Christian Noyer: Challenges ahead - the accession process Speech by Mr Christian Noyer, Vice-President of the European Central Bank, at the Foreign and Commonwealth Office, London, 12 November 2001. *  *  *  Ladies and gentlemen, It is a great pleasure for me to be able to be here today at the Foreign and Commonwealth Office to share with you some thoughts on the process of EU accession and the challenges that this process poses for the accession countries. While recognising that this process raises challenges for the EU itself, I will not elaborate on those in my speech today. Undoubtedly, the enlargement of the European Union to embrace a number of countries from central, eastern and southern Europe and the Mediterranean constitutes, after the changeover to the euro banknotes and coins, one of the main challenges currently faced by European policy-makers. However, I would be giving a somewhat misleading impression if I devoted my speech today solely to the “challenges ahead” without first mentioning the very foundations of the European structure. The latter form the basis for our capacity to actually meet those challenges. EU enlargement rests on the proven success of European integration. The European Union constitutes an unprecedented framework for the successful development of regional co-operation.
The greatest challenge to these emerging markets is how to achieve a more balanced and sustainable growth in the midst of globalisation. As more economies in the region move to the middle-income category, I urge the Bank to proactively consider ways and means to help them meet the new challenges of changing times. Sustainability of the region’s future growth seems to lie in the growing trend of intra-regional trade and economic interdependence. Asia is highly integrated in trade. Propelled by vertical integration of the production process, intra-regional trade grew by 14% a year between 1995 and 2003, while world exports increased only 7.5%. Compared to trade, integration in the financial sector has been progressing at a much slower pace. As a result, the very substantial volume of foreign reserves accumulated in the region, of some $ billion last year alone, goes mainly to the developed rather than the regional markets. When some of the capital from the developed market is recycled back to the region, it is of a more volatile and repercussive nature, and can be difficult to cope with as we saw it in the late 1990s. To reduce the reliance on the recycling of domestic savings through the developed markets, Asian governments have put in place several initiatives to strengthen financial intermediation. A notable example is the Asian Bond Markets Initiative under the ASEAN+3 forum.