the euro area developments in the euro area have been relatively calm over the summer, despite some political uncertainty in portugal, spain and italy. moreover, there have been assessments of ireland and greece, for instance, that indicate the on - going reform work is progressing well. the reform work in both countries has been approved, which has paved the way for continuing aid payments. but the problems remain, and during the summer both italy and france had their credit ratings downgraded because of poor growth prospects. perhaps the most important thing is that new statistics show that the euro area gdp has begun to grow again. after being negative for six quarters in a row, gdp growth was 1. 1 per cent in the second quarter of this year, according to preliminary figures and calculated as an annual rate. in germany, which is very important to swedish exports, gdp growth was clearly above the average for the euro area as a whole. at the same time, indicators for the bis central bankers ’ speeches start of the third quarter point to a continued improvement. the aggregate purchasing managers ’ index rose in july to just over 50, for the first time since the start of 2012, and consumer confidence also began to rise. new labour market statistics also show that unemployment in the region has stabilised, albeit at a very high level. all in all, the new information confirms the picture that the recovery in the euro area has begun. mixed signals from the rest of the world... new us statistics indicate continued strength in the us economy. preliminary figures show that gdp increased in the second quarter by 1. 7 per cent, calculated as an annual rate, compared with the first quarter of this year, which is in line with the assessment we made in july. at the same time as the new outcomes were published, the statistics authority released revised gdp figures for previous periods. these show that gdp growth has been slightly higher since 2007, and that the fall in gdp during the financial crisis was thus not as large as indicated by earlier statistics. in the united kingdom, gdp was slightly better than expected during the second quarter. the indicators for july also point to a gradual recovery in the british economy. however, in japan, which showed positive signals at the start of the year, newly - received statistics over the summer have not been as clear. gdp growth slowed down during the second quarter and the recovery in both the household and corporate sectors appears to have been dampened slightly further at the start of the third quarter. at the same time

such a crisis scenario would look. as financial imbalances usually build up over a long period of time, this means that, in practice, we need to look beyond the three - year perspective that normally forms the base for our forecasts. monetary policy is already forward - looking, but with a more long - term focus we could also include target attainment in the longer run. so, to what extent can monetary policy affect the probability of a crisis occurring? well, it is mainly the effect of the repo rate on debt that is important in this context, as the probability of a financial crisis increases when indebtedness is high or when debt increase at a faster rate than normal. 2 as the interest rate entails the cost of taking on debt, monetary policy has an effect on indebtedness. in the short - term perspective it seems as though the relationship between the repo rate and household debt is not very strong. however, if households expect the prevailing low interest rates to persist, and therefore increase their debts to unsustainable levels, the effects can be substantial. in the july report we describe a potential scenario in sweden if house prices were to fall at the same time as indebtedness is high. 3 experiences from other countries show that this would probably mean that households increase their savings and reduce their consumption, which would subdue demand in the economy and push up unemployment. the effects on gdp and unemployment may therefore be both substantial and long lasting. relevant examples here are spain and denmark. experiences also show that the higher households ’ debts are, the greater the negative consequences will be of a fall in housing prices. 4 at the same time, there would probably be long - lasting difficulties in attaining the inflation target, as the uncertainty over future inflation increases significantly. conducting a flexible inflation - targeting policy in this context involves taking into account the risk of a crisis occurring by balancing the effects within the normal forecast period against the long - term risks i described. there is of course considerable scope here for different assessments, for instance, to what extent monetary policy affects the probability of a crisis, as well as how a crisis scenario would play out. these are difficult monetary policy deliberations without easy answers. as sweden is a small country with its own currency and strongly dependent on other countries, it is particularly important that we do not create see, for instance, m. schularick and a. m. taylor ( 2012 ), “ credit booms gone