But in a monetary policy perspective it may be a problem if resource utilisation is so high that inflation risks overshooting the target. If resource utilisation is so low that inflation risks undershooting the target, the general political and monetary policy implications coincide. An estimate of what level of employment can be regarded as normal can be obtained by calculating an HP-based trend similar to that used for calculating the GDP gap. This can be considered to represent a normal situation in the labour market, without temporary disruptions that affect the supply of or demand for labour. Gaps that measure the actual deviation in employment from the normal level, either in the number of persons or in the number of hours worked, are called labour market gaps. Figure 4 shows two such labour market-based gaps. Capacity utilisation But neither the number of persons employed nor the number of hours worked provides a really good picture of resource utilisation. During a severe cutback in output such as in the current economic situation, companies tend to a large extent to retain their employees, although they have less work for them to do. To obtain a better picture of resource utilisation the labour market statistics need to be supplemented with data from, for instance, Statistics  2  For a discussion of the flexprice gap and monetary policy, see Jonsson, M., C. Nilsson and S. Palmqvist (2008), “Should monetary policy stabilise resource utilisation?" Economic Commentaries 1, Sveriges Riksbank. http://www.riksbank.com/upload/Dokument_riksbank/Kat_publicerat/Ekonomiska%20kommentarer/2008/0803 06e.pdf.

As the European Central Bank president, Mr. Jean-Claude Trichet has recently underlined “the international interdependencies are too large for purely national or regional rules to be optimal and there is a clear need to strengthen global governance, in particular in the financial field”. In the case of the European Union, the crisis has exposed fundamental weaknesses of the European economy, revealing growing internal imbalances. The functioning of the European  BIS central bankers’ speeches  1  Monetary Union has been under particular stress as the existing surveillance procedures proved to be not comprehensive enough. Therefore, more effective economic governance in the European Union and the euro area is seen as achievable through five main pillars: fiscal discipline, broader economic surveillance, closer coordination, a robust framework for crisis management, stronger institutions and rules-based decision making. At this point, let me say that just recently the European Union has taken important decisions to ensure that Member States coordinate their economic policies more closely. The new economic governance is therefore based on three main responses to the crisis: •  reinforcing the common economic agenda with closer European Union surveillance  •  safeguarding the euro area stability  •  and repairing the financial sector  As a result of these decisions, the EU’s interdependent economies will be better placed to chart a path to growth and job creation. To conclude, I would like to emphasize here that economic governance is a topic that concerns us all.