The main challenge is to limit flows of persons into benefit. Recent research findings can provide us with guidance.18 During periods of restructuring of private and public sector activities, the number of new benefit claims rises. Findings show that the interaction between unemployment benefit schemes and other social security schemes is not optimal. When demand for labour falls, flows into benefit increase. But the flows do not primarily go into unemployment benefit and seeking work and activity, but directly into rehabilitation. And rehabilitation is to a large extent a gateway to disability benefit. A broad range of measures is probably needed to limit these flows. The new government agency the Norwegian Labour and Welfare Organisation is facing considerable challenges. Moreover, there should be strong financial incentives in enterprises to counter employee flows into benefit. Certain schemes should be reassessed, schemes that now function as pure poverty traps, because for certain recipients there is little to be gained financially in early phases from moving from welfare to work. 5  Growth and the environment  Strong growth in the world economy is reducing poverty at a faster pace than ever before. Increased trade and economic integration are bringing opportunities for raising living standards to ever larger groups. 17  European Foundation for the Improvement of Living and Working Conditions (2006):”Fourth European Working Conditions Survey”. 18  Knut Røed:” Hvor stor er arbeidskraftsreserven? Og hvordan kan den mobiliseres?” (How large are labour reserves? And how can they be mobilised?)

While further cultural integration may take time, the integration policies of the European Union (EU) had the explicit aim of removing legal barriers and building the necessary technical infrastructure. Indeed, the recent economic history of the EU has been marked by distinctive efforts aimed at the removal of barriers to cross-border activities. The EU Banking Directives (1977, 1988), the Financial Services Action Plan (1999), the White Paper (2005) are all examples of EU initiatives aimed at creating a true level playing field in the financial sector. Financial integration is essential for the functioning of the euro area as it is for other economies and regions. The financial system represents the primary channel through which monetary policy affects the economy. A stable, efficient and integrated financial market is the basis for smooth transmission of monetary policy in which monetary policy decisions are transmitted equally across member countries. The Eurosystem has taken since the launch of the euro a proactive stance to promote financial integration in the single currency area. For instance, the establishment of an integrated European payments infrastructure – through the creation of the Eurosystem largevalue payment system TARGET and its successor TARGET 2 – has been instrumental for the integration of the money market. The integration of the money market has been of particular help in the recent crisis for the ECB to react promptly and successfully. It has proven to be beneficial in effectively providing liquidity to the market, and thereby ensuring a proper and smooth transmission of monetary policy.