Overall, I believe that Europe has the ability to meet the challenges that the western world faces, if it is able to make full use of its own experience and institutions. Changes are nevertheless needed. And this brings me to the questions specific to Economic and Monetary Union. 2  BIS central bankers’ speeches  In this regard, I would like to make two main points: first, the global economy is becoming increasingly “multipolar” and the euro will have to stand its ground alongside at least three – and possibly more – other major international currencies. Second, the euro can only be assured of a major role in a multipolar currency world if the architecture underlying the single European currency is sufficiently strong. The task of achieving this cannot be delegated to financial markets and requires appropriate institutional steps. The euro in a multipolar world When the idea of the single currency was first mooted in the 1980s, the global economy was dominated by three countries: the United States, Germany and Japan. Since then, the global economy has seen major changes. With the ongoing integration of global markets, we have witnessed the rise of emerging market economies. China, in particular, has led to a progressive shift in the centre of economic gravity and is expected to overtake the United States in terms of GDP at market exchange rates sometime from 2025 onwards.
Fiscal deficits in emerging Asia are 2–3% of GDP.   The debt burden is low. Public sector debt ranges from about 25% to 55% of GDP. External debt is about 30% of GDP.   Official foreign reserves are healthy.   The banks are well-capitalised. The 25 largest Asian banks comfortably meet Basel III Tier 1 capital adequacy ratios.   Governance is stronger. Stronger regulatory frameworks and corporate governance reforms following the Asian financial crisis in 1998 have improved the resilience of the financial and corporate sectors.   There is policy flexibility on the fiscal, and to some extent, monetary fronts, in the event global growth slips more than expected. Notwithstanding emerging Asia’s strong fundamentals, there is no room for complacency. The region is not without significant challenges which, if unaddressed, will prevent it from realising its potential and render it more vulnerable to shocks from the advanced economies. Let me highlight three medium-term imperatives for emerging Asia. Increasing domestic demand First, Asia must increase domestic demand. As growth slows in the advanced economies, it is in the region’s interest to reduce reliance on external demand and develop indigenous sources of growth. This will help to strengthen and stabilise Asian economies over the longer term. If an increase in domestic demand in Asia is complemented by fiscal consolidation in the key industralised economies, a longer term rebalancing of global demand could be achieved. 2  BIS central bankers’ speeches  Demographic factors will work to increase domestic demand in Asia.