problems in many countries, the imf's advice is worth taking seriously. many factors contribute to sweden ’ s access to potential swap lines being uncertain. the fact that sweden is in global terms a small economy is of course one such factor. one cannot assume that it is always in the interests of an individual country to help another country, particularly not in cases that concern a largely domestic crisis. the tendencies towards a more introvert policy that can be discerned in some economies do not exactly give hope for greater helpfulness in the future. perhaps the conditions would be better in a global financial crisis, when it may be in one's own best interests to help others. but the hopes of bringing about a swap agreement could be dashed if the borrowing country ’ s own buffer, the foreign currency reserve, has been weakened. on the contrary, there may be doubts that the country is capable of managing its own risks. who would want to come to the rescue of a country that is not prepared to pay the cost of a reasonable insurance? let me make a comparison. some years ago, sweden chose to re prioritise within its defence forces, and the compulsory military service system was abolished. now that uncertainty in global policy has increased, the swedish defence budget has increased, and compulsory military service is being considered again. it is quite simply safer to have, for instance, a number of jas fighter planes on standby than to rely on being able to rent them if one needs them, partly because in an acute situation it would probably take too long and because it would be difficult and expensive. foreign currency reserve – part of sweden's economic defence similarly, we can regard the foreign currency reserve as part of sweden's economic defence. the advantage of having a foreign currency reserve is that it can quickly be made available for liquidity support to the banking system if an acute need were to arise. a foreign currency reserve can also prevent a financial crisis by creating confidence in the central bank ’ s ability to take action when necessary. this is particularly important in a situation where market confidence in the country ’ s credit and payments systems is under pressure. if you say it could never happen to sweden, let me remind you of ireland and iceland. prior to the global financial crisis, these countries were assessed to be in good condition with healthy public finances and consequently high credit ratings. but in connection with the crisis, both ireland and iceland suffered serious confidence crises. their credit ratings were cut rapidly, at

for instance, a new production technique can affect capital stock and industrial structure. many of the disturbances that occur affect both the supply and the demand in the economy. according to some calculations, which were presented in the inflation report, production capacity during the slowdown could have declined from approximately 3 per cent at the beginning of 2000 to 1 per cent at the end of 2001. at the same time, it is important to emphasise that production capacity cannot be measured in a reliable and simple manner, which means that this type of calculation is characterised by uncertainty. gdp growth in sweden is estimated to amount to 1. 5 per cent this year, 2. 7 per cent in 2003 and 2. 6 per cent in 2004. an important issue is whether production capacity will increase when the economy picks up. after all, it is the long - term production capacity that determines whether growth is compatible with low inflation and can thereby provide a sustainable positive development in income and welfare in the economy. the most important factors with regard to developments in the near future are the labour supply and productivity. the labour force has increased considerably in recent years, mainly thanks to increased employment in trade and industry. at the same time, a reduction in the average working hours has had a counteractive effect. the decline in the average working hours over the past year is partly due to the economic downturn, as overtime has fallen. however, there also appear to be structural factors, such as a rising level of absence due to sickness and central agreements on shorter working hours, behind the decline. this indicates that the reduction in the labour supply could be at least partly of a more lasting nature. the decline in productivity during 2001 was limited in comparison with the declines in 1977, 1980 and 1990. greater openness towards the world around us, a higher level of education during the 1990s and certain improvements in competitive pressure indicate that productivity will continue to be higher than in the 1970s and 1980s. however, this also presupposes that productivity in the information and telecommunications sector will return to a good level. there are also other risks : inflation rose more than expected last spring, which was only partly due to price increases of a more temporary nature. the rest was primarily due to wage developments in the services industries. when employment begins to rise once again, while the labour market is strained, there is a risk that the new central wage agreements signed over the coming years will be affected by the fact that others have previously received high wage increases. to summarise