2/3  Financial services policy I would now like to say a few words about the European Commission’s Green Paper on Financial Services Policy for the period 2005-2010. As already expressed in its contribution to the Commission’s public consultation, the Eurosystem supports the key policy orientation of the Green Paper, which highlights the need to focus on the consolidation and consistent implementation of the legislative framework for financial services. To this end, the potential of the Lamfalussy framework should be exploited to the extent possible. As regards the area of financial regulation, the Eurosystem concurs with the emphasis placed by the Commission on the objective of rationalising the existing framework. The proposal for “better regulation” based on open, transparent and evidence-based policy-making is fully supported. The Eurosystem also supports the suggestion by the Commission to launch a feasibility study on the development of one body of consistent law. We regard such a “financial services rulebook” as a tool to rationalise the existing set of EU rules for financial institutions and, in particular, to reduce complexity and legal uncertainties and to eliminate possible inconsistencies. Still in the context of financial regulation, the completion of the current FSAP legislative work is also important. In that connection, I would like to mention in particular the Capital Requirements Directive, on which, I am informed, work is proceeding smoothly. Also, I would like to make a specific reference to the issue of securities clearing and settlement, to which the Eurosystem attributes great importance.

In Finland, unemployment has fallen sharply from the high level that took hold in the 1990s, and wage growth has slowed. In the euro area, unemployment has dropped without an increase in wage growth. In Norway, the high growth in labour costs may be a source of rising unemployment. In connection with the wage settlement last year, short-term interest rates rose by 1½ percentage points. The substantial rise in costs in Norway, which was reflected in the strong pay increases for white-collar employees and in the centralised income settlement, contributed to pushing up interest rates. In previous periods, higher wage growth has also been accompanied by a rise in interest rates. In 1998, the negotiated wage increases, in conjunction with the depreciation of the krone exchange rate, led to a rise in interest rates of 4½ percentage points over the spring and summer months. The income settlement in 1986, which was negotiated during the strongest boom in the post-war period, resulted in a severe cost shock for Norwegian enterprises and, combined with the fall in oil prices, forced a devaluation of the Norwegian krone. This was followed by high interest rates over several years. Falling wage and cost inflation from 1989, however, provided the basis for the decline in interest rates from 1992. The centralised income settlements are important for wage and interest rate developments, but they do not take place in a vacuum. The outcome is influenced by labour market tightness and income developments for groups other than those covered by the centralised settlements.