important shock absorber than public risk sharing. the integrated markets for equity capital in the us cushion around 40 % of total cyclical fluctuations between federal states. if a negative shock hits an industry or a specific region, then this loss is spread widely beyond that region. creditors, on the other hand, are not exposed to losses – except in the case of insolvency. in other words : equity is a shock absorber, debt is a shock amplifier. that ’ s yet another reason why we need to promote the integration of equity markets in europe, too. this should also include venture capital. when it comes to providing capital to innovative firms, the eu has a lot of room for improvement. in the us, for instance, finding investors is not much of a problem for innovative companies. on average, an innovative us firm can attract significantly more capital than one in the major european countries. dismantling national barriers and creating a european venture capital market would help fast - growing, fledgling enterprises to get better access to capital. while regulation has been harmonised to some extent, however, many crucial domains for venture capital funds, such as investor protection and insolvency law, remain fragmented. hence, to exploit all economic advantages of a capital market union would imply more legal changes than currently proposed by the eu commission. 4. 2 barriers to market entry another obstacle that particularly stifles growth by business start - ups is red tape. frequent administrative formalities, long approval periods or high fees make starting a business more complicated and expensive than it should be. even though an enterprise ’ s direct costs may appear to be manageable at first glance, the economic cost of difficulties in entering the market and, as a result, weaker competition should not be underestimated. for example, studies indicate that the differences between the cost of entering the market in the usa and in the eu, though relatively small, could still account for 10 % to 20 % of the eu ’ s productivity shortfall. the costs of removing red tape are comparatively low and could help strengthen growth. this holds true for many european countries – not least for germany, which ranks 106th in the global competitiveness report of the world economic forum on the question “ how bis central bankers ’ speeches many procedures are required to start a business? ” – alongside countries like ethiopia, zimbabwe, mozambique and chad. 4. 3 market integration even in the uk, i think, few would doubt that the single market has been a great

rates. this has made it easier to compare ourselves with other inflation forecasters and also to assess our monetary policy. 2 the new interest rate assumption we now apply means that we can no longer use our old policy rule. if the forecast with a constant repo rate was close to two per cent, the repo rate would be held unchanged according to the old policy rule. if the forecast according to the new outlook shows inflation close to two per cent, the repo rate will normally develop in the way reflected by market expectations. this could mean that the repo rate, given the underlying inflation forecast, should be raised or lowered in a number of stages over the coming two - year period. the new outlook thus means that the monetary policy discussion is based on an interest rate path throughout the entire forecast period, while the old policy rule only took into account what should be done at the time the decision was made. i have seen several examples where the old policy rule is used in discussions concerning the new interest rate path. this is fatal, as it can lead to entirely wrong expectations of monetary policy. the old policy rule is dead and the market now needs to bury it. even with the new outlook we care about developments in the real economy when making monetary policy decision. if, for instance, the forecast inflation rate were to be close to target two years ahead, but showed a rapid acceleration at the same time as growth in the real economy was high, it is possible that the implied forward rate path could not be expected to reflect a desirable development in the repo rate. in this type of situation it is possible that the repo rate would need to be raised more quickly at the beginning of the forecast period. when we make our decisions regarding the repo rate, we thus do not merely look to see whether inflation is close to target two years ahead, we take into account the entire development paths for inflation and the real economy. a desirable monetary policy is characterised by inflation under normal circumstances being close to the inflation target in a twoyear time perspective while at the same time the paths for inflation and the real economy do not exhibit excessively large fluctuations. for the record, i would like to point out here that the forecast assumption that the repo rate will follow implied forward rates does not of course entail any commitment from the riksbank that this will be the case. we have no unique information about the future. we cannot in advance commit monetary policy to a particular sequence of future interest rate