policy in the euro member states should result in just as tough conditions for denmark irrespective of whether or not we decide to bis central bankers ’ speeches participate in the new agreement. in reality we will hardly get a higher degree of manoeuvrebility in the economic policy by staying outside – quite the contrary. if we decide to stay outside, we have to make sure that it is not mistakenly seen as a signal of less commitment to sustainable economic policy. with respect to financial resources for the short term crisis fighting, the ceiling of the efsf / esm will be reassessed in march 2012 and the financial resources to the imf will be increased substantially through bilateral loans. the commitment is up to 200 billion euro. the danish part will be up to 40 billion danish kroner which will be taken from the foreign exchange reserves. * * * for close to 30 years, the fixed - exchange - rate policy ( slide 9 – the krone rate ) has been a cornerstone of danish economic policy – and has served denmark well. inflation and interest rates are in line with those of the best - performing euro area member states, and the danish level of prosperity matches that of our neighbouring countries. prior to the pegging of the danish krone to the d - mark, the situation in denmark was similar to that of the problem economies in the euro area today. denmark had been through a period of slow growth and large imbalances as regards government budgets, the current account and the labour market, which was affected by high unemployment throughout the 1970s in the wake of the oil crises. in 1982, inflation reached 12 per cent and interest rates 22 per cent. the government yield spread to germany peaked at 12 percentage points ( slide 10 – long - term yields ). this level of interest rates would be devastating to any economy. the pegging of the danish krone to the d - mark in 1982 marked the beginning of a long period in which structural imbalances in the economy and fiscal inadequacies were gradually addressed politically. but this was not without setbacks. the danish economy has performed relatively well – also after the introduction of the euro in 1999. this can be attributed to a stability - oriented economic policy with a medium - term focus, and to the implementation of structural reforms in the labour market and elsewhere during the 1990s. it is also a fact that, in practice, the economic policy pursued outside the euro area must be at least as tight as that pursued in

level of economic activity and the level of potential would be widening throughout this period. instead, growth has turned out to be much stronger than expected. this means that our economy is operating at a much higher level than we thought. so the output gap is smaller than we had predicted and is currently narrowing. indeed, we expect that it will close in the second half of 2003. the output path that we are now projecting is consistent with core cpi inflation being at 2 per cent by about the end of next year. total cpi inflation will probably continue to fluctuate in coming months as oil and natural gas prices move around. but, like core inflation, we expect it to be at the 2 per cent target midpoint by about the end of 2003. although we no longer face the same degree of uncertainty as we did last fall, there are still important risks and uncertainties in the outlook — some of which are working on the upside and others on the downside. given the amount of monetary and fiscal stimulus in the economy, output growth could be even stronger than projected. but it is also possible that some of the recent strength in spending on consumer durables was borrowed from the future, so that the growth of household expenditures will be weaker than expected. at the same time, there is still considerable uncertainty about the timing and strength of the pickup in business investment in north america, mainly because of the continued weakness in profits. moreover, recent tensions in the middle east could have implications for crude oil prices and the global economy. while we face many of the same risks as the united states, there are a couple of differences in our situations that are worth noting. first, as we pointed out in the monetary policy report, we expect that in canada final demand will make up a larger share of the growth in the first quarter, while inventory rebuilding will constitute a smaller share than in the united states. second, while weaker - than - expected confidence among large businesses remains a risk for both countries, the sectors that face the biggest challenges, such as computer equipment and telecommunications, make up a larger share of the u. s. economy than of the canadian economy. so what do recent economic developments in canada mean from a policy perspective? as i mentioned, our economy is now operating at a significantly higher level than we had expected. so the amount of spare capacity is smaller, and is expected to be absorbed sooner, than we assumed last november. in these circumstances, our job will be to gauge the strength of the