, it has been politically impossible to bring about the kind of reforms that we in sweden succeeded in introducing through political accord. the financing of the state pension systems are of vital importance for the taxpayers ’ confidence in the economy. if we have learned anything from recent economic developments, it is that households and firms have become better and better at putting things in context, and to change their behaviour accordingly. when forward - looking taxpayers have realised the obvious - that the pension systems sooner or later must be overhauled - it has also affected their behaviour. because in the end, the taxpayers have to foot the bill when the systems are underfinanced - either by way of higher pension charges or lower benefits. irrespective of which, uncertainty results in households preferring to save a little extra rather than consume. this could also be one explanation to why saving in many central european countries has remained at a comparatively high level. it is therefore pleasing that steps have now been taken in the three largest euro area economies to reform their pension systems. even if these reforms are insufficient to secure the government finances in the long term, they are important stepping stones towards healthier economic growth. tax and benefit systems a key question for the labour supply income tax and benefit systems are also important for long - term potential growth in a country, particularly in countries with a high tax burden. it is indeed not possible to establish with certainty that a high tax burden in itself would constitute a limitation to growth in the long term. studies by organisations such as the oecd and the imf point to a clearer connection between long - term growth and the structure of tax and benefit systems than any direct relationship between the tax burden and potential growth. however, this is an area to which sweden by virtue of its high taxes must pay continued attention. economic policy must be focused on finding ways to reduce the distortional effects of the tax system, not least as regards people ’ s willingness to work. high marginal taxes can reduce the motivation to work, thus hampering the economy ’ s potential growth. this applies particularly when the benefit systems are linked to income. at an individual level, this could mean that someone who is offered a job and at the same time must pay higher tax and receive lower benefits may come to the conclusion that it is more rewarding to remain outside the labour market. this dampens the labour supply and thereby also the economy ’ s long - term potential growth. growth issues and particularly the labour supply now appear to be increasingly

bankers. 8. another material change in banking from the “ good old days ” is the problem of what i call “ short - termism ” amongst some bank shareholders ( “ impatient capital ” focused only on bolstering their own short - term returns ). it has also become increasingly common for senior bank managers, especially at the top levels, to be hired on contract basis. while this might be justifiable from the point of view of hiring the best talent available in the market, it could have the unfortunate side effect of cultivating short - termism amongst senior bankers if they only work for a contract or two and therefore must deliver tangible and quantifiable financial results within a short period of time, such as a target roe. in essence, like football managers, they survive on their reputation for delivering fast results during the current league season. the problem has been exacerbated by two more factors. one is the move towards higher frequency of financial reporting, from annual, half - yearly to quarterly. while this move may have been driven by good intentions of promoting transparency and accountability, inevitably it compresses further the performance measurement period faced by bank management and increases the pressure on the senior managers in delivering short term performance. the second factor is the emergence of activist shareholders in the form of hedge funds and, to a lesser extent, certain pro - active fund managers. the net effect of 2 / 5 bis central bankers'speeches short - termism in banking is that firms would tend to opt for businesses or transactions that would boost short term performance in profits or share price, such as large scale acquisitions or mergers or rapid expansion. investments that are necessary for the longer term viability or competitiveness of the bank, such as upgrading of it systems and internal talent development, would tend to be given a lower priority. we have seen many high profile cases of massive expansion of business through indiscriminate acquisition or a sharp rise in proprietary trading by banks, which, as we now know, ended rather badly. fast forays into areas with insufficient expertise or chasing bulge - bracket status by combining aggressive trading businesses with more traditional banking have left banks exposed and created culture clashes in the race for profit. again, this short - termism in the modern corporate world is not at all conducive to regaining public trust in, and respect for, bankers. 9. while many bankers did place profit ahead of the interest of the customers they serve, it is at the same time increasingly