higher than estimated in the report and that small and medium - sized firms in particular would find it difficult. the riksbank also drew attention to the risks of sweden being discriminated against in various respects. one example was the disadvantageous terms for outsider countries in target, the european payment system. moreover, an outsider position for the time being would involve additional costs in various parts of the economy. financial institutions, for instance, would have to operate twin systems in order to remain competitive. negative long - term effects of remaining outside such is the nature of the long - term effects that assessments of them are unlikely to change fundamentally in the course of a year or two. still, there is new and additional information that may cast a somewhat different light on certain aspects. one major issue concerns the link between emu and the single market. there is empirical evidence that the single market is exerting downward price pressure in the european union. some assessments suggest, moreover, that emu may lead to a further price fall ; figures as high as 10 to 15 % have been mentioned. if the effects were to be of that magnitude, the welfare gains would be substantial. in practice, however, it is not easy to distinguish the parts that emu and the single market are playing in price formation. empirical data therefore have to be treated with caution. at the same time, emu and the single market are linked at another level ; as an american colleague recently remarked, “ if emu would help to secure the single market ’ s survival, it ’ s worth all the other risks. ” another important long - term consideration is the structure of europe ’ s business sector. i believe we are now experiencing a formative phase. european manufacturing and services companies are being rapidly restructured, with effects that are likely to be considerable. many forces are contributing to this process ; the globalisation of production is one and another is the single market. but there can be hardly any doubt that emu is also playing a part, particularly for the financial sector. participation in the euro area would give sweden and swedish companies access to a larger capital market that is expanding rapidly. assessing what being outside the monetary union entails in this phase is not easy. personally i believe the effects are negative. i also think they may turn out to be considerable. a related matter is the location of companies. representatives of large swedish groups, as well as the federation of swedish industries, for example, frequently state that euro participation would result

other countries also have serious problems with their public finances other countries are also experiencing serious problems. among the euro countries, apart from greece, these are mainly portugal, italy, ireland and spain. critical conditions for assessing how these countries shall attain a sustainable development of their public finances in the future are the current size of the public sector debt in relation to gdp, the credibility of their future fiscal policy and the conditions for growth in domestic and external demand. the larger a country ’ s debt in relation to its gdp, the greater its interest expenditure and the closer it is to an untenable situation. among the countries i just mentioned, italy has the largest burden of debt, with a gross public debt similar to that of greece at just over 100 per cent of gdp. the other countries are not quite so vulnerable, but their debts are rising rapidly. ( slide : gross public debt in portugal, ireland, italy and spain ). the credibility of their future fiscal policy is a decisive factor, not least for the rate of interest they are forced to pay on their public debt. here, earlier patterns of balance or deficit play an important role, as does, of course, the content of their fiscal policy consolidation programme. the deficits are currently large in all of the vulnerable countries, but while ireland and spain have been able to show a balance or surplus during the years prior to the crisis, italy and portugal have shown a deficit throughout. ( slide : general government net lending in portugal, ireland, italy and spain ). a common precondition for the ability of these countries to renew their loans at a manageable cost is the credibility of their fiscal policy consolidation plans. the example of ireland points to a credible consolidation plan with concrete decisions on large cuts in public expenditure being able to reverse an upward trend in interest rates, while the greatest pressure is currently on portugal, where the ten - year rate rose last week. ( slide : government bond rates of portugal, ireland, italy and spain, compared with those of germany ). the more favourable the conditions for the development of domestic and foreign demand, the greater are the chances that good gdp growth will be able to reduce the problems in public finances. those countries that have not had large falls in asset prices, including italy, do not risk suppressed domestic demand in the same way as, for instance, spain and ireland, where property prices have fallen substantially. with regard to demand from abroad, the problems are made more severe by wages and prices having grown faster in