Cover -- Contents -- Foreword -- Executive Summary -- PART I: Outlook: Through Financial Turbulence to Sustained Growth -- Outlook: Through Financial Turbulence to Sustained Growth -- Strong Fundamentals Should Help Overcome Financial Turbulence -- Protracted Credit Market Tightening Would Add Downside Risk -- Policymakers Are Facing Unexpected Uncertainty -- Reforms Are Key to Sustaining Growth -- PART II: Analytical Focus: Strengthening Financial Systems -- Analytical Focus: Strengthening Financial Systems -- 1. Tuning the Financial Systems of Advanced Economies -- Overview -- Evolution of Financial Systems -- Quality of the Financial System Matters -- Garnering Benefits without Incurring Excessive Risks -- 2. Managing Rapid Financial Deepening in Emerging Europe -- Finance's Role in Convergence -- Driving Safely at High Speed -- Preparing for the Curve Ahead -- 3. Sustaining Financial Development in Emerging Europe -- What Is the State of Financial Development? -- Which Factors Are Key? -- How Can Progress Be Sustained? -- References -- Tables -- 1. European Countries: Real GDP Growth and CPI Inflation, 2006-08 -- 2. European Countries: External and Fiscal Balances, 2006-08 -- 3. Index of Economic Freedom: Ranking Compared with the Rest of the World, 2005 -- 4. Credit to Nonfinancial Corporations and Households, 2000-06 -- 5. Banks' Exposure to Emerging Economies, 2006 -- Figures -- 1. Europe and the Rest of the World: Real GDP Growth, 2001-08 -- 2. Convergence in Europe and in the Rest of the World, 2001-06 -- 3. Euro Area: Average Interbank Offer Rates, July 25, 2007-October 3, 2007 -- 4. Change in Banking Sector Stock Prices, July 25, 2007-October 3, 2007 -- 5. Daily Stock Markets Indices, January 2005-October 2007 -- 6. Sovereign Spreads, July 25, 2007-October 1, 2007 -- 7. EU-27 Confidence Indicators, January 2005-September 2007.

8. European Regions: General Government Balance, 2003-08 -- 9. Emerging Europe: Monetary Conditions, 2000-06 -- 10. Emerging Europe: Credit Growth, 1999-06 -- 11. European Regions: Ratio of Current Account Balance to GDP, 2003-08 -- 12. External Debt, 2006 -- 13. Bank Credit to the Private Sector in Europe, 1995-06 -- 14. Financial Innovation in Europe, June 1995-June 2007 -- 15. Financial Integration in Europe, 1995-06 -- 16. Financial Index by Subindices, 1995 and 2004 -- 17. Interest Spread, 1995 and 2004 -- 18. Assets of Nonbank Financial Institutions, 1995 and 2006 -- 19. Stock Market Turnover, 1995 and 2005 -- 20. Outstanding Amount of Domestic Debt Securities Issued by Nonfinancial Corporations, 1995 and 2006 -- 21. Convergence in Europe, 2000-06 -- 22. Current Account Balances and Income Levels in Europe, 2006 -- 23. Convergence with and without Capital Inflows -- 24. Share of Foreign Assets and Liabilities in GDP, 2005 -- 25. Credit to Nonfinancial Corporations, 2000-06 -- 26. Credit to Households, 2000-06 -- 27. Productivity, Flexibility, and the Current Account -- 28. Speed of Credit Growth and House Prices, 2002-06 -- 29. Share of Foreign Currency Loans in Total Loans, 2006 -- 30. Impact of Confidence on the Relative Price of Nontradables -- 31. Asset Share of Foreign-Owned Banks, 2000 and 2005 -- 32. Two Stages of Convergence -- 33. Changing Composition of Production -- 34. Labor Market Rigidity and Speed of Credit Growth -- 35. Bank Credit to the Private Sector and Per Capita Income, 2006 -- 36. Outstanding Debt Securities, 2006 -- 37. Equity Market Turnover and Capitalization, 2006 -- 38. Institutional Investor Size, 2006 -- 39. Bank Credit and Institutitional Quality -- 40. Institutional Quality Index, 2006 -- 41. Borrowers and Lenders Legal Rights Index, 2006 -- 42. Credit Information Index, 2006.

43. Corporate Governance (Compliance with OECD Principles), 2004 -- 44. Banking Reform and Interest Rate Liberalization Index, 2006 -- 45. Regulatory and Supervisory Power Index, 2003 -- Box Boxes -- 1. Why Was Europe Affected by the Collapse of the U.S S. Subprime Mortgage Market? -- 2. Europe's Economic Integration -- 3. Continued Relevance of Relationship-Based Lending in an Evolving Financial System -- 4. Financial Intermediation at Work in Denmark -- 5. Upgrading a Financial System: Italy's Experience -- 6. Addressing Financial Speeding in Latvia -- 7. Rapid Financial Deepening: Lessons from Portugal -- 8. National versus Regional Exchange Markets: Implications for Emerging Europe -- 9. Developing the Government Securities Market -- 10. Institutional Quality, Corporate Governance, and Financial Development: The Case of Ukraine.