around 13 per cent in the last two years. however, the krone was exceptionally weak in mid - 2000. the krone is 4 - 5 per cent stronger today than in the early 1990s, and about as strong as the previous high in early 1997. thus, the recent strong showing of the krone is not without precedent. changes in the oil price have time and again been an important factor behind exchange rate movements. empirical evidence shows that the exchange rate is affected mainly by large fluctuations in the oil price. the krone tends to depreciate if the oil price is very low, as happened during the russian crisis in 1998. on the other hand, the krone did not appreciate accordingly when the oil price surged from 1999 onwards. hence, the relationship between the oil price and the exchange rate has not been evident for the last two years. since late 2001, however, our currency may have been used as a hedge against the upside risk to the oil price, and this may have contributed to its appreciation. another factor behind the appreciation of the krone is the current low risk premium in global currency markets ( measured by a global risk index, gri ). since the beginning of this year, lower risk premiums have accompanied a stronger krone. developments in the gri were also an important factor during the russian crisis in 1998 - 1999. when global risk premiums and interest rates are low, investors may turn to higher - yield currencies. there is also a tendency for more peripheral currencies to attract increased attention when volatility between the major global currencies is subdued and risk premiums are low. the interest rate differential has been an important explanation for the movements in the krone exchange rate, at least since the summer of 1999. a higher interest rate differential has accompanied a stronger krone. the krone has appreciated significantly since the beginning of this year, however, and apparently somewhat more than what can be explained by the interest rate differential alone. one explanation may be that market participants react to signs of pressure in the economy by adjusting their interest rate expectations in the longer term. this has an impact on longer - term interest rates. thus, movements in the exchange rate may be a result of changes in forward rates, as well as current interest rates. since early january, the 12 - month money market differential appears to have followed the krone exchange rate more closely than the 3 - month differential. the pressure on internal resources seems to have resulted in

design. however, on the positive side, it has also encouraged the euro area to equip itself with new instruments to tackle these weaknesses. indeed, significant reforms have been adopted since 2010 to increase the resilience of the euro area. at the european level, the revamp of the stability and growth pact and the creation of the european stability mechanism ( esm ) strengthened the fiscal framework and the crisis management capacity with a permanent funding instrument. moreover, the decision to establish the banking union in 2012 has put in place the basis for a supranational supervision and crisis 1 / 16 bis central bankers'speeches management. also at country level, steps were taken to correct macroeconomic imbalances, including through the implementation of structural reforms. these measures have put the euro area on a more resilient and safer footing and we have started to see the pay - off : countries with previously large current account deficits now record surpluses, competitiveness has improved and the impact of reforms on growth starts to be visible in some countries. at the same time, these positive developments should not lead to complacency as crucial challenges remain in an environment of low trend growth and still high debt levels in a number of euro area countries. to address these challenges we need to continue to make progress at national and european levels. at the national level, the reform momentum needs to be maintained while at the european level, further steps need to be taken to complete the institutional architecture. let me start by reviewing a few facts on the euro area recovery and on the adjustment process during the past years. the euro area has been on a recovery path during the past four years ( see slide 1, chart on the left ) with the recovery gaining momentum as of late. the euro area has finally reached a gdp level above the 2007 level, recovering the output lost over the period 2008 – 2013. on the other hand, stronger growth was coupled with increased convergence of growth rates in the euro area, as shown by the development of the cross - country standard deviation of annual real gdp growth over time ( see slide 1, chart on the right ). slide 1 over recent quarters, the economic recovery has also become more broad - based across euro area countries and the different sectors of the economy. all euro area countries are currently recording positive real gdp growth in annual terms, for the first time since 2007 ( see slide 2, chart on the left ). at the same time, growth rates have become less dispersed across