jose manuel gonzalez - paramo : the euro money and financial markets – where do we stand? speech by mr jose manuel gonzalez - paramo, member of the executive board of the european central bank, at the spanish capital markets forum, madrid, 24 october 2007. * * * i am very grateful to the organisers for inviting me to address such a distinguished audience on the occasion of this interesting forum on spanish capital markets. in my intervention i will focus on the developments of the euro area money and financial markets into which the spanish capital markets are highly integrated. outbreak of the turmoil 1 as you are well aware, in july and early august a series of events led to an intensification of the tensions in the us sub - prime mortgage market and a sharp decline in the degree of risk appetite of global investors. market volatility increased across almost all financial asset classes. stock prices declined as investors sold equities and moved funds into safe - haven investment assets, such as government bonds. in this context, several investment funds holding asset - backed securities suspended withdrawals from their clients. at the same time, a number of european banks made public their direct or indirect exposures to the us mortgage market, particularly to its sub - prime component. in the money markets the impact of the turmoil was initially felt mainly in the longer - dated unsecured inter - bank market and in non - government repurchase agreement ( repo ) transactions : trading in these two segments became increasingly thin. these frictions eventually spilled over to the very short - term money markets ( i. e. below one - week ), at first in the us dollar market where banks – particularly, the european ones – encountered difficulties in raising short - term liquidity. early in the morning of thursday 9 august, the tensions spread to the short - term euro money market and also to other money markets such as those related to the british pound and the swiss franc. the tensions were also felt in the foreign exchange swap market, which is very important for banks managing liquidity in different currencies. interventions of the ecb after it became clear that there was the risk of an imminent gridlock in the euro money market, the ecb released a communication stating its readiness to contribute to orderly conditions in the euro money market. subsequently, the ecb conducted a first fine - tuning operation with an overnight maturity to inject liquidity. the operation was conducted as a fixed rate tender at 4. 00 % and the

, high gross fixed capital formation ( chart 5 ). importantly, this increase in investment has also translated into a larger measured level of euro area domestic demand, although the associated change in the underlying euro area domestic production patterns is likely to be quite minor. chart 5 euro area national accounts : selected components ( quarter - on - quarter growth rates in percentages ) source : eurostat. notes : seasonally and working day adjusted quarterly data. the latest observation is for the third quarter of 2019. such episodes highlight the dichotomy between the residency principle underlying macroeconomic statistics and the global footprint of mnes. data on the numerous entities belonging to mne groups are not consolidated across borders with the home country of the parent mne. instead, they are recorded in the national statistics of the economy where the entities reside, even if their effect on domestic economic activity may in fact be small. this dichotomy also extends to the way statistics are still collected and compiled nowadays, which is not much different from a century ago : these are gathered nationally and subject to strict data confidentiality rules, which often prevent cross - border data sharing. for global companies, this implies that the information sets available to national statisticians differ across countries, which gives rise to both gaps and overlaps at the same time. this, in turn, has negative implications for cross - country comparability and overall data quality, including for the euro area. it also enables the emergence of large bilateral asymmetries. a case in point is the sizeable differences recorded for the bilateral current account balance between the euro area and the united states based on us and euro area data ( chart 6 ). this discrepancy gives rise to several interpretations, which i will come back to later on. chart 6 bilateral euro area - us current account ( eur billions ; 2018 ) sources : ecb and us bureau of economic analysis. note : positive balance indicates a surplus for the euro area. measuring the financial side of globalisation let me turn to the financial side of globalisation. while the post - crisis environment was generally marked by a halt in financial globalisation, foreign direct investment ( fdi ) positions continued to expand until recently. a striking pattern that i identified in collaboration with gian maria milesi - ferretti of the international monetary fund is that the post - crisis expansion was concentrated in positions vis - a - vis international financial centres ( chart 7 ). this can, in turn, be linked