. in my view, three points are of importance with regard to government wealth management. first, investment must be based on the reason underlying government saving which, as i understand it, is to distribute petroleum wealth across generations and establish a foundation for maintaining important elements of the welfare state. second, the manager must seek to achieve a maximum return within duly considered risk limits. returns and risk must be monitored continuously. the return and the risk limit must reflect the government ’ s motive for saving. third, the management must be organised so that the manager pursues the objectives of the owner and does not develop its own goals. the government ’ s motive for saving resembles the motives underlying saving in pension funds and life insurance companies. among the government ’ s saving vehicles, investments in the national insurance fund and the government petroleum fund are best adapted to this motive for saving. for both funds, there is a clear division of responsibility between the manager and the government, with the ministry of finance as owner. in the case of the petroleum fund, norges bank ’ s mandate is to achieve the highest possible financial return in keeping with the strategy and risk limits established by the government. the fund ’ s investments are distributed among many countries and spread among a large number of equities and bonds. at end - 2000, the fund had invested nok 153 billion in about 1800 companies in 21 countries, while nok 234 billion had been invested in bonds in 18 countries. all ownership interests are now less than 1 per cent of the companies ’ total value. a turnaround in one country or a region, which in isolation may be pronounced, will not have a major effect on the total value of the fund. the value of the fund ’ s equity portfolio will therefore shadow developments in prices on international stock exchanges. there is a substantial element of risk diversification, although we are not immune to the risk associated with the uncertainty in global developments. along the same lines, the return on bond investments will reflect international interest rate developments. the government petroleum fund is built up through transfers of petroleum revenues that are not used domestically. in other words, the value of a natural resource is converted into a financial asset. the name of the fund was chosen to reflect this. however, one weakness that may be associated with the petroleum fund is that the objective of saving is not sufficiently highlighted. the future use of revenues could have been made clearer either by choosing another name or by earmarking the capital for specific future uses, even though this

inequality has deepened. this may in part be related to the global change in the price of labour. in other countries, particularly in europe, economic restructuring is throwing a large number of people into unemployment. over 26 million people are now unemployed in the eu today, almost 10 million more than in 2007. low growth, high unemployment and high debt levels are not a good combination. even though there are signs of a moderate revival of activity abroad, growth may remain low for a protracted period. chart : real wages and productivity for mainland norway real wage growth in norway has diverged substantially from that observed in germany and the us. this is attributable to the sharp price rise for norwegian goods in recent years. norway ’ s terms of trade have improved. the gains are shared between owners and workers. real wage growth in norway has been considerably higher than productivity growth. but the economic picture for norway may be changing. we cannot assume that norway ’ s terms of trade will continue to improve. investment in the petroleum sector is levelling off. output growth in the mainland economy has slackened. when activity in the petroleum sector eventually declines, there will also be a need for economic restructuring in norway. the business sector will have to seek new markets, where competition may be intense. restructuring may prove particularly demanding given norway ’ s high cost level. although restructuring will be a gradual process and may lie some years ahead, norway may find that sustaining growth and keeping unemployment low in the coming years may become a challenge more on a par with that facing other economies today. the economic policy framework matters. fiscal policy follows the fiscal rule, which aims to ensure a sustainable level of petroleum revenue spending over the long term. in the event of bis central bankers ’ speeches major aggregate demand shocks, fiscal policy, in line with the fiscal rule, can be used to alleviate the situation in the short term, as evidenced during the recent financial crisis. but an imbalance arising from a cost level that is too high and weak competitiveness cannot in the long term be addressed by means of an expansionary fiscal policy. this approach could, on the contrary, amplify the problem by crowding out businesses. the fiscal policy stance can affect the growth capacity of the economy. government regulation and various features of the tax system can influence corporate decisions with regard to localisation, investment and technology. other measures can affect the labour force and the functioning of the labour market. over time, real wages must move in line with productivity and