expensive and difficult in practice to create an efficient competition across borders, as the suppliers of financial products must adapt their marketing strategies to each individual country. one might have believed that the internet would break this national fragmentation and open up the way for a demand - based international market for traditional bank services, but so far electronic banking services have mainly been used on a national basis. there are also numerous examples of tax systems discriminating between domestic and international financial transactions, which of course impedes the customers ’ incentives to use foreign suppliers, even if they offer more favourable terms for the actual service. integration contributes to greater welfare despite the difficulties in moving ahead more quickly with financial integration in the eu, there are estimates that it may be extensive enough in the future to make a contribution of more than one half of a per cent to gdp on an annual basis. the actual figure should perhaps not be seen as exact, but there is reason to expect an unequivocally positive connection between financial integration and real growth on the basis of the development trends observed so far. a larger market makes it possible to benefit from economies of scale and economies of scope. this means increased economic welfare for the financial system ’ s customers, provided that a sufficient degree of competition is maintained on the market and that there are efficient systems for supervision and oversight to ensure the stability of the system is upheld. if, for instance, european securities funds could operate under the same market conditions as american ones, they could become much larger than they are now. according to the same source as above, this could entail annual savings for european fund savers of 5 billion euro 2 close to 50 billion kronor! more diversified demand a more efficient supply also presupposes changes on the demand side. if the element of national thinking in financial investments were reduced, more savers would also be able to benefit from a broader supply of products. at the same time, it is essential that increased financial exposures towards companies and financial operators in other countries occur in controlled forms, i. e. with a high degree of transparency with regard to the risks attached to them. this is particularly important with regard to financial commitments of normally very long duration, e. g. investments in connection with life insurance. there is reason to believe that the demand for financial services will continue to be a driving force behind the integration process and give a basis for further structural changes in the financial markets. increased corporate financing through securities is one trend that will undoubtedly be further reinforced

. i see that as basically an advantage for people ’ s confidence in sweden ’ s monetary policy. having said that, i also want to underscore the broad agreement among members of the executive board as to the fundamental framework for our efforts. it is important to bear that in mind. after these preliminary remarks, i shall now turn to developments in the swedish economy in recent years. sweden ’ s rapid economic expansion has slowed economic growth in sweden has been strong for a number of years. and although demand has risen rapidly, inflation has been low. this is partly explained by cyclical factors. by this i mean the plentiful supply of unutilised resources - not least all those who had lost their jobs during the economic crisis that ravaged sweden in the early 1990s. that lessened the risk of the upswing in production soon leading to the economy reaching its potential output. but as far as we can judge at present, the more favourable trend also has to do with an economy that is functioning more efficiently. sooner or later, however, demand growth that is unduly strong and persistent will generate economic imbalances, whereupon price and wage increases usually tend to accelerate. in time, such a development is liable to turn into a recession, with falling output and rising unemployment. rapidly rising inflation is often - though not always - an indication that the economy has been expanding too rapidly and that economic policy has not been sufficiently tight. economic overheating and rising inflation were in fact a recurrent problem in the 1970s and ’ 80s. restricting economic activity when times are good has often proved difficult. but sooner or later it has had to be done in ways that were then more dramatic. production and employment have then fallen and unemployment has risen. towards the end of last year we judged that it was time for economic activity in sweden to start slowing down to the growth rate that is commensurate with a stable long - term trend. continued growth at a rate around 3 to 4 per cent was not reasonable. observers usually consider that the swedish economy is capable of long - term growth at an annual rate of about 2 to 2. 5 per cent. a similar situation had been faced for a time by other central banks around the world. in the united states, for example, the federal reserve had raised its instrumental rate successively during 1999 and 2000 to 6. 5 per cent. in europe, the ecb tightened its rate last year to 4. 75 per cent, while the bank of england