Further, in the last few years Spanish institutions have shown notable skill in managing operating costs, becoming some of the most efficient players in the world. In the current circumstances, progress along these lines is even more necessary. Third, and very importantly, some of the international markets on which Spanish institutions have raised financing in recent years have narrowed substantially. In this respect, the lack of discrimination seen in the last few months is surprising, as the markets have similarly penalised products whose features, in terms of level of complexity and risk, are substantially different. This is the case, for example, of Spanish securitisations which, on account of their simplicity, the high quality of the securitised collateral and the low level of bad debts recorded, bear no relation to the more complex structured products used by banks in other countries. A particularly striking case is mortgage covered bonds, whose credit quality is very high and easily measurable. This quality resides in their legal characteristics, since they are backed by the whole of the issuer's mortgage portfolio and their minimum level of overcollateralisation is 25%. However, financial market participants have not taken these arguments into consideration. In fact, banks have to keep explaining to the market the differences in their issues. An effective way of doing so is to start issuing medium-term securities again. And, as mentioned above, congratulations are in order because this is the path successfully taken by some banks in recent months.
Domestic economic activity in much of Asia will inevitably be subdued, with knock-on effects elsewhere, and major imbalances are likely to emerge in international trading patterns. It is too soon to have any very clear view about the likely scale or duration of these economic effects. The IMF, in its Interim World Economic Outlook, based on information available to early December, has tentatively estimated that world gdp growth this year - at 3½% - might be around 1% lower than it had expected in the autumn. They expected much of the impact to fall on the Asian economies themselves - with forecast growth in the newly industrialised Asian economies falling by 2½%, whereas growth in the G7 countries was expected to be only about ¼% lower at 2¼%, with a substantially larger impact on Japan. My impression is that, notwithstanding these revisions, most analysts would still see the risks as being quite heavily on the downside. There have been suggestions that the dampening of activity, particularly in this country and in the US, as a result of these developments is welcome insofar as it will help to prevent the re-emergence of inflationary pressures. And that is true - up to a point, my Lord Copper. It is clearly not desirable that the necessary moderation of demand should be narrowly concentrated on those sectors that are exposed to international competition. And while some of the industrial countries can certainly tolerate significant external deficits for a time, persistent, large deficits would not be sustainable indefinitely.