However, the pattern of its recovery is, so far, relatively weak in comparison with other similar cyclical phases. The financial restructuring being implemented by certain large corporations, which has limited their ability to spend on new projects, and persisting factors of uncertainty over the pick-up in demand may have been behind the as-yet subdued response of this investment component Goods exports expanded at a faster rate than their markets, despite the loss of competitiveness induced by the appreciation of the euro. This favourable result was offset, however, by the sluggish behaviour of tourism and by the rise in imports, boosted by the euro appreciation. Consequently, net external demand exerted a significant contractionary effect on GDP, which has run into the opening months of 2004. It should be borne in mind, moreover, that the employment adjustment in the industries most exposed to foreign competition may be reflecting the fact that the defence of market share is, in some cases, based on unsustainable processes that erode the economy’s overall competitiveness in the medium term. 4  BIS Review 39/2004  Notable among the achievements in 2003 was the improvement in inflation which, after starting the year at a rate of 4%, ended it at 2.6%. This sizable downward adjustment partly reflects the removal of certain transitory elements from the index which had had an upward effect in 2002, but it was also the result of the restraining impact of import prices, favoured by the euro appreciation and the slowdown in oil prices.
But part of it is up to us. For banks, the tiering mechanism adopted last September reduces the cost of negative interest rates by nearly EUR 4 billion for European banks, of which around EUR 800 million for French institutions. These figures are significant enough to be worth quoting, feel free to do so as well. As regards insurers, two points should be stressed. First, the return on non-unit linked life insurance products needs to further decline. Second, the measures taken at the end of last year regarding the profit-sharing reserve. This reserve, which belongs and will continue to belong to policyholders, can henceforth be taken into account in the calculation of insurers’ solvency ratio. I supported the adoption of this measure because it brings French practices into line with that of the other countries concerned, in particular Germany. However, it will never be able to compensate for insufficient solvency. Adapting to the low interest rate environment also requires increased vigilance with regard to the quality and pricing of loans. This is the role of the Haut Conseil de Stabilité Financière (HCSF – High Council for Financial Stability), chaired by Bruno Le Maire; last December we issued a recommendation on the maturity of mortgage loans and associated debt burden. It applies to all new loans issued since January. This means, in short, no more excesses, and a rapid change in behaviour. Otherwise, we might see a capital surcharge for non-compliant loans, although that is not part of my wishes.