high level that took hold in the 1990s, and wage growth has slowed. in the euro area, unemployment has dropped without an increase in wage growth. in norway, the high growth in labour costs may be a source of rising unemployment. interaction with fiscal policy it is important that the annual budgets are based on a long - term strategy that takes into account possible fluctuations in oil revenues from one year to the next. with large and, to some extent, varying budget revenues, the basis for determining central government expenditure and taxes from one year to the next may easily be impaired. if budget spending is allowed to vary in step with oil prices, the norwegian economy may experience abrupt shifts and instability. changes in oil prices may then quickly influence wage and price expectations, the exchange rate and long - term rates. in addition, short - term rates would have to be changed frequently and sharply. in recent years, central government real underlying spending growth has accelerated somewhat. in 2000 and 2001, spending growth has been higher than 2 per cent, which is higher than normal growth in the mainland economy. at the same time, direct and indirect taxes have increased. fiscal policy has thus had a virtually neutral effect on domestic demand for two years while wage growth has been substantially higher than in other countries. a possible interpretation of this development is that it is more demanding to use the government budget to dampen cyclical fluctuations during an upturn than during a downturn. the willingness and ability to pursue a counter - cyclical policy may in itself be cyclical. another interpretation is that a neutral fiscal stance this year, with a strong increase in government financial wealth, is a balanced approach to using the budget to stabilise the economy while phasing in an increase in financial income in the economy. conclusion the norwegian economy is fragile and vulnerable. as long as oil prices are high, the norwegian economy is fairly sheltered. many central banks are now reducing their key rates. as our economy is affected to a lesser extent, the differential between short rates in norway and abroad may widen. thank you for your attention.

at banks. while it is still too early to look at lessons learned about resolving such problems from this round of banking difficulties, we can draw on the lessons of the past. the 1980s and early 1990s offer examples of what can be done to resolve banking problems. for example, the united states suffered oil and agriculture - related regional recessions in the 1980s and a real - estate and leveraged buyout - led recession in the early 1990s. severe real - estaterelated problems developed around the same time in many european countries, with serious repercussions for some banking systems. today, banks in most of these countries are much stronger, and until recently, highly profitable. what happened? i would like to suggest five steps that form a common theme in the more successful recoveries. first, banks, often with the assistance of their supervisors, ascertained the true dimensions of their credit problems. the result of the process was realistic assessments of : a total of actual losses in the portfolio that needed to be charged off ; the potential additional losses, both in a “ most likely ” and “ worst case ” scenario ; and the exposures that needed to be considered in “ workout ” mode. the workout loans were those which had sufficiently severe problems that it was time to stop viewing them as “ business as usual ”, but to see them as requiring special attention. second, the workout loans or exposures were assigned to the special expertise of workout specialists. banks built their own staffs or outsourced the activity to another financial institution, a consulting firm or a boutique. in the early 1990s, some banks took an even more drastic step and sold the loans to firms that specialized in managing distressed debt. the key, however, was to get these exposures in the hands of those who could work with borrowers or the markets to maximize the value from problem portfolios. the workout process must not be allowed to interfere with the continued provision of credit to the economy, however. the key policy concern in the early 1990s in the united states shifted quickly from worries about bad banks to a credit crunch as banks aggressively tackled their loan problems. and that is why it is so important to segregate the “ workout ” portfolio from the remaining loan portfolio. when a dedicated staff is working out bad loans, the bank ’ s officers can devote their attention to the continued sound operation of the bank — the current agenda of serving the bank ’ s customers well and the forward agenda of developing and executing a sound business