth quarter of 2011, there was a significant tightening of credit standards on loans to both companies and households. there was no doubt that the euro area was on the brink of a major credit crunch, with potentially adverse consequences for the economy and employment. at that time, many observers had little confidence in the capacity of the euro area to reverse the situation. yet today, only four months on, the picture looks different. there are signs of stabilisation in both financial markets and overall economic activity – albeit still at low levels. conditions in bank funding markets have improved. for example, euro area banks have already issued about 70 billion euro in senior unsecured debt so far this year, which is well above the amount

euro area and emerging asia the economic performance of the euro area and other regions of the world has greatly benefited in recent years from the increasing globalisation of markets, the pace of trade expansion, and the sizeable flows of foreign direct and portfolio investment across borders. that said, globalisation also creates challenges, both at the micro and macro levels. against this background of the opportunities and challenges of global markets, let me now concentrate on the economic and financial relations between europe – or rather the euro area, to be more precise – and emerging asia, specifically china, and on some of the challenges for policy. i will first focus on bilateral trade relations between china and the euro area. china ’ s share in the euro area ’ s total imports has increased markedly over the past ten years, from 3. 6 % in 1994 to 8. 6 % in 2004 – a rise of five percentage points. 1 by comparison, the share of goods imported from china by the united states rose from 6 % to 13. 7 % over the same period. the rising share of chinese goods in euro area imports is not a surprise in itself, given the rapid pace of development of the chinese economy. what is rather more surprising, however, is the fact that china ’ s share did not rise as quickly on the export side. euro area goods exported to china in 2004 amounted to only 3. 5 % of total euro area exports in that year, which is significantly below the share of the united states ( 15 % ). from a chinese perspective, the euro area is a fairly important trading partner which accounted for 13. 7 % of the share of non - japan asia in euro area imports increased even more, from 10. 5 % in 1994 to 18. 7 % in 2004. china ’ s exports in 2004 – up from around 10 % in 1994. the share of euro area products in china ’ s total imports is of the same order of magnitude, but it has declined somewhat over the past ten years – from 13. 6 % in 1994 to 10. 4 % in 2004. 2 in parallel to trade integration, capital mobility and foreign direct investment is the second vector of globalisation. the expansion of capital flows is impressive. a real surge in fdi accompanied the specialisation of manufacturing at the international level. flows of fdi have risen 25 fold between the 1970s and the 1990s. over the last decade, 90 % of world fdi outflows originated from high income countries and one - third of world