further down among civil servants and experts. it is partly a learning process, an exchange of thoughts about good examples, a communication of ideas and so on. new, more specific knowledge is also being generated. at present, for instance, common principles are being drawn up for the measurement of budget outcomes and capacity utilisation. this is necessary for effective surveillance of compliance with the stability and growth pact. similar work has begun in the field of pensions. these quotidian efforts should not be underrated. they help to make many problems more understandable and promote a consensus about how they should be handled. sweden has much to gain from this kind of international collaboration. to exemplify how international discussions can influence matters i can mention that when we at the ministry of finance were aiming to alter the economic policy agenda in the late 1980s, we were greatly inspired by the work that had been done under the auspices of the oecd and others. in my opinion, the policy realignment owed at least as much to our international contacts as to the successful opinion - forming work by, for example, the centre for business & policy studies ( sns ). many of the problems and measures that are being discussed are of a national nature ; they vary between countries and it is in each country ’ s interest to solve them. moreover, due to differences in the initial situation, the solutions may have to differ, too. one should therefore be cautious about imposing universal mandatory rules. furthermore, solutions will presumably become more uniform as a result of increased trade and competition. it is likely, however, that fiscal and budget polices will be further coordinated, though this process will not necessarily be driven solely by principles and intellectual arguments. i am more inclined to guess that circumstances will bring this about by degrees as new problems, stemming from the member states sitting in the same boat, have to be tackled, perhaps in some cases at rather short notice. fiscal policy in sweden the problems for stabilisation policy so what about the problems for stabilisation policy that arise if the euro is adopted? we would clearly have to do without an independent monetary policy. by itself, this may imply a risk of larger cyclical fluctuations and it would also make a proper crisis more difficult to manage with measures of economic policy. as was the case in the early 1990s, a crisis can arise mainly from an inappropriate domestic policy ; it can also result from an external shock that hits sweden more strongly than the average euro country ; a third possibility

of which i have mentioned earlier, inflation has been much lower in sweden than in other countries. compared with the united states and the euro area, the difference is between 0. 5 and 1 percentage point on average for the past three years, depending on which inflation measure is used. in 2004, the difference was as much as 2 percentage points. when one looks ahead, which is important in this context, according to consensus forecast, forecasters are expecting higher inflation in the euro area and the united states than in sweden, ” continued mr heikensten. ” it is clear that the krona has developed more weakly since the spring than the riksbank expected. as you know, we do not have a target for the exchange rate. however, it is an important factor when we assess future inflation. in this context it is not the present exchange rate that is decisive, but how we see it developing in a slightly longer - term perspective. there is no reason to depart from the basic assessment we made earlier ; there are still strong reasons in favour of a stronger krona. it is not merely that swedish macro data in general has developed well over a number of years compared with, for instance, the euro area ; most forecasts indicate that this development will continue. sweden is also one of the countries that has had the highest trade surplus as a percentage of gdp over a number of years, which is one indication among many that the value of the krona has been relatively low. however, even if we should not – as i see it – change our basic assessment that the krona will strengthen, its value at present is rather different. there is therefore reason to take into consideration a risk scenario for inflation linked to a weaker exchange rate. just as the riksbank emphasised during 2003 and 2004 that the strong krona was one reason behind the low inflation rate, there is reason to point out that the weakening of the krona this year, particularly if it persists, could result in higher inflation, ” said mr heikensten. ” all in all, i do not at present see any reason to change my view of inflation now to any great extent, compared with the october assessment. however, in my opinion, the changes that have occurred would appear to indicate slightly stronger economic growth and perhaps also the risk of a slightly more rapid rate of price increase, mainly connected with international inflation and a weak krona. given the information we have now, the financial markets ’ expectations