2½ years after the cyclical change. inflation is still being restrained by the fall in prices for imported consumer goods, increased competition in a number of markets and the current period of lower nominal pay increases. the trend in prices for consumer goods over the past two or three years is a result of favourable developments in the norwegian and global economies. low inflation is being accompanied by real income growth and a rise in production. it cannot be ruled out that small open economies are particularly vulnerable to fluctuations in international prices. deviations from the inflation target in norway are broadly in line with sweden and new zealand, but are larger than for example in the uk and canada. developments in recent years have also been influenced by the fairly large favourable disturbances to which the norwegian economy has been exposed. developments in norway ’ s terms of trade provide an illustration of this here. as consumers, we enjoy the benefits of falling prices for many imported goods. as a nation, we benefit from a fall in prices for the goods we import in relation to prices for the goods we export. norway ’ s terms of trade are improving. the impact of the rise in oil and gas prices is particularly strong – and the domestic economy is shielded to a certain extent through the oil fund mechanism – but there have also been terms - of - trade gains in the mainland economy. the situation in norway differs from that of our nordic neighbours. it should also be noted that the figures for the twelve - month rise in consumer prices are considerably more volatile in norway than in other countries. we see from the figures that consumer prices in norway, even when tax changes and energy products are excluded, are more volatile than indices in other countries where these products are included. low inflation is not the result of declining demand, activity or employment. in our conduct of monetary policy, we weigh the objective of stabilising inflation close to 2½ per cent over time against the objective of stable growth in output and employment. since inflation is low, we have chosen to keep the interest rate at a low level and have at times considered an even lower interest rate. however, as the norwegian economy has shown solid growth since summer 2003, we decided instead to use some time to bring inflation back to target. in a period of increasing cross - border labour flows, substantial technological advances, changes in competitive conditions and new trading patterns, we may, with our very open economy, have to accept a somewhat greater variation in inflation and deviations from the target, as we have witnessed over the

in the eu has attained a most notable level. however, the process has been neither linear nor gradual. over almost 7 decades of history, the european project has witnessed long periods of calm – where little or nothing remarkable happened – punctuated by “ transformative periods ” that have contributed decisively to its development and to shaping its current form. normally, these deep transformations have stemmed from processes involving reflection and negotiations, conducted in a more or less orderly fashion. 3 / 10 introduction of the single market and the euro for example, the start - up of the single market was the outcome of lengthy negotiations that began officially in 1985. however, the idea had already been raised as an objective since the founding of the european community in the 1957 treaty of rome. moving, trading, and establishing a presence or providing services in any eu country appears as something evident today. yet the single market did not come into force until 1993. admittedly, we tend not to properly value most things that seem evident to us. but the free movement of goods, capital, services and persons is one of the eu ’ s major achievements. at the start of the process, in 1985, around 300 measures to achieve this goal were identified. a whole series of internal obstacles and borders progressively disappeared. changes were made to key mechanisms to allow for progress, introducing the qualified majority as opposed to the unanimity required until that point. it was opted to pursue the minimal rather than full harmonisation of national regulations, which the eu partners acknowledged as equivalent. the history of the single market shows, as voltaire asserted, that perfect is on many occasions the enemy of good. the lack of headway in achieving the single market before 1985 was no doubt due to competition - busting practices maintained by national authorities, but also to the difficulty of reaching unanimous agreements in the council and to the pursuit of overly detailed legislative harmonisation. the situation was unlocked after opting for goals which, a priori, were less ambitious. in fact, certain administrative barriers remain, e. g. in the area of the provision of professional services, meaning we cannot consider the single market to be complete. in addition, the creation of the single currency has been another key transformation on the road to greater integration. the euro constitutes the world ’ s most ambitious economic integration process since the second world war ended. it was in maastricht, in 1992, just before the entry into force of the single market, when 12 member states decided to exceed this