But there are significant pockets of financial fragility, with some of the households that bought and borrowed at the peak of the market still facing very heavy debt service burdens. And even though gross public debt is now on a declining path relative to GDP, at 70% it is still high in historical terms. The biggest legacy problem, though, is the comprehensive capital controls. During the early stages of the crisis, the controls were helpful in stabilising the economy and providing the shelter needed to repair balance sheets and rebalance the economy. But over time – and increasingly, as the economy and the rest of the world recover – they become obstacles to economic growth. However, there have been major hindrances to speedy removal of capital controls, due to the legacy balance of payments problem reflected in huge króna positions indirectly or directly owned by foreign residents. These take two forms. The first and more important were the domestic assets of the old banks in winding-up proceedings. The problem here is that most of the claims on these banks are foreign but their net domestic assets amount to 25% of GDP. When considering the complication this creates for Iceland, you should bear in mind that it is partly because the resolution of the third-largest bankruptcy in the history of mankind is taking place in one of the smallest countries in Europe and is intertwined with its balance of payments and international investment position. The second is the so-called offshore krónur owned by foreign residents.

Philipp M Hildebrand: Open world - Switzerland open to the world Summary of a speech by Dr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, at the Swiss Economic Forum, Thun, 7 May 2004. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Globalisation - the worldwide exchange of production factors, goods, technologies and ideas - is a process that has evolved in different ways and degrees ever since humankind can remember. Technological progress is the actual driving force behind globalisation. It thus becomes possible to reduce costs through increasing specialisation and the best use of comparative advantages. The process of globalisation, however, is restricted to some extent by national and international legal frameworks. Despite overall positive and widespread net effects, globalisation is, however, frequently not accepted due to adjustment costs arising for certain global players. With its successful export sector and its comparatively attractive local conditions, particularly the excellent infrastructure and the flexible labour market, Switzerland has the potential to benefit from the continuing globalisation in future as well. A necessary condition for this, however, is a rise in productivity and, as a result, enhanced competitiveness of the domestic sector. With international competitive pressure intensifying, insulating itself or merely adhering to the status quo are no options for Switzerland in the long term. This would lead to considerable losses in social security and growth and threaten the long-term survival of the country’s social institutions.