The banks, on the other hand, were funded by deposits and short-term bonds, but were not allowed to issue long-term 2  BIS central bankers’ speeches  mortgages. However, the mortgages were indirectly funded by the general public’s savings in that the banks were forced to invest in housing bonds. In the 1960s, the general pension fund (AP fund) was established, which meant that the state gained further control over savings in the economy and over the conditions for the banks’ funding. When pension allocations began to be deposited with the AP fund, it quickly grew to become the largest investor in mortgage bonds, among others. Developments accelerated when the credit and currency markets were deregulated in the mid-1980s at the same time as technological developments were beginning in the financial markets. New participants entered the markets and began to offer new financial products, such as saving in unit trusts. The Swedish banks were not slow in following the trend and began to offer their customers their own unit trusts. Saving in unit trusts involved gains for both the banks and households. The banks gained a new source of income and households were given the opportunity to actively invest their savings and spread risk. State initiatives have since continued to push household saving towards the securities market. “Allemansfonder” (national public saving funds), investment savings accounts, unitlinked insurances and individual pension savings are all examples of savings forms that are under certain circumstances taxed at a lower rate than savings in traditional bank accounts.

These reforms have enhanced the credibility and independence of public institutions and, in particular, the central bank’s role and independence. They were not guided by the wish and goal to join Europe, but rather to build a society similar to the European one. By achieving economic, political and social convergence in these countries, each of them hopes to become a worthy partner to the developed Europe, and adopt the euro as the final phase of this transformation process. From this viewpoint, the European integration process, European Commission and the euro became powerful external anchors for each SEE country. Current developments have diminished the anchoring role of the EU and the euro. Consequently, the European Commission and all European decision-making authorities should, in the future, pay greater attention to the characteristics of countries and regions aspiring to EU membership, and engage in closer cooperation with the respective national authorities. It is, however, important to emphasize an evident and indisputable fact to all of us: external factors cannot safeguard long-term stability if internal anchors are missing. The current situation in Europe shows that the integration process does not prove to be a sufficient anchor, be it both inside and outside the euro area, as long as the internal economic and political choices are not stable in the long run. This conclusion underlines the role and importance of internal anchors as warrantors for macro-financial stability and continuation of structural reforms that have brought our  2  BIS central bankers’ speeches  economies to this point.