BIS central bankers’ speeches  3  Lately, efforts have been made towards a closer regional integration, making the region more attractive to potential foreign investors. With a deeper regional integration, a better anchoring in the EU convergence process and more funding, the Eastern and Southeastern Europe has much to offer to Europe and to the global economy. The periphery of the euro zone or the future new members provide many attractive investment opportunities in development projects in infrastructure, trade, exploitation of natural resources, energy and production capacities. Most importantly the development of these strategic sectors is designed within the framework of the European development plans and the future to be larger European economy. Therefore investing in the region would mean to invest in the future of the European economy itself. Dear Participants, A prosperous and integrated European Economy and confident single currency provides a better anchor for the future of our economic, financial and institutional convergence and therefore additional benefits for the European economy itself. European economy is an important partner in global scale, accounting for a substantial share of global demands, financing, education and technology advancement. The strength of European economy is mutually beneficial for Europe and its partners, including China. Considering the past and the present state of economic, social political and intellectual affairs, I remain firmly convinced in the ability of the Europe to rise up to current and future challenges to reintroduce itself as the land of opportunity and prosperity.
And so when exchange rates move sharply, which they do, the currency mismatch results in large losses. 12. But I suppose we all learn from mistakes. We in Hong Kong did so the hard way in the early 1980s when the situation was compounded by uncertainties about the political future of BIS Review 115/1997  -3-  Hong Kong. We had our currency crisis in 1983, after nine years of operating with a floating exchange rate, against volatile capital flows, without any effective mechanism for monetary management or currency anchor. Our banks had been overly exposed to credit, maturity and currency risks, and a total of seven banks had to be rescued directly or indirectly through the use of public funds. In short, we had been complacent. 13. But, thankfully, never have we been in any doubt about the need to maintain free and open markets, and a liberal financial system. The correct response to financial turmoil is not to resort to controls or to apportion blame, but to put one’s own house in order, and ensure that one is in a position to cope. This we did through a series of reform measures to strengthen our monetary and financial systems implemented in the past ten years. This was, in part, also spurred by the desire to minimize the risk of possible financial disturbance ahead of and through political transition, and to provide the environment for Hong Kong’s continuing development as an international financial centre, as required under the Basic Law.