Peripheral Europe is experiencing positive growth, albeit at a low level. The Germany economy, however, contracted in the second quarter while growth in France remained at around zero. The Eurozone remains a significant market for South African exports. Low European inflation and the risk of deflation point to weak potential GDP growth with structurally weak demand across the monetary union.
Policy-makers and regulators do not want to discourage appropriate risk taking to the point where incentives are created for appropriate risk-taking activities to move outside the regulated financial system. Given the development of a wide range of new financial instruments and the exponential growth in their use, the need to find this regulatory balance is becoming more and more acute.