 I'm very happy and honored to be here in the 7th conference as in Harry Potter's books, He Who Must Not Be Named, says, isn't 7 the most important magical number? And I think, hopefully, this discussion becoming first public discussion of those issues will produce magical results. Now, I looked at the list of people around the table when I was preparing the slides, and I realized that we've already discussed these issues together in July in Dubrovnik and in the IMF conference on institutional quality governance and convergence. So I will try to steer away from my presentation in July to something new we've done since then. And I think what Peter has said is very important. Issues related to governance, fairness, issues related to rise of populism, issues related to democratic political institutions, reversal of reforms, and so on. I will talk a little bit about that, but I'm mostly going to talk about the background of convergence and lack of convergence. Now, I will show you what we have on this particular region, but I will also talk about IBRD region as a whole, which now includes not only post-communist countries, but also Turkey, also includes Middle East and North Africa. And in that sense, when I say IBRD region, I should say that that also means not only post-communist countries and not only central European, southern European countries. We also operate in Greece and Cyprus on a temporary basis, just for you to know. So our region now includes some previously non-members. Let's put it this way. Anyway, so this is the chart, which is completely consistent with what Peter was talking about. So our region used to grow fast, and now it's not growing fast. So 2008 was a major structural break when growth rates slowed down. This is not something which happened in other emerging markets. And so people started to talk about middle income trap regarding our countries of operations. So our countries reached middle income, and now they need to come up with a new model to make convergence sustainable. Now, it is actually not true that our countries are in a typical middle income trap, and this is what I'm going to talk about today. So why is that? So let us compare our countries to other middle income countries. So what we did for each country of operation of ours, we created a synthetic control panel. So a comparator based on several countries, at least 15 countries, with similar income levels, similar levels of development, and also similar populations weighed by population. So this is the chart where you see how our countries performed relative to comparators before the crisis and after the crisis. And before the crisis, you see green bars which show that our region outperformed the comparators. And after the crisis, you see red bars. I think these are reasonably red on this chart, which show that our region underperformed the comparators. So it's not just our countries are in a typical middle income trap. Now, compared to other middle income trapped countries, our countries are doing even worse. And we are talking about cumulative 9% of output underperformance after the crisis. Now, we can go country by country, but for the sake of time, I will not do it. If you have questions, we can go back to this chart and talk about specific countries. But let me talk about decomposition of the slowdown. So let's look at the decade before the crisis. What did our region do in terms of solo growth decomposition, so solo growth accounting? Basically, our region converged to the west. Our region grew fast because of growth in TFP, which is kind of expected. Our countries used to be industrialized, urbanized, educated. So further increase in contributions of labor, human capital, and capital was less important than putting those factors of productions together in a more efficient way than they used to be under the old system. And that's why if you look at the first bar and look at the comparator bar, which is what I just said, this is the bar based on group of comparators for each country of operations, you see that our countries did better than comparators, and most of this outperformance was driven by contribution of TFP growth. Now let's move to the next slide, which unfortunately is much less optimistic or much less positive, I should say. I always say optimistic about our region. And the future is always brighter than the present. So this graph, which I think is the main takeaway from what I would like you to see in this presentation, is that in our region after the crisis, TFP growth has become negative. Most of the growth, whatever slow it was, is now driven by capital accumulation and capital accumulation also underperformed. But overall, if we look at comparator regions, comparator countries with similar income levels had positive, well, zero TFP growth and larger capital accumulation, also larger contribution of labor. Our countries are also doing not as well in demographics and similar contribution of human capital. Now if you look at Africa, Latin America, emerging Asia, you have all kinds of stories, but everywhere you see that other countries or other emerging markets overperform our region. Now let us go region by region. We also group countries. And I guess the reason for that, I guess the same as in ECB and the commission, is that we need to have teams that cover several countries. So in our case, we have Central Europe and Baltics and we have Southern Europe, which cover S-C-E-S-E. And if you look at the last two pairs of bars, you see Central Europe and countries which are comparators to Central Europe and you see Southern Eastern Europe and comparators to Southern Eastern Europe. And you also see that both of those regions radically underperformed the comparators. And you also see that contribution of TFP growth has been negative in both. And you see that in Central Europe, not surprisingly, and in Southern Eastern Europe, we have major demographic challenges. So this is a point of concern. And of course, that is completely consistent with the focus of this conference on institutions, thinking about what we can do to make TFP growth to be restarting. Now, this is not the middle income trap. Of course, as I said, is worse in our countries, but it's not something which is globally unknown. So if you look at TFP growth as a percentage, as a function of percentage of US level of GDP per capita, you see that there is a middle income problem. So around middle income, you see that the non-linear trend of TFP growth with regard to level of development is around zero or even negative. And our countries are kinda approaching this trap. This level of 40, 50% of US level and that's where TFP growth is a challenge. Now, South Korea is one successful counter example to that South Korea managed to move from growth model based on investment, adoption of technologies developed somewhere else, to the model of post-industrial development based on human capital innovation and research, but otherwise middle income countries are facing trouble. And this trouble is usually exactly what Korea managed to avoid. So countries build institutions which are suitable for industrial development model, but not suitable for innovation based model. And reforming the institutions is exactly the challenge. Now in our countries, the story is actually a bit more complicated because they also had this source of growth coming from reforming the inefficiencies inherited from Soviet Union. That was a gap of productivity catch up that could be covered and it was covered and now we have additional challenges. Now let me add something and I'm not going to talk about pollution today. Well, let me add something about environmental Kuznetz curve. This is not a very robust relationship and yet conceptually, middle income trap is also about pollution because if you have rich countries that moved on to post-industrial service based, innovation based growth model, their pollution is low. If you look at the poor countries that have not yet industrialized, pollution is also low. These are the middle income countries that have polluting industries and are yet to transition to a new sustainable growth model. So let me skip country by country graph but also say that if you evaluate the accumulated gap in investment over the last few years, we see that we are talking about two trillion euros which our region has not invested relative to comparators, out of which about 40% is due to infrastructure investment. So this is something very important for us because we are actually a bank. We are not a central bank, we invest in energy infrastructure and other projects. Now, let me talk a little bit about some work we are doing for the forthcoming transition report. So what we tried to do, we tried to look at the transition from overperformance to soft landing or hard landing after long overperformance episodes. So what we did, we looked at countries which managed outperforming the comparators for a long period of time. And then we ask a question, how these episodes end? And basically the answer is, well, in 40% of the cases, they end with a hard landing with something that we observe in our countries now. But in many cases firms manage to do soft landing and some episodes are still continuing. And in that sense, it is a question, let me skip this slide now. It is a question of what drives the ability to avoid hard landing of a overperformance episode. And of course one of the things was something that Petter discussed related to capital flows, to current accounts. So countries which base their growth models on external inflows would have a problem, especially after a crisis with a sudden stop. And so on the left, this is a story of beginning of an outperformance episode. And you see that it's about growing investment but also growing current account. And the right hand chart is about the end of each outperformance episode where you see that countries have a shrinking current account and slow down in investment. Now we ran a simple panel regression looking at those episodes and we find, not surprisingly, there is no rocket science here, that investment matters, institutions matter, demographics matter, financial development openness and savings or current account also matter. And these bars show the regression coefficient. So we find that investment is more important than institutions but institutions come second. So let me say a few words about governance, politics and institutions. This is something that we observe for a few years and we keep talking about this but I think this is worth repeating. So a lot of people talk about how lack of democracy is good for reforms. You need to centralize political institutions to reform. This is not what we observe in our region. In our region, there is a clear correlation between countries that continue to be open, democratic and therefore being able to sustain reforms. And there are countries which manage to reverse democratic transition and build chronic capitalist systems. And this is something, I'm just showing you one chart but we actually have the whole transition report three years ago devoted to this and we continue running those regressions and we see that in our regions at least but also actually globally there is an emerging consensus that democracy is not negatively correlated with growth. And in our case, we also see quality of economic institutions and quality of political institutions are closely correlated. And it's not just across countries, it's also within countries over time. We see that countries that move backwards are in the left-hand side lower quadrant. These are the countries that are not managing to reform their political institutions. Now, you can always find counter examples but and I'm happy to talk about specific countries but in general I should say that we are talking about in our countries the great divide between countries which managed to build democratic institutions and competitive economies and countries which centralized political institutions and build chronic capitalist. Now, this is a regression which confirms that. We run it globally and we also add transition country dummy interaction with quality of political institutions and basically democracy is good for quality of economic institutions. We measure those in this regression as average of four world governance indicators, a rule of law, control of corruption, quality of regulation and government effectiveness and quality of political institutions we measure by polity to score of polity for data set. And you see that there is a positive regression coefficient and this coefficient if anything is higher in transition countries even though this transition country dummies interaction with quality of political institutions is not significantly different from global correlation. Now, one of the things that we also can say once we run those regressions and try to look at the magnitudes of those coefficients and decompose quality of institutional convergence we see that EU membership matters. EU membership in our region is the single most important factor and again within your group of countries everybody has accomplished convergence in terms of a key community or almost accomplished even though there's some back track. But since we look at both members and non-members we can actually judge and this is the graph that I would like to show. So this is average annual change in quality of institutions relative to the accession year. And you see that three years before accession you have major acceleration in reforms and right after accession it goes down and on average basically reforms slow down on average to zero. So EU accession is important both across countries within countries. So one of the things which people talk about a lot they talk about inequality. And I'm happy to take questions about inequality last year's transition report was all about inequality and inequality of opportunity. We also now have a paper about European trust crisis and rise of populism in Europe which just came out in Brookings papers on economic activities and basically there we show how and why people vote for populist anti-European parties in European sub-national regions. But I would also say that it's not only inequality of opportunity it's fair versus unfair inequality. So basically we decompose inequality into inequality of opportunity which we call unfair inequality and the rest which you may attribute to effort and the rest we would call fair inequality. And fair inequality in our region is not an empty word. Why? Because 30 years ago we all lived in countries well we lived in countries where people working harder would be paid the same amount. And this is unfair equality. So transition was about replacing unfair equality with fair inequality. Unfortunately in many of our countries we have unfair inequality, inequality of opportunity. And we see that actually people are happy with fair income inequality. You see that there is a positive and significant coefficient there in the impact of fair income inequality for support of market reforms. And it's actually negative for unfair inequality. So not all inequality is bad but inequality of opportunity and this is where your outcomes are driven by circumstances you cannot control such as place of birth, parental background, ethnicity, gender, race and so on. This is what people believe being unfair and rejecting reforms in this case. Now let me say just a few words about firm level productivity. And I am conscious of time but I'll try to be reasonably quick. So one of the things which we do we run big surveys of firms and I'm very happy to say that we used to do it with the World Bank. Now we will also do it jointly with European Investment Bank next year. And in those surveys we look at governance of firms. We look at their perceptions and practices of corruption. We look at quality of innovative and R&D efforts in those firms. And basically the story of our firms is a story of innovation light growth. So our data show that if you look at firm level or country level intensity of innovation South Korea grows income per capita and number of patents. China increases income per capita and number of patents. Pretty much the slope in China and Korea is actually the same. Israel, similar slope. Our countries in this chart are very flat in the sense that we adopt somebody else's innovation. We grow. TFP grows because we rearrange factors of production in more efficient way, which is great. But we are not yet inventing new products, new services. Now one other thing which I would like to mention and this is, I'm very happy to talk about this here because this is based on COMPNET, a data set initiated by ECB. We are now also members of COMPNET and I'm very happy about this data set because it allows to compare many different countries in a very rigorous way. So one of the things we find is in our region we have many small firms. Now I'm not against small business, but I'm in favor of growing an efficient small business. This is not what we observe in our countries relative to Western countries. So this is a chart again, one of the main takeaways I want you to focus on. If you take 100 being the level of the smallest firms TFP in this economy. So the question is in our countries of operation, what is the size premium in terms of TFP? How much more productive are larger firms compared to smaller firms? And the answer is in our case it's something like the factor of two, larger firms controlling for sector, for location, for other things. Larger firms are twice as productive as small firms. In Western Europe the premium is 50%. So we are talking about a major productivity challenge because small firms don't grow. And we also look at entry and exit and we see that small firms also don't exit. So they stay the same, they neither grow nor exit relative to the Western Europe. So again, let me say a few things about firm level convergence challenges. Again, we know that the closer you are to the frontier the harder it is for you to grow. And we observe that, so up to the level of something like 60, 70% of German TFP level firms slow down in TFP growth. So if you're further away from German level it's easier for you to adopt better technology including better managerial technology and grow productivity. So the trend is negative and this is kind of TFP convergence which is going on up to 60, 70% of German level. And red diamonds here are our countries and blue ones are our western countries. But now the question is where this slow down ends at 70% and where it continues up to 100%. And basically when we run interactions and try to explain what are the differential factors that affect the ability to continue to converge not to slow down TFP growth when you get to 50 or 60 or 70% the answer is you have to be more open so industries which import more and export more continue TFP growth and convergence up to 100% of US TFP levels. When we look at integration in global value chains in our case it's also the case firms that are parts of global value chains they are less likely to slow down once they approach advanced countries levels. And finally one other thing I would like to mention is job creation. We all care about job creation also because this is an important issue for political economy. And basically in the global setting in the advanced economy settings especially in Anglo-Saxon countries in US in particular people talk about job polarization. The jobs are created at the top of income distribution at the top of skill pyramid and at the bottom in the middle they are being wiped out and technological progress actually creates job-light growth. So if you look at a company like Facebook it's not a home to many jobs. Now in our country the story is actually different. More efficient firms are creating jobs and this is the chart which shows the job growth at firms and industries which are closer to productivity frontier. These industries are more likely to create jobs at 2% a year while firms that are further away from productivity frontier are those non-dynamic smaller firms that actually don't create jobs and in the case of 20 or 30% of Germany TFP level these firms actually create jobs at a rate which is not significantly different from zero. So let me conclude now and say some less controversial things which I mentioned in my talk because this is what media sometimes tends to take away. Basically our countries are slowing down. This is a fact and this slowdown is actually worse than in comparable middle income economies and this is something that is driven by the need to reinvent the growth model. The old growth model has exhausted itself so we need to think about growth model based on human capital, innovation, firm dynamics, entry and exit and for that of course we need better institutions that protect competition, protect firm dynamics, providing incentives to integrate with the global economy, innovate and so on. Now one other important takeaway I would like to mention is the one I just showed in the previous slide. In our countries, in our middle income countries productivity growth is not about losing jobs. It's actually about creating jobs and I think this is why in our case we don't have this trade-off between rising TFP and losing and unemployment. In our case these things go hand in hand. When we grow smaller firms, make them mid-sized and large we actually create jobs, not lose jobs. So this is where I'm going to end and I would encourage all of you to read the forthcoming transition report which we will unveil in November. Thank you. Thank you, thank you very much, Seiji. I had a look on the transition report to prepare this meeting. So we are really on time, thanks to the fact that I put it very short to my introductory remarks. My summary of what you said is about the same but from imitation to innovation, I think that's quite interesting to reflect on this. The infrastructure deficit that you mentioned but you also put there the intellectual property deficit which came very often also in your presentation. The reliance on foreign savings was also I think quite interesting in the presentation. Then of course the more controversial and political question about democracy and the quality of economic institutions I think which is a complex theme of course because democratic, very different forms of democracies also. So it's not a concept which is so easy but I think you came with a sort of convincing, convincing graphs there. So that may also come in the discussion. It's a bit more difficult. You had the European Union membership does matter positively which I think we fully agree with that but then you came with the, it works better in the pre-accession period than in the post-accession. We have found it was interesting also that graphs and then fairness and I know Marie is going to come also with question of trust and fairness and the importance of these soft sort of values, difficult to measure values but quite, quite important. And then you came about the equality of opportunity of course which is very important. The COMP net I was quite happy that you mentioned that because what important efforts to get these statistics. And I looked at indeed other studies where you had the diffusion of ITC and the structural firms, the micro firms would probably not be very good in diffusing technology and making then the investment. And more important which you mentioned actually is the turnover of the micro firms which you say they tend to persist. Sometimes on the fringe of the official market also. That's one of the way of surviving in sort of gray or parallel economy but obviously they're not very good in general in the diffusion of the ITC or other technologies in general which I think was also a very important you mentioned. So now we are fully in time but now we are on our budget. Marie, you have the floor now. Yes, when I get mine. You get... That's right. You can present mine as well. They're not the same. They're complimented and then you push here on the right. Thank you and good morning everyone and thank you very much for the invitation. Happy to be here and share the OECD's view on the catching up process in CC countries and actually I could use also your slides. I was happy to hear that our messages are not in conflict against each other so there will be some overlapping of course in the messages but OECD's engagement with the region is deep from these countries. Seven are OECD members from Central and Eastern European countries. Latvia was the latest to join last year and we are just now discussing with Lithuania so it's only a question of time when Lithuania will join and during the autumn we will discuss inside the OECD about some new members so maybe the membership of the CC countries will increase in the future when it comes to the OECD membership. And we have several programs at the OECD in which we cooperate with the countries in this region. We have regional program on Southeast Europe that promotes stability and prosperity in the region since 2000 and we have also work in Central and Eastern Europe the Caucasus and Central Asia and then I would like to underline the work or the joint OECD EU SIGMA initiative which supports institution building and structural reforms in the public sector. So I will show now some facts and figures on convergence in Central Eastern and South Eastern Europe but I think that the most important part of my message will be the OECD's reform priorities to revive convergence. But to begin with let me say I totally agree with Peter Pratt that it's a bit difficult to discuss this group of countries because it's a very diverse group but despite this diversity of course they share a common convergence challenge and after a period of rapid catch up over the past two decades since the global financial crisis these countries have seen a slowdown in convergence as we heard from Sergei and really compared with more advanced European countries. And going a bit more into the details I know that it is a bit violent to put these countries into groupings but I'm trying to do it. I put them into four different groups first Southeast European economies the former Soviet Union states, the politics and the Central Eastern countries in order to go through a little bit of their progress that they have made and to see where they stand now. So first to the Southeast European economies so the breakup of Yugoslavia and the prolonged conflict that accompanied it provided very little supportive conditions for convergence and this decade was followed by a credit driven consumption boom that abruptly ended with the global financial crisis and when it hit Southeast Europe it revealed the shortcomings of this credit based growth model which relied on consumption rather than productive investment and exports. See economies had limited resources to mitigate the impact of the crisis and as a result its effects are still being felt across the region today. Government finances were strained and the low debt ratings reduced the scope for fiscal stimulus and top of this the euroization of these economies limited the scope for competitive devaluation. So these economies have also not fully recovered from the impact of the crisis and on top of that many of these countries have faced political challenges in recent years. A major shift is needed to help the region achieve a new growth model based on innovation and skills. The second group the former Soviet Union states Russia the region's largest economy grew fast and converts rapidly towards European Union averages until around 2013 fuelled by strong commodity prices but since then convergence has stalled and GDP per capita remains 60% below the EU average and the reasons for this disconnect with EU are both economic and political as you very well know. Russia still heavily depends on oil exports and so recent sharp decline in oil prices meant a blow to oil revenues leading to declining investment and household consumption and the sanctions in the wake of the Ukraine crisis also hit non oil exports and imports were replaced by home produced goods which are less productive. So the other countries in that region have equally shown disappointing conversions GDP per capita in Belarus, Moldova and Ukraine remains below 50% of the EU average and these economies were also badly affected by the global financial crisis. So the third group the Baltic states in the Baltic states the convergence performance has been remarkable especially compared to some other countries while in 1995 average per capita income stood at only around 28% of the EU 15 average in 2015 so in 20 years time it has reached 66.5%. So EU membership has been an important engine to convergence and the harmonization of regulations before their accession to the EU in 2004 so the adoption of the Akii Communiter helped these countries to significantly improve their institutional quality. EU structural funds have also played an important role in fostering structural reforms by improving the business environment and financing important structural policies. So their admission to the Euro area has thus helped to strengthen their financial and fiscal frameworks and these achievements are remarkable especially because the politics were very vulnerable at the start of the global financial crisis. So turning to the last the fourth group let me look at the Central and Eastern European countries. These countries achieved significant conversions vis-à-vis other EU countries before the crisis but however the progress has been uneven across countries and the path not always smooth. Countries which entered the EU with low income levels have converged somewhat faster but on the other hand the catch up has been limited for richer countries like Slovenia, Czech Republic and Hungary. Extensive EU structural funds and large inwards FDI in some countries and particularly in export-oriented sectors such as automotive like in Czech Republic and Hungary have secured a high integration in the global value chains and have importantly contributed to drive growth. Moreover where there was conversions it was not always sustainable. The rapid convergence before the crisis reflected an investment boom supported by a positive global environment including strong capital inflows and optimistic expectations about the growth prospects of these countries in an enlarged EU. So due to rapid and in some cases overly unbalanced growth most countries accumulated considerable internal and external imbalances prior to the crisis reflected in high inflation and wide current account deficits. And these vulnerabilities meant that these economies were significantly hit by the crisis with all countries except Poland experiencing negative growth rates in 2009. And while most countries recovered rapidly growth rates have remained significantly lower in the post-crisis period and convergence has slowed down largely as a result of lower potential growth. And when we, oh, so these slides, sorry I didn't, that was a slide I was supposed to show in the first place. Now we come here, you see the convergence process, these were not in the right order, the slides. So that was concerning convergence but now to the potential growth. And when we have a look at the whole region again, so the convergence prospects for the region seem very bleak following the global financial crisis and weak productivity growth and low investment rates during the crisis which have come on top of a rapidly aging population and also declining workforce have reduced the long-term growth potential of these economies as you see here. And in addition, many higher skilled workers have left the region in search of better opportunities abroad. So the international context while becoming, as we all can see, more supportive, it may not provide the same support as during the previous decades. In our recent interim economic outlook where the global economy is picking up with global GDP growth projected to increase to around 3.5 this year, next year 3.7 from 3% in 2016, but however strong and sustained meeting term global growth is not yet secure. So the recovery of business investment and trade remains weaker than needed to sustain healthy productivity growth. And in the Euro area, a major trading partner for the region potential growth has substantially fallen as a result of weak productivity and investment. So the prospect for further EU enlargement are uncertain and given these challenges the slowdown in the pace of structural reform documented in our 2017 going for growth report is deeply concerning. This annual flagship publication shows that the pace of reforms has steadily declined in 2011 to 12 in the EU, including in Central Europe, as you can see here. And it also shows that the implementation of the type of reform packages that we typically recommend to foster convergence has been uneven. In many European countries, reforms have been undertaken in either labor or product markets. But not so often in both areas. This means that governments have missed opportunities to take advantage of synergies in reforms. And by doing that, they of course increase the risk of getting fewer benefits of fewer people. So our message really is that these reform packages are the most influential ones. So reforms both in labor and product markets are implemented at the same time to achieve the best results. CC countries have only one way to restart the convergence machine, and that is to accelerate and intensify their reform efforts. And these countries need to keep pressing for reforms in crucial areas, such as education, skills, labor, competition and the corruption to name just a few. I'm going a bit more into the details. From the OECD's perspective, I want to name, when it comes to these reform priorities, I want to name two areas. First, boosting productivity, and second, improving the quality of institutions. So when it comes to productivity, which is key to fostering convergence and offset also the impact of demographic pressures on long-term growth and on public budgets, more productive societies not only grow faster and create more jobs, but also enjoy better living standards. And at the OECD we have spent a lot of time thinking about what can be done to get back to faster productivity growth, as well as reverse the slowdown in productivity experienced by most countries. And when we look at what has been happening with productivity over the past two decades, we see a number of factors at play which look like they could be reversed by policies. So our recent work points to three such factors. First, is what appears to be a widening dispersion of productivity across firms, in particular between leading firms and the others. And this suggests that there has been at least a partial breakdown of the diffusion of innovation from leaders to laggards. Another is the decline in the pace of business creation. In most countries, the share of young firms in total businesses has been falling. And the third important trend to note is the slowdown in the growth of investment in knowledge-based capital, such as research and development, skills and organizational know-how. So boosting productivity will be really essential to help the region move up the value chain and connect with regional and global markets. And the recipe for reforms varies from country to country, but there's a common set of structural economic challenges that will need to be tackled, including low levels of innovation, skills gaps exacerbated in a number of economies by significant emigration of skilled workers, fragmented capital markets, and limited access to finance. And reforms should also focus on enhancing human capital, as well as improving the business environment to allow the benefit of significant floating direct investment in the region to spread to the rest of the economy. But what is clear is that even if we manage to foster convergence, we would not really be prospering unless the fruits of growth are widely shared. So we need to work on both boosting growth and making it inclusive, in that sense, very much the same message as Sergey Kuryev took up. We can partly also reverse the effect of population aging on growth by extending working lives and getting more people, particularly women, in the workforce. For example, increasing female labor force participation could help support growth in southeastern Europe and Turkey. But last, certainly not least, it's critical to improve the quality of institutions if we really want to reinvigorate growth and the convergence process. One could identify plenty of idiosyncratic futures that hinder these economies, but really the quality of institutions is in many cases an impediment to more and better investment, as well as to productivity growth in the region. So property rights are not enforced in many countries. Governance of state-owned enterprises is OPAC. Public governance is weak. Corruption is a barrier for investors. And lower development and higher corruption really go together, as you can see in this slide. So ambitious and forward-looking strategies are needed to strengthen institutions, and countries should address their needs for a strong professional civil service with managers who are appointed on merit and who are able to work across institutional boundaries to deliver value for money within budget for large-scale projects, as well as delivering services efficiently and effectively to business and citizens. Efforts should also focus on building stronger and better enforced property rights, improve governance of state-owned enterprises and fighting corruption, and the governance of state-owned enterprises has been really the weak point of all those CC countries which have joined the OECD, most recently, despite of the fact that they have been also members of the European Union, so every single country has been obliged to make changes in the legislation when it comes to the state-owned enterprises in order to join the OECD. That was the case with the latest, which joined with Estonia and Latvia, but also the case with Lithuania. But having mentioned all these needs to reform also the institutions, I want to underline that the quality of institutions depends not on form only, but also on the way their essence is brought to life. So formally, what is needed is, of course, checks and balances, oversight frameworks and institutional settings, and they are mostly in place, but really what is needed and what is lacking is the genuine belief in their functioning. The Balkan Parameter Public Opinion Survey 2017, which will be officially launched next Monday in Brussels, shows a concerning absence of confidence in institutions. So this mistrust risks eroding these frameworks, enabling political capture and further weakening, or in the worst case, a punishment of their roles and powers. So this versus circle is endangering the overall economic growth prospects. And to get the best managers to lead public institutions is, of course, important, but in order to make sure that we get the best managers, we need also to give them the necessary freedom to work. And a good example of a success story can be seen in Estonia, where the National Tax Administration has evolved from an old-fashioned bureaucracy to a future-looking service provider. Efficiency has increased fast with half the staff, reduced tax avoidance, and satisfied customers. And the citizens of Estonia are now regularly voting the tax administration among the best public service providers in the country. So really success stories are possible in a rather short time, and you really can follow in the countries which are not yet there where this mistrust is to be found. So to those countries which has been able to achieve these success stories. So ladies and gentlemen, progress during the last 25 years has been enormous, and I have no doubt that the countries in the region will succeed. What is needed is, of course, hard work and really the starting of this convergence machine, pro-competition structural policies to encourage innovation and dynamism, and ultimately productivity, and also what is needed is the strengthening of the institutions. And the OECD stands ready to work together with you to address these fundamental challenges through contributing our experience and sharing best practices through our cross-cutting forums. So thank you very much for the attention. No, thank you. Thank you to you, both of you. I think really the excellent presentation. I think it really introduces very well the topic. It complements also. There were some repetitions sometimes. I think they were quite useful actually, which sometimes happens. I mean, and you complement. If I may very quickly, Marie, I liked your clustering comments because you also remind us about, I would just quote a sort of forgotten countries. Countries we don't speak much, because you mentioned also conflict in conflicts, which I think is important to remember. The commodity-producing countries, I think it's also good to remember a bit more on the East side, but still, I mean, that's an important comment. I thought, compared to Sergei, you had this convergence illusion, I would call it, the expectation gap thing, because before the global financial crisis, it was the expectation that the future growth rate would continue, of course. And part of that was based on capital misallocation, because sometimes excessive capital inflows in some sectors. And then you get, of course, a correction. This is not something that is typical to that region. We also had that in the, let's say in the older member states of the union, but that's something that you mentioned very much. And then you get these questions when the crisis is badly managed, which is very often the case. Then you get hysteresis effects, and then it feeds on itself. Then you get into a sort of pessimistic sort of loop. And so, I mean, that factor, I think it's important when you look at what is structural, really, and what are the things which are more related to the crisis and pre-crisis actually also. So that, of course, is typically in the topic on sustainability, of course. And saying that the old model was good, and then you had the crisis, and then, no, the things, the crisis is also related to sort of illusions about the sustainability of the model, which was before, which is one of the things you singled out. On the scope of reforms, I mean, what's quite interesting also, you came, of course, with some very important issues about the labor market, which I think is probably something which didn't come that much, and the huge migration flows that we have seen in the region, immigration, a little bit in all directions. I heard a figure of 20 million people moving across countries. I mean, this is huge. I mean, when you look at the population there, you mentioned also the female participation, which I think is also very relevant in what happens in the labor market. But I think the migration flows didn't really come up. I know, there are so many topics, of course. The diffusion of growth between the top performing and the others, I think it's quite important to put the term inclusive there. That's a little bit original, because we know these gaps, but at the end of the day, it leads to income distribution differences, of course, over time, which of course creates reactions against the top performing firms because the excluded will not like it, of course. And so I think to put diffusion from high growth to the others, I think was also, and then the trust in institutions, of course, it's a quite delicate topic because we see that in the trust in European institutions has been eroding, is picking up again recently, but that's quite a difficult topic because very often what you see in the population is sometimes the lack of courage or leadership sometimes. But these are very difficult topics to address, but you are perfectly right, I think, to single out this trust in it. I would have been curious having other countries on your table, not only these countries, but other countries, because we also saw this erosion of trust in the institution. Now on the panel, we are really almost on time, a few, very few minutes, we are really on time. I will follow the program. So Erky, you have the floor. No, we have about seven minutes, but let's say we have a little bit of flexibility. Thank you very much, Peter. I like very much Sergei's and Mari's presentation. Sergei said that EU membership matters. Mari and Sergei spoke about role of institutions. I want to come back a little bit to the roots of enlargement because sometimes we lose the sense of history. The first post-Cold War enlargement took place in 1994 when Finland, Sweden and Austria concluded negotiations. Norway did also, but they failed in referendum. They became members in 1995. They happened to be in the team who negotiated. In the middle of these negotiations, in summer 1993, Dennis Presidency organized summit in Copenhagen. That was after the end of the Cold War, and countries want to give the vision to the new countries from Central East Europe. And that meeting, basic cornerstones for enlargement were set up. And the summit said that we want to give an opportunity for those countries with desire, but there are three pillars which must be completed. First, the candidate country has achieved stability of institutions guaranteeing the rule of law, human rights and respect for and protection of minorities. Still important. Second was existence of functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union. Third, the ability to take on the obligations of membership, including adherence to the aims of political, economic and monetary union. Very far side these pillars in 1993. After that in SN, pre access and strategy was agreed upon. And as Sergei said, that turned out to be very successful. He gave a solid anchor to all those countries who wanted to follow. In summer 1997, all the countries have applied. The European Commission gave an opinion on each country. They are, by the way, impressive papers. I went through a few of them, 100 pages for each. And then they said, what are the preconditions for negotiations? First chapter analyzed the political criteria under the title of democracy and rule of law. Essential parts were judiciary, its structure, and its functioning. It's no surprise that these issues remain a cornerstone in the European Union. When joining the EU, the countries took the commitment to respect these principles. And it's also very important that the European Commission actively monitors the developments closely and takes also actions after that whenever needed. This political side, which remains intact, as to the economic side, it's true that post-crisis economic development has been weaker. So it has been everywhere in Europe. We must also remember that. We had this second recession. But when you look at this in totality, let's see what happens. During last 25 years, real per capita gross domestic product in Hungary and Czech Republic increased by approximately 80%, 80%, very rapid increase, even in global terms. Some countries did even better. Estonia and Poland, corresponding increase in economic welfare, was approximately 170%. And research from EBRD shows that the countries that joined the EU have also been better in ensuring that the growth is inclusive. That's also important to note. Rapid economic growth in the region, integration with the older EU countries, and convergence towards them has been an economic success story for the whole continent, not only for the new countries, but also for the whole continent. A showcase example of economic reforms yielding benefits that can be and are shared widely. And now, since 2004, many of these countries are integral bonds of EU-wide production networks. I was happy to be a member of commission when the new countries arrived, first of May in 2004. It was a great moment of unification in Europe. Two months later, I moved here. So that was a short lived experience, but I never forget it. But when we still celebrate those achievements, taking into account the difficulties today, we still need to remember and come back to these prerequisites. Global economy is full of sad examples of countries failing to catch up, failing to improve welfare of their citizens. And often, they have one common denominator. When the institutions are not stable and credible, if the rule of law is not respected, it's not possible to track investments in the long term and not possible to ensure sustainable economic convergence in the long term. So Sergey is right that investments are the most important, but without institutions, you don't have them. So they go hand in hand. As was said earlier, in pre-accession phase, EU was the anchor. It was followed, it helped. Later, it has been a little weak, as we have told. But it's equally important. The same EU legal order applies to everybody. While this model of independent institutions and rule of law has been successful, many see it challenged today globally. And also, the problem is not unknown in our continent. Every country and every nation has the right to choose their political leaders and their political tendencies. But the membership in the European Union, which is based on common values and the respect of rule of law, brings also its obligations. The question is, how to preserve the rule of law, how to preserve independence of public institutions, including central banks and financial supervisors from undue political influence. If you go to economic literature, you find a lot of evidence, and it's not mixed. How important the role of institutions is. It's critical for a sustainable growth, and there's more and more research that has come to that direction. The countries that are able to share increasing prosperity and, for example, ensure educational opportunities are a better place to uphold functioning institutions in the long run. But of course, even the countries with good economic performance are not immune to temptations of various degrees of populism. But I will divide this populism in three tendencies. First is one type, that the establishment and the force in power is challenged. This is challenged. Everyone's power must accept. It can also be a healthy warning. You have a right remedy afterwards. It's not easy. But still, it's more serious if these populism take, first, a tendency where pluralist democracies and independent institutions are challenged. But even worse, if the rule of law and independent judiciary is challenged, then you call to the fundamentals of the principles of the European Union. The situation can become very serious. So when the resilience of rule of law and independent institutions are challenged, it's important that we take the challenge and we are serious in our monitoring. Because we know that in the long run, such tensions within societies, especially if they persist, can be also detrimental to economic growth and development. Moreover, damage to the cohesiveness of a society may be hard to repair after such periods. Thank you. Thank you also, Erki. Go to the next panelist, Dimitar. Thank you also, Erki, for your passionate tone, I think that historical perspective. Thank you. A lot have been said by the previous speakers. So I can just add a few more points and I will try not to repeat with the previous presenters. But the topic is such that we all use more or less the same sources and we cover the same issues. Well, if we look at the history, there were several examples of catching up. And they were very successful, like the cases of Japan, case of Taiwan, Korea, Spain. However, all of them, to all of them, it took quite a long period, close to three decades to catch up with advanced economies. And now we have the case of CEC countries. So if you look at these historical examples, we can see that there are several common features of this convergence process. Initially, there are very strong reforms and this creates a fast growth. Then investment to output ratio is increasing at the initial stage. And this leads to very strong and sustained growth in TFP. Also, the whole process is supported by financial deepening. If you look at our group of countries, more or less the same features appears. So the main difference might be at the initial stage when there was a huge decline due to the transition, due to the very specific circumstances. Afterwards, stronger reforms, low-healing fruits were picked very easily and there was very strong recovery of the output. And this was driven mostly by TFP, which was stronger than in this historical set of catching up countries. However, compared with them, there was slower performance in labor force growth and capital deepening. However, the convergence process was caught by the emergency of the global financial crisis. And if you look what we achieved in this period, we can see that the environment, especially after 2000, was extremely favorable, the global environment, also driven by EU prospects, and much was talked by previous speakers regarding it. 60% of the catching up in the post-transition was achieved in the period 2003, 2008. Financial crisis from 2008 put the whole process on hold. However, after the crisis, there was some recovery. The cycle became positive again. However, we can notice on the upper chart that the growth rates were much more moderate than in the previous two decades. And most of the countries are already above the 2008 level. If we compare with this historical set of convergence countries, in our region, advantages were that we enjoyed a very favorable global environment that is very rarely, maybe once in 50 years, if not even more. With global liquidity, low interest rates, rapid expansion of global supply chains, trade, financial flows were like never before. And EU prospects, EU integration process. But on disadvantage side, we can notice capital stock, which was obsolete, low saving rates, aging population. When the countries entered into the convergence, they already had aging population. And in some of the countries, especially South Eastern Europe, political instability, wars, changing borders, and all this made the whole process more difficult. What were the main factors behind the convergence? If you look, we will find TFP. And it was set also before. I will not repeat. Productivity was growing because of new technologies, new production, new capacities, FDIs that entered into the region. And most of the countries reduced the productivity gap with Germany compared with 1980, except with South Eastern Europe, which is still below the gap that it had in productivity with Germany. Well, TFP was the major factor. And we saw in Sergey's presentation. This came on the wings of reforms. So EBRD transition's course is very clear. However, we can notice that in the first decade of the convergence, the achievement was much better. After that, there was some moderation. And we can argue that there are several factors behind. One might be that there was some nature of stagnation. In some areas, convergence was already achieved. So there was not much more to go up. However, we see that in some sectors, convergence was not achieved. And still it stagnates. EU driver as a factor might be one reason. Once the countries entered the EU, those who entered, it's not incentive anymore. And we saw that reforms are stagnating. And if you look in the regions, in the sub regions, in this region, we can see that South Eastern Europe is especially weak, especially in governance and competition. But also governance and competition are sectors where other regions, Central Europe and Baltics, are not doing quite well or not doing as good as in other sectors. If we divide this whole period into sub periods, we can see very strong convergence in 2000, 2008, and then substantial slowing down in 2016, 2008. Only Poland is doing better in this second period than in the first period. All the others are doing substantially weaker. And we have even countries which are reversing in this process of convergence after the global financial crisis. Well, where are we standing now? Again, if we make three sub periods, we can see that all factors of production are slowing down, labor capital. But the situation is very concerning in TFP. It's turning even into negative territory. And TFP is the key, as we also saw by the previous presenter's key for the future convergence process. Why? Because in labor, we are not so strong. In labor, there are some weaknesses, aging population, migration, they're all contributing to decline in the working-age population. But there are some reserves. And we should look at female participation rate and youth unemployment, especially in southeastern Europe and to some extent in central Europe. There is some reserve here to go to these resources and to make labor more contributing to the economic growth. Capital gap to EU is substantial. To US, even more substantial. And here, we have to cope with low saving rates. So as I said, the key is TFP, structural reforms. If you look at the heat map, we can see that where we should concentrate. For Baltic states, they're good in all these areas. Central and Eastern Europe institutions and business environment are areas where some action is needed. Southeastern Europe, there are much more work. Institutions, human capital innovation. But it's interesting to see that in business environment, southeastern Europe is doing quite well, even better than central Europe. And this might be for central Europe, some area where they can achieve some stronger contribution to TFP. Euro area membership, I will not talk much because everything was said before. So how do real and nominal convergence interact? Obviously, the real convergence impacted also the nominal convergence. And this is natural. What is important, that nominal convergence is catching up with real convergence. And it's OK. But if you look at the sub regions, we can see that southeastern Europe is not quite good in this area because nominal convergence is higher than real convergence. But if you look more in details, we can see that in three countries, there is some problem. Price pressures are not supported with equivalent growth. There is also positive shift in this area after the crisis. Even before the crisis, real and nominal were going in the same direction. Now we can see that growth is improving, although more moderately, but there is no creating of price pressures or there is less vulnerability. And to conclude, obviously, tremendous improvement was done in the real convergence process in the last 25 years. Last large part of it, it was created before the global financial crisis. After that, we have slowing down. And the main challenge is how to foster the convergence process again. Thank you very much. Thank you very much, Dimita. Go directly to the guest board now. Thank you. It's a pleasure to be here and to speak on a topic which has always been very close to my heart. For a long time, economists didn't take into account the quality of institutions. This has changed. Also, the ECB has done some work on quality of institutions also in Western Europe, because we have experienced during the crisis that we have some issues also there. So Plasma has written a working paper already two years ago. Also, the Austrian Central Bank is doing work on this. And they have supported my preparations. Despite what Sergei has said, what we still do not understand too well, I think, is the interaction between the political system and the economic prosperity. Because we seek countries with backlashes in democracy and still doing rather well economically, at least in the short term. And compared to Sergei's and Marie's remarks, whose job is to point to gaps, I think, in the institutions, of course, I would like to strike a bit more positive tone. I've talked to a number of entrepreneurs who are doing business in the region. And I'm meeting people from Central and Eastern Europe in my daily work. And I think we have to keep in mind where we come from. Democracy has a short history in our part of Europe, 100 years only, much shorter than the UK or Sweden, for instance. And during this century, many countries had authoritarian regimes for several decades and an exclusion from the transformation of Western Europe after World War II. And the last 25 years can be considered a window of opportunity favorable to a political constellation, the EU still in the making, and the need for transforming the system. And when a visitor to the border region of Austria and Hungary asked me recently why Hungary still has only 53% of Austria's income per capita, my answer was rather vague, because 25 years ago, we had no clear picture how fast the convergence would be, nor what the ultimate success factors were. But we can say today, overall, a big economic experiment has worked. I would like to mention a few of the successes of the convergence process, the outlook for the future catching up, some problems which need to be addressed, they go in the direction of what the previous speakers have said and special opportunities which have to be focused on. This is the picture of convergence of GDP per capita and what was done during this process. I mean, we should not underestimate the big difficulties of macro stabilization at the beginning of the transformation. Exchange rates, interest rates, inflation rates were a big challenge at that time, and of course, also the stabilization of the financial sector. We had huge banking crisis in several countries which used losses of GDP. What has been achieved is confidence for investors, favorable terms for investors like tax exemptions, and this is the FDE by economic sector. We see that we had capital inflows to industry, to services at the same time, but we should not overlook that at the moment we have FDI inflows very much based on structural and cohesion funds. So this investment gap which was mentioned already by the previous speakers is a very important point. Integration into global value chains was certainly a driver for growth and can explain the success of Poland, Czech Republic, Slovakia, as well as Hungary and Slovenia. So these are the global value chains and the comparative advantages. Of course, geography plays a role as well. Proximity to industrial clusters abroad and availability of trained workers and manufacturing skills. So there are old traditions in technical colleges, technical knowledge, I think this is very important and you see here the increase in skills which we have seen over the last years. Of course, there are still gaps, but I think it's moving forward. Change of control in the private sector was important and institution building of course. We see here some improvements in governments but still a lot to be done. The crisis has changed the picture but only temporarily, I think. Growth has picked up again, is picking up again. Now the pace of growth is one and one and a half percent above EU rates, also EU rates are lower but growth becomes more broad based now in the region domestic consumption is a major driver especially for instance in Romania. The horizon for convergence has shifted into the future since neither excessive credit growth nor labor cost increases above productivity growth lead to sustainable convergence. Therefore, this is the outlook and if the growth potential would continue at the base we see now, we would have a full convergence in around 30 years from now. Of course, increased macroeconomic stability, generally more balanced economic development could increase the probability of an earlier closing of this income gap and focus on some factors which I will mention. This is basically the issue not only of institutional reform but also of innovation. Country bus differ, control of corruption is an issue, continuous to be an issue, very difficult to tackle but I think should be much more focus on government effectiveness was also mentioned by the previous because I think quality of public institutions but also infrastructure. We see a huge variation in the availability of infrastructure and focused programs on let's say combining different programs of structural investments and infrastructures would be important because we have at the moment, we have many diversified programs not necessarily linked together. I mean the fact that we need Chinese investors to complete a railroad system between two of our member countries I think could be solved differently as well. There's an issue which was mentioned by the IMF recently. This is the strengths of public investment management by institution you see here also clear divergences between countries. We tend to perceive the region with a common approach but there are fewer commonalities than we think. Labor migration is still an issue. We see in some countries quite a large number of young qualified people who want to leave the country. We have for instance had a decrease in population of 2% in server recently. The incorporation of the key commentator as well as EU membership was mentioned already. I think it was a catalyst for change. Welcome lever for setting one word on currencies maybe. When the cooperation with the new member countries was intensified the message was nominal convergence is a precondition but real convergence is required to make a common currency a sustainable advantage. And while Slovakia might be a role model on the one side on the other side Greece had the same rules but structural and institutional weaknesses and lost of cost competitiveness led to a painful reversal of course. Countries like Poland and Czech Republic have demonstrated in the past that quality of institutions and an anchor currency as orientation can work if and only if the financial sector is under tight control. And the fact that Poland came through the crisis much better than other countries could have to do with macro potential tools they have introduced already in two or five but also this counter cyclical policy, fiscal policies, swap agreements and the VN initiative. But we should keep in mind that there is a ratified treaty also on the currency adoption with clear rules on the adoption of the euro. One more aspect of European policies this is now more the opportunities for the future if we look at the European innovation scoreboard and the infrastructure gaps there is a lot to do. We see here the R&D spending in the public sector and we have policy areas like energy, transport, communication and innovation. They will be the crucial drivers for growth in the future and for further catching up. We have here R&D spending in the private sector and this goes very much along what Sergei and Maria have said. I think we need innovative firms, we need firms which are more linked to the research and innovation institutions. We have, let's say, pockets of high technology exports in the regions. We have very successful companies but we have still quite a gap between Eastern and Western parts of some countries. One issue which is very drastic I find is energy efficiency. If you look at that you see there's a huge potential for investment for gains in let's say productivity but also in quality of life of course. And let me conclude the economic and political transformation in the region was a disruptive process. There have been great achievements but there are risks ahead of us. There's more to be done and the risks maybe could be more in the political sphere than in the economy. Thank you. Thank you, Gertrude. Bosnian, I'm curious what you can add to all what has been said to now. Not much, I think, but I really like the presentation. My predecessors and I'm, because I'm the last, I can summarize what you all said and then I think that I have some charts which confirms what has been said already. But the main point that I'll try to make is that yes we all observe the economic convergence but there is something which we and then all my colleagues who already presented their views also concluded was that there is still some lacking institutional and particular cultural view on convergence. So in general, to summarize everything what was said, that catching up did take place. We see the income convergence being fostered by EU membership. I tried to, on some charts, distinguish or I tried to single out the potential effects of the global financial crisis on different regions or different countries of our region also touch upon the total factor of productivity but I conclude with still rather puzzling institutional convergence in terms of where we stand today. I still remember the early days of the transition we were all pretty much following the Washington consensus in those bold points starting with macroeconomic stabilization, price liberalization, privatization. Then further down the list, you came to a small print institutional building and capacity building and I think that this, at least in my view, has been overlooked in the whole process of convergence or transition in this respect and this is still something that needs fuller attention from both sides, from the policy making side and particularly from country side. So the charts that I'm going to present only confirms the convergence. This is the charts on the Sigma Convergence where I tried to split the region into those who joined the EU a bit earlier and those who are still in a waiting room to become the members of the European Union in this respect and we can see that the Sigma Convergence in which measures the reduction of the dispersion of income among the group slow down for candidate countries or potential candidate countries while it continues for those who already became the member of the EU a bit earlier. The EU membership matters. I really like the surrogate chart on this pickup of the efforts two years before entering the EU in terms of the convergence and in building up of institutions but we can see that there are differences among those who joined the EU earlier and those who are still waiting to join the EU particularly after 2004 where the potential candidate countries convergence almost half in measuring by the slope of the beta convergence. If anything, and this was a bit surprising that we haven't touched upon so far is what was the effect of the financial crisis affected the convergence in the region. In my view, the EU membership did serve as an anchor for those who were able to join the EU a bit earlier and impaired or hampered the convergence process for those who are still waiting to become the membership member of the European Union. These charts are of course very illustrative and not taking the full scope of the problem but it is something that might also work as an argument that the EU membership does matter and does promote the convergence in this respect. There was some mentioning of the total factor productivity growth but if we split the phases of what was happening early in transition and then later when some of us joined the EU we show that there is a heterogeneity among the different countries in terms of total factor productivity effect on the growth and we have some unfortunate cases where total factor productivity even declined in this respect. I think Sergei was the most elaborate on the different factors and then drivers behind these processes but it is something that we need to keep in mind in further discussions. Now the progress has been remarkable in terms of human development since early days of transition and the red bars shows the improvement in the Human Development Index. However, we are still having problems with the institutional convergence and the right hand side chart shows that once you enter the EU the institutional convergence slows down at least if you look at the data only. Now of course there are different explanations for this but my question, maybe a little bit provocative question for further discussion could be does EU membership slow down in institutional convergence once you are in? And the right hand chart strikingly could lead to this conclusion that once you are in you put a handbrake and then just enjoy the wave of being in the group of others and then maybe this is also the question whether the institutions that we are jointly building in the European Union are still continuing to improve the institutional quality. I would always say that institutions are nothing but people who govern the institutions and there is of course still enormous cultural difference among us in terms of how we perceive the institutions. Unfortunately I can speak for my own country which was the frontrunner in terms of the transition process convergence process. I am not the first to adopt the euro but being the frontrunner now also generates some potential backlashes while I am saying this because we are in a rather unfortunate process of undermining some institutions which might be important for further efforts and some institutional convergence in this respect. To be even more bold we have problems with the central bank independence in terms of responding to the financial crisis which we had to deal with and there are of course in my view particular problems of perceptions on how institutions in our countries in our regions are perceived by general public if not the politicians and in this respect I would like to conclude and say look that we saw we observed the economic convergence but there is still enormous room to improve in terms of institutional cultural convergence and then of course there is a question whether the institutions of the European Union are there to continue these efforts not only for countries in the region but for the European Union itself. Thank you. Thank you, Bosjan.