alternative vehicles. this made the krone market more attractive. the krone appreciated at the same time that foreign stock markets and domestic equity prices fell. bonds and other interest - bearing securities have been of particular interest. chart 6. nok bonds issued outside norway total outstanding. in billions of nok source : norges bank this is reflected in the international market for bonds issued in nok. last year, such bond issues amounted to more than nok 50 billion. both foreign and norwegian companies were issuers and a number of small and large foreign investors and norwegian companies - primarily life insurance companies - were buyers. the relationships in the foreign exchange market are unstable. new shifts in the world economy may reduce interest in the krone. chart 7. relative labour costs deviation from historical average. per cent 31 january 2003 - 5 - 5 common currency - 10 - 10 - 15 - 15 sources : trcis / imf, ministry of finance and norges bank as a result of the strong krone and a high wage level, competitiveness in business and industry is close to 15 per cent weaker than the average for the past 30 years. historically, following such substantial deviations, competitiveness has always returned to the average fairly rapidly. market participants weigh the interest rate differential between norway and other countries against the likelihood of a depreciation of the krone in the future. cyclical divergence can cause the krone to overshoot its future level in the short term. however, in the long term, the krone cannot remain this strong. this would require a substantial improvement in our capacity to generate income. what are the factors behind the wide interest rate differential? with the krone exchange rate prevailing at end - january, competitiveness had weakened by a little less than 25 per cent since 1996. the krone had appreciated by almost 10 per cent. chart 8. relative labour costs 31 january 2003 local currency common currency sources : trcis / imf, ministry of finance and norges bank in the same period, wages in norwegian manufacturing increased by close to 15 per cent more than wages among trading partners. in the years around the millennium, the depreciation of the krone veiled the underlying deterioration in competitiveness. in may 2000, the krone hit its lowest level in six years. the krone has since appreciated, and the effect of high wage growth has gradually come into evidence in company accounts. in the ten years that have passed since the banking and currency crisis in 1992

for stable supplies and intensified international competition have made enterprises in many industries ever more vulnerable to even short operational disruptions. the employers ’ ability and willingness to take on open labour conflicts have therefore diminished. on the other hand, corporate boards and management are responsible for decisions on expansions, closures, rationalisation, location and workforce increases. unions have little direct influence on these matters. if company costs increase, either productivity must be improved, production closed or relocated to another country. this is the companies ’ arena. their decisions concerning operations, investment and location are in turn determined by the required rate of return that owners set to keep their capital in the company. under these operating parameters, developments in labour costs essentially reflect employees ’ and their organisations ’ assessment of the trade - off between real wage growth and employment. these organisations cannot assume that others can safeguard their members ’ jobs when they determine how high pay increases should be. the pay increases for white - collar workers in the business and financial sector and academics in the public sector have been particularly high. for a long period, this mirrored the high wage growth for liberal professions, consultancy firms, law firms and the it industry. however, wage growth for whitecollar workers and academics appears to be holding up even with weaker labour market conditions for these groups. in many places in our country, public sector wages are higher than the level that can be sustained by local businesses in a less favourable economic environment. it may appear that wages for white - collar workers are first increased in line with that of other groups and then supplemented by individual increases based on performance and profits. the overall rise in wages does not seem to be adapted to the situation now faced by many enterprises or to an ample supply of labour. the system for determining these groups ’ wages may be an unnecessary source of cost increases for enterprises and public entities. last year ’ s wage settlements resulted in wide differences in pay increases across different groups. this may give rise to renewed tension between occupational groups and new wage spirals. because substantial pay increases negotiated in 2002 will take effect in 2003, wage growth will also be high this year even without any new generous pay increases. it may take time and be very costly for business and public entities to resolve the problems caused by last year ’ s wage settlements. it will only be well into 2004 before we can assess how high the unemployment rate will be in this business cycle. one of the richest countries in the world? norway ’ s position as petroleum exporter may have influenced