of the fall of the iron curtain. we recall from those times the russian word glasnost, which means openness. mikhail gorbachev sought to modernise the soviet union and used glasnost as a means of reducing corruption and abuse of power. in western democracies, the term glasnost took on a broader meaning, and was associated with detente between east and west in the 1980s. 11 as mentioned, the shift towards a more decentralised economy both in norway and abroad reflected the failure of centralised planning. monetary policy is an important component of the economic policy framework. 12 in my lecture here last year, 13 i noted that it can be demanding for the political authorities to ensure price stability because low interest rates are often more popular than high interest rates. an appropriate interest rate may therefore be demanding to see nou ( official norwegian report ) 1973 : 36 om prisproblemene ( on price problems ). for an account of economic policy in norway in the twentieth century, see tore jørgen hanisch, espen søilen and gunhild j. ecklund ( 1999 ) : norsk økonomisk politikk i det 20. arhundre. verdivalg i en apen økonomi ( economic policy in norway in the 20th century. ethics in an open economy ), høyskoleforlaget. see i. e., chapter 5 in the norwegian act on securities trading. in norway, the concept is also associated with jahn teigen ’ s contribution “ glasnost ” in the national final of the eurovision song contest 1988. during the financial crisis last winter the government wrote : “ monetary policy is the first line of defence in countering a setback in the economy ”. see report no. 37 ( 2008 - 09 ) to the storting ( norwegian parliament ) “ om endringer i statsbudsjettet 2009 med tiltak for arbeid ( on changes in the 2009 budget and labour measures ), ministry of finance, p. 6. the lecture entitled “ on keeping promises ”, remarks by endre stavang and henrik syse and francis sejersted ’ s summary of the debate have been published in nytt norsk tidsskrift 1 / 2009. set in government corridors. 14 most government authorities in democratic countries have solved this problem by delegating interest rate setting to an independent central bank. but

favourable loans than they are to unprofitable and highly indebted ones. in addition, profits and investment are subject to cyclical fluctuations. it is reasonable to assume that monetary policy has led to a decline in firms with negative profitability by stimulating the economy. this positive effect of monetary policy is, of course, desirable, and contrary to what the zombie theory would predict, and it is especially noticeable in the countries that were particularly hard hit by the european sovereign debt crisis, such as spain ( slide 22, right - hand side ). after increasing abruptly when the crisis broke out, the share of less profitable firms in that country gradually fell back to pre - crisis levels when economic growth picked up. but such cyclical effects should not belie the existing structural deficiencies. compared with other large economies, first and foremost the united states, europe still has structural weaknesses which are curbing the potential growth of the euro area. the structural reforms of recent years have helped to remedy some of these weaknesses in many former crisis - hit countries. all in all, however, the labour and goods markets in the euro area remain comparatively rigid, meaning that the broader conditions for growth and innovation need to be improved further with a view to counteracting the weakness in productivity growth. part of the problem here is the european banking and capital market. the european banking sector has not yet recovered from the serious crisis that emerged around ten years ago. and it is still dealing with pre - crisis structural problems, such as inefficient cost structures. the establishment of the banking union was a fundamental step towards enhancing the resilience of the european banking sector. among the priorities of the new ecb banking supervision is the swift reduction of non - performing loans. significant progress has been made in this regard in recent years ( slide 23, lefthand side ). the ratio of non - performing loans in italy, for example, fell by half over the past four years. and initial successes can now be seen in greece too. these advances are likely to be far more important for the “ de - zombification ” of the european corporate landscape than monetary policy. for example, an ecb analysis shows that weak banks are more likely to extend risky loans to weak firms ( slide 23, right - hand side ). so the drive to press on with banking sector reforms plays a significant part in enhancing the forces of economic growth. this includes allowing weak banks to exit the market, which would at the same