them in a satisfactory manner will undoubtedly have far - reaching consequences in the economic and financial spheres, and the year might end better than it began. ” while times are difficult abroad in our day too, there are bright spots. growth in asia remains robust and some figures for the us economy have been positive recently. europe is facing the challenge of remedying economic imbalances in the face of weak growth prospects. for many countries, demographic developments will in a few years add to the pressure on fiscal budgets. while austerity measures will improve government finances, in the short term they will stifle activity and delay a recovery. this is a very difficult balancing act. but euro area countries have no choice. there is a need to agree on measures to restore confidence in financial markets. just like 80 years ago, it is difficult to predict where we are heading. the norwegian economy should be able to hold a steady course. but we will have to take into account that the return on the fund ’ s investments may be lower than expected a decade ago. and wage and price inflation is likely to be low for some time to come. rygg ’ s hopes were partly realised. in europe the crisis bottomed out in 1932. cycles and confidence may shift rapidly and when we least expect it. after hard times come good times. come what may. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches

øystein olsen : economic perspectives address by mr øystein olsen, governor of norges bank ( central bank of norway ), to the supervisory council of norges bank and invited guests, oslo, 16 february 2012. * * * demanding time for europe “ the year started without much hope, and it had to be expected that the pressure on business and industry would intensify, but however dim the prospects might have appeared, the outcome was darker than anyone had imagined. i need not enumerate the successive collapses that spread from country to country. ” this was the opening of the annual address delivered by norges bank director nicolai rygg 80 years ago. britain had abandoned the gold standard and one country after the other, including norway, followed suit. interest rates had increased. financial markets were turbulent. although the tremors were on a greater scale in the 1930s, nicolai rygg ’ s description could serve as an apt retrospective today as well. in the course of the past two years we have seen economic problems spread across debt - laden countries in europe. greece was the first country to experience a financial collapse. the greek government had to resort to external financial assistance in spring 2010, followed by ireland and portugal. the turbulence spread further in autumn last year. interest rates on public debt rose markedly for spain and italy and thereafter belgium and france. several euro area countries are now struggling with soaring public debt and weak competitiveness in addition to restructuring and public budget cuts. confidence in some countries ’ ability to service debt has been weakened. the monetary union is under pressure. ( chart 1 : current account ) the crisis has its roots in global trade imbalances, with high saving in emerging economies and comparably large deficits in many advanced countries. the imbalances drove down long - term interest rates to very low levels and the appetite for risk grew. inadequate financial sector regulation led to a further deepening of the imbalances. ( chart 2 : yield on 10 - year government bonds ) four years after the financial crisis engulfed the world, a european version has now emerged. both market participants and the authorities failed in their assessments after the introduction of a single currency. prior to the introduction of the economic and monetary union, there were wide differences between interest rates facing different european countries, which primarily reflected different inflation expectations across countries. but through the 1990s, long - term interest rates drifted down to german levels. over the next 10 years, sovereign interest rates were fairly similar –