An even greater risk for both candidate countries and the EU could be to try to transfer the entire system of subsidies and taxes applying in several richer EU countries to central and eastern Europe. Most of the candidate countries already have higher tax levels and a greater degree of state influence in the economy than the majority of countries in the world at their welfare level, and much more so than in countries such as Taiwan and South Korea, which have succeeded in rapidly attaining a higher standard of living. To further increase the tax pressure and subsidy levels would risk subduing growth. 4  BIS Review 9/2002  Here I should like to highlight a warning example and a good example. The warning example is the former East Germany. It is often said that it was the fact that the East German mark was replaced at parity by the West German mark that led to the economic difficulties in the former GDR. This perhaps was not the decisive factor; rather it was the fact that wages and subsidy levels, together with the rest of the West German system, were transferred to a much poorer economy, which needed much greater room for manoeuvre. Despite massive investments, the new eastern länder suffered a recession and mass unemployment.
Moreover, this will have to be done against a complicated macroeconomic backdrop in Europe, where economic conditions  4  BIS central bankers’ speeches  are still prone to vulnerability and interest rates remain very low, acting as a brake on improvements in the quality of loanable assets, growth in lending and recovery in interest margins. That said, at the Banco de España we are convinced that Spain’s banks will successfully adapt to all these challenges, adjusting where necessary their business strategies, improving where possible their efficiency levels and harnessing any opportunities the market may offer to continue to bolster their balance sheets in keeping with the new demands. Thank you for your attention. BIS central bankers’ speeches  5