14  BIS central bankers’ speeches  In summary, in this speech I have pointed out that it follows from the Sveriges Riksbank Act and the associated Government Bill that the mandate for monetary policy is price stability and highest sustainable employment. I have also explained that this means that the Riksbank shall stabilise inflation around the inflation target of 2 per cent and unemployment around a long-run sustainable rate. A lower repo rate in the last few years would have led to better target attainment for both inflation and unemployment. At the same time, financial stability and mortgage growth under current circumstances provide no reason for keeping inflation below target and unemployment above a long-run sustainable rate. Financial stability and mortgage growth can be better handled with the instruments available in macroprudential policy. It is also likely that average unemployment has been higher in the last 15 years because average inflation has undershot the target. Therefore it is important that average inflation over a longer period is kept in line with the target. References Assenmacher-Wesche, Katrin, and Stefan Gerlach (2010), “Monetary policy and financial imbalances: Facts and fiction”, Economic Policy, July 2010, 439–482. Bank of Canada (2011), “Renewal of the Inflation-Control Target: Background Information – November 2011”, www.bankofcanada.ca. Claussen, Carl Andreas, Magnus Jonsson and Björn Lagerwall (2011), “A macroeconomic analysis of housing prices in Sweden”, The Riksbank’s inquiry into the risks in the Swedish housing market, April 2011, p. 67–95. Fuhrer, Jeffrey (2011), “Inflation Expectations and the Evolution of U.S. Inflation”, Policy Brief No.

As you know, the Toledo Pact has already been in place for more than 13 years. Over that period demographic and, until recently, macroeconomic developments made for a significant improvement in the Social Security system's financial position. Since the signing of the Pact, the Spanish population has grown strongly by more than 6 million, most of whom immigrants. Immigration has been significant not only in terms of volume but also of its composition, insofar as it tends to be concentrated in the younger age groups. In parallel, macroeconomic developments enabled this strong growth in population to be absorbed by the labour market. Notable in this connection was not only the contribution of the foreign population but also the significant role played by female nationals progressively joining the labour market. These developments occurred against a background of very low growth in the number of pensioners as retirement was centred on the generations born during the Spanish Civil War and the post-war period. As a result, Social Security registrations far outgrew pensions in recent years, which explains how the Social Security system ran growing surpluses, rising to 1.3% of GDP in 2007. These surpluses were assigned, in part, to the Reserve Fund, which reached a significant size of close to 5% of GDP at the end of 2008. In the past year, however, the impact of the economic crisis has also been felt in the Social Security accounts, meaning there has been a rapid deterioration in this surplus, which could even disappear within a year.