currency accounts and french banks to lend french francs to non – residents. of course, the indian experience differs from the french one as there is no " one - size - fits - all " transition process. and i would be very interested in listening to your views on this. 2. but before, let me remind you that, to be successful, it is not sufficient to improve the financial system : shaping appropriate institutions and economic policies is of the essence the need to set in place strong institutions should never be underestimated. a g20 work entitled " institution building in the financial sector " ( in which both india and france participated ) stressed the importance of solid institutions along with deep and sophisticated financial markets as key elements to maximise the benefits of globalisation and reduce the risks of financial crises. an appropriate institutional framework includes among others a well functioning legal system, a reliable payment system, a proper framework for regulation and supervision, an appropriate deposit insurance scheme, and propitious conditions for implementing new developments in information and communication technology. as a central banker, i will of course argue that the role of the central bank is crucial. it should be the guardian of the health of the " financial ecosystem " through reinforced surveillance and a continuous improvement of the regulatory and legal framework. sound supervision must be promoted by an independent body, which may be more or less related to the central bank. in france as in india, banking supervision is indeed implemented by the central bank staff. sound supervision and a clear legal framework in turn are likely to encourage foreign participation and maximise the associated benefits in terms of best practices. the need for appropriate supervision is indeed not reduced but modified or may even be increased in case of financial liberalisation. for instance, a working group in process at the bis, in which both the rbi and the bdf are currently participating, shows that the development of local bond markets changes the types of risks faced domestically from currency risks to interest rate risks or maturity mismatches. this requires to enhance and control adequate risk management in the banking sector and in those institutions in which the risk may have been transferred. indeed financial innovations such as credit risk transfers may well spread risks but risk does not disappear. the central bank is also responsible for producing and disseminating various sets of monetary and financial statistics whose quality is of utmost importance for policy makers and investors. an efficient statistical apparatus provides the basis for financial transparency, thus contributing to disseminating best practices in terms of governance. besides, institutional quality also

be somewhat weaker than assumed in december. this is mainly due to the financial situation of municipalities. the municipal sector as a whole is running a deficit, which must be redressed in the years ahead. one issue that has been debated recently is the effects on the swedish economy of the weaker dollar. it is true that the dollar ’ s performance has been weak, but this is not the whole picture. in tradeweighted terms ( tcw ), the krona has not strengthened recently. this is mainly because the krona quite contrary to what many had expected - rather has weakened slightly against the euro. so for foreign trade as a whole, the currency developments should not constitute any great problem. another issue of course is if the weaker dollar, primarily in relation to the euro, could jeopardise the revival in the world economy. neither does this appear likely as long as the adjustment is fairly orderly. as i mentioned earlier, it is probable that growth in europe will be slowed down somewhat, but on the other hand it is likely to be more robust in the us. moreover, the most recent data for the national accounts and foreign trade indicate that we so far rather have been slightly too pessimistic about swedish exports. the most palpable concern is the labour market, where growth has been weaker than expected particularly towards the end of 2003. employment was indeed somewhat higher in 2003 as a whole than we expected at the beginning of the year. but this was primarily because the unexpectedly robust growth in the public sector countered weak growth in the private sector. we have no reason to expect any such pattern during 2004. the strained financial situation in the public sector points to weak employment growth in the public sector, while the economic upswing is likely to be reflected to a rather small extent in a rise in employment during 2004 in the private sector. of course there is a risk that the weak labour market growth will affect households ’ expectations of the future and propensity to consume, which is a risk that we highlighted back in december. the higher the rate of unemployment, the more cautious households are likely to be when it comes to purchasing and consuming. this in turn could entail a risk of lower growth in 2004. nor as regards domestic economic activity is there now reason to make any large revisions compared with our assessment in december. a number of factors are indicating possibly weaker growth, but at the same time there are factors that are pointing in the opposite direction. compared with the picture we had in