we lived for a long time - rather longer than the core emu countries - under the impression that better economic growth and lower unemployment could be achieved merely by allowing inflation to be slightly higher. this led to repeated devaluations and to much poorer economic growth. sweden fell behind the other eu countries in terms of gdp per capita and purchasing power. there was a break in this policy at the beginning of the 1990s, in connection with the crisis during that period. importing the stability - oriented policy that had long been conducted in the emu's core countries helped to create better conditions for future growth. the policy model we now follow comes originally from germany. during the entire post - war period they have endeavoured, to a great extent successfully, to maintain price stability. the task of achieving this has fallen to the german central bank - the bundesbank - which has operated independently, at arm's length from party politics. the bundesbank model is now copied by a number of industrial nations, which have given their central banks a large degree of independence and the task of aiming for price stability. this policy is also reflected in the maastricht treaty and in the riksbank legislation. my colleagues in the major industrial nations also try - as long as they are sure that inflation is not about to deviate from the desired level to take account of economic activity and unemployment. there are thus considerable similarities and this applies not only in europe, but also in a comparison with, for instance, the us, although the stipulated targets vary, sometimes for historical reasons. in this sense we are all the children of the bundesbank! within the central bank world the methods of working have also become more similar in recent years. although not all industrial nations with a floating exchange rate say that they use inflation targeting, they actually do so in some form. all of them apply a forward - looking perspective ; they produce forecasts and try to adapt interest rates in good time to ensure that inflation will be in line with a target that is formulated with varying precision. the ecb now says that inflation should be below, but close to, 2 per cent, which does not differ greatly from our symmetrical 2 per cent target, given the prevailing error margins. in addition, we usually say that we focus on inflation 1 - 2 years ahead, while the ecb says it applies a medium - term perspective. there is no great difference here, either. when it comes to communication and accountability,

continues to be required, and i therefore call on all jurisdictions to intensify their commitment to achieving greater alignment. for its part, the central bank of bahrain will continue to provide its own strong support to initiatives aimed at narrowing these differences. with respect to accounting standards, the policies set by aaoifi, the accounting and auditing organisation for islamic financial institutions, provide a solid framework for islamic financial institutions. bahrain is one of the few jurisdictions to have made its standards mandatory, although others use them as guidelines. further promulgation of these standards would help increase consistency in accounting and sharia standards. similarly, in the field of financial regulation, we support the work of the islamic financial services board in developing various prudential standards, and would encourage other jurisdictions to also commit to implementing these standards over time. and finally, the third critical pillar under this heading is that of developing standard contract designs and associated documentation. progress here will help address the concerns sometimes expressed about the impact of different sharia rulings on the structuring of instruments, and the lack of certain types of instruments. it will also be instrumental in encouraging more liquid islamic capital markets. this critical third pillar, of course, is in many ways why we are here today, and i should like to pay tribute to the sterling efforts now under way within the industry, with the leadership of the iifm, to tackle these issues. i am now hopeful that real progress in this area is now within our grasp. you will hear during this conference updates on the initiatives now underway, in conjunction with the international capital market association and the international swaps and derivatives association, to develop sharia compliant hedging instruments, as well as standardized repo and commodity murabaha contracts. these will be important breakthroughs for the industry, and we very much look forward to their realization later this year. these initiatives have gained good support from the industry, but i would also call on regulators to help support these initiatives : we too can also play an important role in bringing about greater alignment, by encouraging the use of standardized contracts and documentation, where appropriate. on this positive note, i should like wish you a productive conference, and to thank you for your kind attention.