have increased. another change in the swedish labour market is the tendency towards increased short - term employment. this could eventually increase the flexibility of wage formation and increase productivity. this development is particularly in evidence in the expanding services sector. according to the national institute of economic research, the proportion of time - limited employment has increased from 10 to approximately 16 % of the total number of employees between 1990 and 1998. this development may have been reinforced by the difficult situation in the labour market during these years but many believe that the trend will continue. new methods of compensation are also spreading. bonus wages, profit sharing and a 13th monthly wage are examples of components in wage formation that increase flexibility in the labour market. increased cost consciousness due to stiffer competition can be a factor driving on this development. although short - term employment in various forms may reduce the inflationary pressure and make the labour market more flexible, this does not mean that this development is always positive for wage - earners and households. uncertainty about future income makes long - term planning more difficult such as having children and buying a house. in order to reduce the risk of various groups in the labour market competing against one another to drive up pay increases in a way that in the end creates a poorer outcome for all, various changes in the forms of wage formation have been carried out and are planned. the most important is the so - called industry agreement between some 20 organisations in the labour market. this agreement thereby affects some 20 % of the labour force and includes rules that reduce the risk of periods without agreements and rules that reduce the risk of conflicts breaking out. in the state sector, adaptation of pay bargaining has been facilitated by the frame budget process, which entails that wage development in the export industry shall set the level for state wage costs. with the intention of facilitating wage formation compatible with economic balance, the government introduced a bill in december last year that included proposals to create a new agency, the mediation institute. the bill includes measures that aim to reduce the risk of conflict breaking out and are to come into effect if contractual solutions are not reached in some other way. in conclusion the state of the swedish economy is better than for a very long time. inflation expectations have stabilised around the target and economic policy is focused on continued consolidation of public finances. the prerequisites for the riksbank to conduct monetary policy so that it contributes to stabilising growth around its long - term path are thereby improved. however, this does not mean that challenges

lorenzo bini smaghi : reflections on the exit strategy speech by mr lorenzo bini smaghi, member of the executive board of the european central bank, at the sveriges riksbank, stockholm, 21 january 2010. * * * a lot of attention has been devoted in recent policy discussions to the exit strategy from the expansionary monetary and fiscal policy stance adopted since the outbreak of the crisis, and to the interaction between the two. designing an optimal exit strategy should, in theory, not be too difficult. in an ideal world, fiscal stimuli should be withdrawn before monetary policy is tightened in order to ensure that public debt remains sustainable and that monetary policy is not overburdened. we know however that first - best solutions are often hard to implement, because they are based on unrealistic assumptions relating in particular to the rationality of expectations and the ability of policy - makers to rapidly make decisions and to change them if needed. furthermore, policy - makers have to take account of the prevailing uncertainty and of the impact of their decisions on agents ’ expectations. for instance, fiscal policy is normally decided once a year, through an elaborate budget process, but is not implemented until the following year. this process introduces significant rigidities into the decision - making and makes it somewhat less likely that fiscal policy can exit before monetary policy, which is typically a much more flexible instrument. today i would like to focus my remarks on the exit from the accommodative stance of monetary policy. i will not consider the phasing - out of the non - standard measures that central banks have adopted over the last few months. the discussions so far have centred mainly on the timing of the exit decision, which should neither be premature nor tardy. there are counter - effects in both scenarios. if the decision to exit is made too early, the economic recovery may be put at risk, as higher interest rates will produce a tightening effect on consumption and investment decisions at the very time when the pick - up in the economy is still fragile. furthermore, it might further restrict credit conditions while the banking system is still restructuring its balance sheet. if, on the other hand, the decision is taken too late, monetary conditions will remain too lax for too long, sowing the seeds of the next crisis. in addition, the later the tightening, the sharper it needs to be, thus producing valuation changes that may reduce banks ’ profitability and undermine their ability to support the economic recovery. given