discovered america at the end of the fifteenth century, even though china ’ s economic development was much more advanced and had a much greater army and navy. 2 i would like to quote briefly diamond : “ christopher columbus, an italian by birth, switched his allegiance to the duke of anjou in france, then to the king of portugal. when the latter refused his request for ships in which to explore westward, columbus turned to the duke of medinasedonia, who also refused, then to the count of medina - celi, who did likewise, and finally to the king and queen of spain, who denied columbus ’ first request niall ferguson, “ civilisation : the west and the rest ”, allen lane, 2011 ; ian morris, “ why the west rules – for now ”, farrar, 2010. jared diamond, “ guns, germs and steel ”, norton, 1997. bis central bankers ’ speeches but eventually granted his renewed appeal. had europe been united under one of the first three rules, its colonisation of the americas might have been stillborn. ” the spirit of competition and the decentralised decision - making mechanism that characterised europe in past centuries explain, for example, why european navigators strove to discover new routes ; how the foundations of commercial dominance were laid ; and how scientific discoveries, which often originated abroad, were turned into innovations and new production processes. again, using diamond ’ s words : “ once spain had launched the european colonisation of america, other european states saw the wealth flowing to spain, and six more joined in colonizing america. the story was the same with europe ’ s cannon, electric lighting, printing, small firearms, and innumerable other innovations : each was first neglected or opposed in some parts of europe for idiosyncratic reasons, but once adopted in one area, it eventually spread to the rest of europe. ” europe rose to dominance over the centuries to the extent that the positive effects of competition prevailed over the negative effects associated with the recurrent conflicts between states that stemmed from the inability to resolve the tensions generated by competition. the european union was created precisely in order to ensure that the spirit of emulation and competition could operate within a framework of peace. there is no doubt that there are currently substantial differences within europe, with some countries demonstrating a strong capacity to adapt to the new global conditions, while others are finding it hard to implement the changes that are necessary to maintain their level of prosperity and continue to grow. these

: low inflation and consolidated central government finances have meant that there was room for manoeuvre to meet the economic downturn. last year sweden had one of the largest surpluses in public savings in the eu, which enabled an expansionary fiscal policy. the slowdown in 2001 also differs from the problem periods during the 1970s and 1980s in that the manufacturing industry ’ s competitive situation was very strong from the start. the weakening of the krona began as soon as one year before industrial activity slowed down and contributed to a strong development in net exports during 2001. nor was it lack of competitiveness or a decline in productivity that lay behind the depreciation of the krona - it was financial flows resulting from the decline on the stock market and portfolio investments connected with the ap pension funds being given the opportunity to invest some assets abroad. a recovery in the swedish economy has now begun and the swedish economy has a good foundation to stand on, with a surplus in both the central government finances and in sweden ’ s trade abroad. inflation is on the way down. at the same time, wage formation and pricing behaviour in general will comprise an uncertainty factor when economic activity gradually picks up speed. it may therefore be necessary to implement further interest rate hikes in future. however, the next monetary policy stage depends, as always, on what happens with regard to economic activity, inflation and in the world around us. developments beyond the forecast horizon the uncertainty in the forecasts increases the further ahead they look, but despite this it can be interesting to look beyond the two - year forecast horizon in the main scenario. economic developments during the past decade have been characterised by considerable free resources following the crisis at the end of the 1990s. that is not the case today, and will be even less the case in two years ’ time, if the economic upturn continues as expected. this changes the focus of economic policy. a decisive factor for economic growth will be the development of production capacity, as i have mentioned earlier. it is production capacity that governs the development in demand that is compatible with price stability. here there are some worrying tendencies, which i have touched upon earlier. the labour supply in sweden risks developing less favourably beyond the forecast horizon as a result of demographical changes. shorter working hours would have the same effect. on the other hand, measures may be taken to increase the supply of labour and thereby affect developments in the opposite direction. this effect could be obtained by, for instance, lower absence due