at a high exchange rate in order to quickly proceed to emu. in such a situation, the problems in the countries ’ government finances would put downward pressure on their currencies, while the euro introduction would be postponed further into the future for the very reason that the criterion for the government finances was not met as quickly as anticipated. it now appears that the risk of such a scenario has been averted. the four largest new member states, spearheaded by the czech republic, have made clear that their government finances must be in order before the process to enter the euro - zone begins. new spending cuts have been planned to consolidate the government finances so that the countries after a few years can take the next step and peg their currencies at the prospect of euro entry. however, this does not allay all concerns on the path to the euro. it is not sufficient either, for instance, to simply save so that a deficit during a boom exactly meets the criterion of 3 per cent of gdp. firstly, the stability and growth pact contains a requirement to keep budgets at least close to balance over an economic cycle. but most of all there must be margins in the budget to cope with situations when developments in a country are weaker than in the euro area as a whole ( which was pointed out in the swedish official report before the euro referendum, stabilisation policy in the monetary union ( sou 2002 : 16 ), and in the riksbank ’ s statement on this ). otherwise there is a risk that the new member states will end up in germany ’ s or france ’ s current situation - saving despite the fact that the slowing economy has needed stimulation. for this reason deficits during a boom should be considerably lower than 3 per cent so that a margin exists when the economy is put to a harder test during slowdowns. on the whole there is concern that the pressure to put government finances in order will lessen when the objective of joining the euro is postponed. the future will tell whether the saving plans are really implemented as intended. the long term : mobility and prosperity although much of the debate necessarily focuses on the short term, the key issues are those that concern the long run. on the one hand, how can the new member states catch up sustainably on the eu average in terms of prosperity and productivity? on the other hand, how can the “ old ” eu countries benefit from the enlarged eu in order to boost growth, which in many cases has left much to be desired

eu entry. when a country has received a timetable for eu entry, investors know that, despite political and economic upheaval, there is a certain fundamental security in its institutions. they know the rules that apply to membership in the shape of democracy, a market economy and the eu's acquis - all the regulations agreed so far that each new member state adopts. this has very much been the case with the eight new member states that became free from communism. between 1993 and 2003 more than eur 130 billion ( sek 1150 billion or almost half of sweden ’ s current gdp ) was invested in the eight countries, of which large parts were capital from old eu countries. the investment was mainly channelled into capital in industry and into infrastructure such as energy and telecommunications. a significant swedish example is the large - scale investment undertaken by swedbank and seb in the baltic banking system. from 1998 both of these swedish banks have each acquired a part of the baltic banking system, comprising a total ownership of almost 90 per cent. the baltic banking system, which previously has been hit by several banking crises, has since then grown very fast, with an annual credit growth of 20 - 30 per cent, giving increased opportunities for both large and small firms, but also mortgages for individuals. a number of new services, including internet banking, have been introduced and become widespread. competition has been relatively tough, with decreasing margins on ordinary financial services and other foreign banks that have gradually tried to gain entry. it is likely that the banking system ’ s fast development has contributed to the continuous growth in the entire baltic region during the current decade. investment flows can also help strengthen the complementariness between industrial structures in different parts of europe. outsourcing of labour - intensive stages to low - wage countries has recently taken the blame for the weak jobs growth in the united states. in reality the data indicate something else : that the integration with the fast - growing countries in latin america and the pacific rim have been a crucial factor for the united states ’ capacity to raise its productivity and prosperity increasingly faster during the 1990s and the 2000s. one study carried out by independent researchers at the institutes nber in the united states, cepr in europe and the imf show that outsourcing to low - wage countries even strengthens employment growth in the long term. the consultancy firm mckinsey has estimated that each dollar invested in outsourcing to india gives the united states an economic gain of usd 1