It is also crucial that we retain flexibility in the implementation of our asset purchase programmes, to avert any potential financial fragmentation problems. Second, in the current phase of the crisis, in which problems are more concentrated in specific sectors, policies aimed at supporting firms should be adjusted by targeting them on those firms most affected by the shock. In addition, a more selective approach that gives priority to supporting viable business projects should be considered. In the particular case of loan guarantee programs, it may be necessary to expand these facilities in future, but some of their parameters could be adjusted (i. e. the percentage of public guarantee) in order to incentivize lending by banks to viable firms. Finding the right balance between continuing to provide the necessary protection and maintaining a sufficient degree of selectivity will require the practically constant reassessment and adaptation of these instruments in coming quarters. Third, so far, fiscal support has focused on averting the materialisation of liquidity risks. This strategy has been very successful in this regard, but firms have accumulated more debt as a result. Further accumulation of debt might prove unsustainable for firms with a high level of indebtedness. Here, public support in the form of temporary equity injections could be an option to explore, especially in the case of large companies where this option seems more feasible. The Spanish Government has already set up a public fund that can be used for that purpose. For other firms, direct grants could be considered.

The most recent labour market statistics for the United States indicate a continued favourable development, although the monthly statistics for household consumption indicated some slackening of demand. The purchasing managers index for the manufacturing industry in March indicated a small decline for the United States, while the index continued to improve for the euro area. Other indicators for the euro area such as the European Commission’s surveys show a positive development recently. Growth in Asia has been stronger than we had assumed. All in all, my opinion is that international economic activity appears slightly stronger now than we assessed in the February Inflation Report. For Sweden, the assessment in the Inflation Report was that GDP growth would be relatively high in the coming years. Statistics Sweden has since then published national accounts for the fourth quarter  BIS Review 33/2006  5  of 2005. These figures show that GDP growth was somewhat lower than expected, although the outcome for earlier periods was revised at the same time in such a way that the growth for the whole year 2005 remainedl in line with the forecast. Recently, indicators have shown a relatively positive picture of the development of economic activity, for example, the business tendency survey, the retail trade index and statistics for foreign trade. The purchasing managers index for the manufacturing industry has, as has been the case in the euro area, indicated a clear improvement in industrial activity since the middle of last year and this development has also continued recently.