economic activity in sweden. the riksbank ’ s decisions are based on forecasts for a more or less uncertain future. unforeseen events in principle occur all the time. this is something we have to live with, no matter how good are forecasts are. to return to the ice skating metaphor, you may fall through the ice despite being careful. but then you will hopefully have both the equipment and the training to manage to get out of the water and get home in dry extra clothing. everything may not happen exactly as you have trained for, but you know what to do – you have both the tools and the techniques required. and we do. we are well - prepared to manage our task, even when there is turmoil in the world around us and when unforeseen events occur. we are aware that extraordinary events may require extraordinary measures. if necessary, we can act both quickly and forcefully. if necessary, we can implement more unconventional measures as a complement to our interest rate policy. this is the way we have worked so far, and this is what we will continue to do. if necessary! concluding reflections – why are things better this time? there have been many gloomy headlines regarding economic developments recently. we are certainly in an economic downturn. and the global financial crisis will probably affect us all for some time to come. but, particularly in the light of all of the measures taken and those that will be taken around the world, we are expecting economic activity in sweden to pick up again next year. after our most recent interest rate decision some analysts wondered why we believe that the swedish economy will recover more quickly now than after the crisis at the beginning of the 1990s. let me go back a little way to 18 september last year when the market for treasury bills was put on hold. i spoke that day with the director general of the swedish national debt office, bo lundgren, with whom i worked during my time at the swedish bank support authority in the 1990s. it was not without some feelings of deja vu. but at the same time i felt then – and still feel – confident that a lot of things are different. that is, better! of course we are an export - dependent economy and of course economic activity abroad looks worse than it did at the beginning of the 1990s. the effects of the global financial crisis contribute to considerable uncertainty and also make the situation very difficult to assess. one example of this is the economic downturn and adjustment the baltic countries

unemployment rising and more companies going bankrupt. households and companies find it more difficult to pay interest and amortise their loans and the banks risk facing loan losses. the banks become more cautious, require larger margins and collateral as compensation for lending money. this reduces the supply of credit, which further reinforces the downturn in economic activity. in addition, it may be the case that the banks earn less money from their lending in such a situation. lower wealth together with greater uncertainty over future economic developments can mean that households and companies neither will nor can borrow as much. to the extent that monetary policy measures alleviate the fall in economic activity, they are also beneficial to financial stability. measures to create confidence the riksbank and other authorities, both in sweden and abroad, have regularly injected oil into the machinery to ensure that financial markets function more smoothly. to alleviate the type of effects i just mentioned. as i said earlier, in our case it is a question of taking measures to directly increase the access to loans in sek and usd, providing the banks with loans at longer maturities and against a broader spectrum of collateral than normal. by allowing the banks to borrow against newly - issued commercial paper, we have also tried to facilitate the supply of credit to the corporate sector, although interest in these auctions has so far been moderate. as you know, we have also granted special liquidity assistance to kaupthing and carnegie. other authorities have also taken significant measures. these include various market measures taken by the swedish national debt office and the fact that the riksdag and government have decided on and implemented guarantee programmes and changes in the law. it is quite simply a question of using various tools that complement one another and together help to restore confidence in the markets. in some cases it merely concerns " being there ” in the background in various ways. the total, massive stability measures taken around the world have had an effect. the fact that the spread between interbank rates and treasury bill rates with the same maturity has fallen is one example of this. but many ups and downs and a lot of work remain before we can declare this crisis officially over. and it is in the light of this that we must formulate our monetary policy. the financial crisis has affected the conditions for our actions – how we need to work to manage our two main tasks. as long as the conditions require it, we will also take whatever measures necessary to safeguard financial stability. when necessary we will also act with greater flexibility,