At the same time, euro area labour markets have been characterised by favourable trends in the last few years. Since 1999 the euro area has witnessed an increase of more than 12 million in the number of people employed and a substantial decline in the unemployment rate from 10% to 7.9% on average in 2006 and 7.2 % in March 2007. Looking forward, it is important that this favourable trend in labour markets continues, so contributing to the diminishing of unemployment as well as a prolonged and robust economic growth. In this respect, the Governing Council of the ECB considers decisive that the social partners continue to meet their responsibilities. Wage agreements should avoid wage developments that would eventually lead to inflationary pressures and harm the purchasing power of all euro area citizens. Beyond this, it is important to point out that particular wage agreements should take into account price competitiveness positions, the still high level of unemployment in many economies and productivity developments across sectors. Wages should be sufficiently differentiated across countries and sectors to reflect these factors. More specifically, moderate wage developments in the euro area as a whole reflect an aggregation of diverse wage developments across euro area countries with important implications for cost competitiveness. Indeed, over longer horizons we observe that euro area countries that have been able to preserve a low level of unit labour cost growth have also experienced significant gains in employment.
Unlike some of its peers, the Turkish banking system did not require any rescue packages or other forms of government support throughout the crisis. The robustness of the Turkish financial system was to a large extent a consequence of the financial reforms implemented in the aftermath of the 2001 financial crisis we experienced in Turkey. Therefore, in contrast to many other countries that have recently revised or put into practice restructuring, supervisory, and regulatory frameworks, many of these were already established in Turkey several years ago. Furthermore, leading into the recent crisis, the Turkish financial system was well capitalized – with capital adequacy ratios exceeding 18 percent – and had relatively low loan-to-deposit and leverage ratios, as well as low levels of foreign exchange rate exposure. Relative strength of the financial sector enabled the implementation of rapid and front loaded rate cuts. No bail out scheme or other forms of public support needed during this period. This has provided room for expansionary fiscal policies. In addition to the sound structure of the financial system, low levels of household indebtedness relative to other emerging economies also contributed to the resilience of the Turkish economy during the crisis. Monetary tightening implemented by the Central Bank between 2006 and 2008 played a critical role in curbing the lending growth and checking the rise in household debt. Prudent and preemptive measures taken by the Banking Regulatory and Supervision Agency in the last 7 years prevented the spread of exchange rate risk among households.