factor productivity when we look at the last fifty years in the turkish economy, we see that turkey ’ s average growth rate has been around 4. 5 percent. a study carried by staff members of the central bank of turkey, dr. seref saygili and dr. cengiz cđhan, suggests that capital deepening has a large share, as much as 75 percent, in this growth rate. according to the same study, the contribution of employment growth and the increase in productivity remained very limited, at 20 percent and 5 percent, respectively. there is no doubt that capital accumulation plays a leading role in the development of an emerging economy, as expected. other country cases also present a similar outlook. however, given the economic transformation of fast - growing countries, such as japan and south korea, we see that the contribution of capital accumulation to growth in these countries has been moderate ( at around 50 percent ), whereas the contributions of employment growth and the increase in total productivity have been higher ( at around 25 percent ), as compared to turkey. in other words, turkey ’ s efforts for development are mostly based on increasing the current sources of production rather than using them more effectively and efficiently. in a country, where the propensity to save is low, any attempt at development through capital deepening would cause a high level of current account deficit and a restricted increase in employment. at this point, i would like to annotate that the contribution of total factor productivity to economic growth climbed significantly to 30 percent on the back of the reforms and structural transformation implemented in the post - 2001 period. i believe that the labor market and total factor productivity are crucial for improving the potential growth rate of turkey. in the next part of my speech, i will cover these two issues, respectively. 3. labor market as i have already mentioned, the contribution of the employment increase in the growth composition of the turkish economy is very limited. although it is often voiced that turkey ’ s younger population structure compared to other countries constitutes demographic window of opportunity, non - participation of this young population in the labor market is an important problem that should be addressed. according to 2009 figures, labor force participation rate in developed economies is above 70 percent. this rate is hovering at around 60 percent in eastern european countries. although the labor force participation rate has surged by 3 percentage points in turkey, it still remains low, at 49 percent. we see that the limited increase in this period was mostly attributable to

the eurosystem, the governing council has to take into account the increased inflation risks. at the current juncture, the sharp increase of inflation – due to high oil and food prices, along with some signs of increase in manufactured goods prices and service prices and ongoing strong monetary expansion – is of particular concern to the governing council. we will do our utmost and we stand ready to act in a timely manner to make sure that it does not affect inflation expectations. this objective automatically entails that we will not tolerate the emergence of second round effects. but let me deliver some more insights into the governing council ’ s decision making process : yesterday, we cross - checked the information from our economic and monetary analysis. the sharp rise in inflation has fully confirmed our assessment that the outlook for prices is subject to upside risks. by contrast, the economic fundamentals have remained sound and the medium - term outlook is still favourable, with real gdp in the euro area being expected to grow at around trend potential in 2008, albeit subject to downside risks. monetary policymakers have two eyes : one for the baseline scenario and the other for the associated risks and uncertainty. in that respect, ongoing financial market turbulence and a continuing reappraisal of risks increases the uncertainty surrounding our inflationary assessment. all in all, our analysis has shown that we face upside risks to price stability and downside risks to economic growth and – in my view – that both risks have augmented in comparison to the september staff projections. at the same time, uncertainty is at the current juncture somewhat larger than usual in prognostic terms. as you know, these staff projections are part of our information gathering process. they are set up and made public four times a year, hence the next projection will be available in december. in a period of rapidly moving markets, our september assumptions are likely to undergo substantial changes. so far, oil prices have continued to hike and reached new record highs. moreover, the euro has continued to appreciate since september, both vis - a - vis the usdollar, but also against a broad number of trading partners. the recent financial market turmoil is likely to decelerate the pace of economic growth in several economies – although the global economy as a whole is still on a growth path. thus, the driving forces tend to shift from the usa to asia and europe ( which, by the way, will help to reduce global imbalances ). given these changes in the euro area ’ s economic environment, chances