continue to rise, the government pension fund global and the fiscal rule provide a sound and robust system for coping with higher revenues. the investment strategy for the government pension fund global let me now turn to how the changes in the world ’ s economic geography influence the investment strategy of the government pension fund global. chart : norway ’ s terms of trade norway has profited from globalisation, through both trade and capital markets. as a major commodity exporter we have benefitted from high commodity prices. at the same time, we have had access to cheap imports from emerging economies. norway ’ s terms of trade have improved throughout the past decade. norway ’ s national income has risen substantially throughout the oil age. substantial current account surpluses and the buildup of the government pension fund global have also made norway a significant exporter of capital. chart : market value of the fund the fund is among the world ’ s largest funds. performance fluctuates in step with developments in global financial markets. nevertheless, the most conspicuous feature ( see chart ) is not the fluctuations, but the sharp, virtually continuous rise in the fund ’ s market value. the stable growth of recent years is due in part to large transfers from the ministry of finance in autumn 2008 while equity markets declined. the krone exchange rate also weakened through the crisis, serving to mitigate the impact on the value of the fund, as measured in nok. chart : return on the fund returns over the past two years have been good. after a return of more than 25 per cent in 2009, the return in 2010 was about 10 per cent. this must be seen in the context of weak performance in 2008. following substantial losses during the financial crisis, the fund has more than recouped these losses. chart : excess return on the fund rising prices on the menu, finance & development, mars 2011, vol. 48, no. 1, imf ( hebling, t and roache s. ) bis central bankers ’ speeches the figures for excess return – the return on the fund in excess of the benchmark indices – also reflect the financial crisis. substantial losses in the second half of 2008 have been more than made up for by the fund ’ s favourable performance since then. since 1998 the annual excess return on the fund has been above 0. 3 percentage point. the fund came through the financial crisis without suffering losses. nevertheless, during and following the crisis we have gained valuable experience. this experience is important as a basis for

europe, the introduction of gdp weights as the basis for asset allocation, and increased risk premiums of certain bonds have all contributed to our present positions. during the past year, the fund has reduced its exposure to some european government bonds, most notably italian and spanish bonds. slide 15 : risk has many facets credit risk is not the only risk attracting attention in portfolio management. it is our view that unequal treatment of investors during the restructuring of greek government debt in march this year, contributed to increase european risk premiums. we are happy to notice that president draghi has underscored that investors would now face equal terms related to the outright monetary transaction programme, as announced by the ecb. draghi pointed out another risk factor in july, when he stated that risk premiums are not only linked to default or liquidity, “ but they also have to do more and more with convertibility ”. 2 president draghi emphasised that this kind of risk is unacceptable. i believe the ecb has taken the relevant measures to eliminate such risks. financial investors are risk - averse. they react to signals, expectations about the future and real adjustments. no doubt some european countries have a long and bumpy road ahead of them, before they get their government deficits and debt under control. my message is that positive steps have been made. as a consequence of the measures taken by the ecb, as well as initiatives taken by the european union and by member states themselves, risk premiums have recently come down. if measures are carried out as intended, it is quite likely that global investors will again allocate the relevant part of their asset portfolios to european government bonds. final remarks let me return to an overall macroeconomic perspective : to factors decisive for sustainable growth. the existence of a large, broad - based business sector that is exposed to international competition and trade promotes learning and development. this is true for any country. in countries with abundant natural resources, the exposed sector may easily be scaled back, while sheltered sectors expand. while other economies have been spared having to deal with the curse of cheap credit, us households and european sovereigns have, over the last decade, largely the same story to tell. easy money is bad for you. speech by mario draghi at the global investment conference in london, http : / / www. ecb. int / press / key / date / 2012 / html / sp120726. en. html bis central bankers ’ speeches