of old age care and health care. at the same time, internationalisation means that it will be increasingly difficult to finance a welfare system by having higher taxes than elsewhere. in the light of this, it is firstly important that labour force participation and the number of hours worked increase in the economy so as to increase government revenue and payment capacity. secondly, it is necessary that central government finances continue to be in surplus in the next 10 - 15 years, which can be used for amortisation. a lighter debt burden creates scope for future increases in costs. the government ’ s expenditure ceiling and balance targets aim at creating such space. at present, the prospects for growth in the economy are so good that the surplus in central government finances is expected to be sufficient to amortise central government debt at a rapid rate and to reduce income tax. the challenge lies in maintaining this ambition over a long period. it is therefore important that economic policy is focused on creating the conditions for growth. in this perspective, it would in my opinion be unfortunate to take decisions on a shortening of working hours since it would worsen the prospects for growth by reducing the supply of labour. by taking responsibility for stable prices and financial stability, the riksbank can make a contribution to creating favourable conditions for long - term good and even growth. stable inflationary prospects and free resources make possible low interest rates the strong upswing that we are now experiencing has been supported by the riksbank being able to keep the interest rate at a relatively low level due to low inflationary pressure. despite us being ahead of europe in the cycle, we have an instrumental rate which is one per cent lower than in the euro area. since inflation is at the same time lower, the differences in the real interest rate are less, however. an important reason for inflation being so low is the broad agreement on the price stability target that now seems to exist. an expression of this is that inflationary expectations remain at a stable level despite expectations on a continued very strong upswing. the riksbank ’ s most important duty in future is to ensure that expectations remain at around 2 % inflation. the very low inflation which is now registered has, however, surprised many people, including us at the riksbank. an important explanation as to why gdp growth has now been able to exceed the growth in output that is possible in the long term for many years without threatening the inflation target is, of course, that the upswing started from a level

pedalling then sooner or later you will fall off. one reason for this is that society is developing and changing over time. new values gain ground and new experiences are added to old. this is a general feature of standards and rules in society and it also applies to banking regulation. to be a little more specific. sixty years ago, anyone wanting to start a bank was forced to get permission to do so from his majesty the king. this was a system that was probably considered reasonable and well - balanced bearing in mind the environment in which the banks then operated. today it is natural that finansinspektionen should give swedish banks licence to conduct their operations, but the number of new banking regulations has also increased over the past 35 years. the banks ’ change in significance for society, internationalisation and the complexity of both financial markets and financial instruments have all meant that the riksdag ( the swedish parliament ), the government and finansinspektionen need to both adapt existing regulations and develop new ones. it is a major challenge for society and a complex balance to ensure that regulation of the banks safeguards financial stability at the same time as contributing to efficient markets, good competition and good consumer protection. but as i mentioned earlier, it is not only values that change over time, but we also gain new experiences and draw conclusions from these. one event that forms a base for modern banking regulation took place in the 1970s. this is when the system with fixed exchange rates was abandoned, the bretton woods system that had been agreed on decades earlier by the world's leading economies. in the wake of this, a number of internationally - active banks became insolvent due to losses linked to transactions in foreign currencies. the most famous of these is probably the west german bank herstatt, which i expect many of you have heard of. as a result of the ensuring financial unease, the central bank governors of the g10 countries agreed to form what would later be known as the basel committee. this committee had its first meeting at the beginning of 1975 and its purpose was then and still is that the representatives of the member countries shall cooperate on issues regarding the supervision and regulation of internationally active banks. this is to reduce the risk of global financial crises occurring. sweden has been a member of the basel committee since its start. i myself have been the riksbank's representative in this context for some years now. finansinspektionen also takes