sweden was ok ”. recent developments abroad have been marked by great uncertainty. sweden is highly affected by this uncertainty. with the help of monetary policy we can do all that we can to promote a stable development of the swedish economy : that is ensure that inflation stays close to the target and that the development of the real economy is as stable as possible. when we look back at how things went in a few years ’ time we should be able to continue to say that, despite the uncertainty abroad, “ sweden was ok! ” bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches

we can say that the turbulence around the world will have a dampening effect on swedish growth in the period immediately ahead. the clearest signs of this so far are the weak stock market in sweden and the dramatic decline in the confidence of the households and companies, which is reducing demand. how can we ourselves facilitate developments in sweden? we have laid stable foundations – which we must build on although we are dependent on what happens abroad, we must do what we can to keep the economy on an even keel in sweden. we can compare the situation to our own personal finances. various external circumstances that we have no control over can undermine our financial situation. however, if we have had a firm grip on our personal finances before this happens, we will be better prepared and have a better chance of managing the situation. but how can we relate this to the swedish economy as a whole? if we return to figure 7 we can see that labour costs over the last 10 years or so have increased more slowly in sweden than in the euro area. we can also go back to figure 9. here we can see that while sovereign debts have increased considerably in the united states and the euro area in recent years, sweden ’ s sovereign debt has decreased more or less continuously over the last 15 years. bis central bankers ’ speeches this indicates that the economic - policy framework in sweden has worked well. the framework reflects the lessons we have learned from our own problems in the past, not least during the 1970 and 1980s, and we should build on this. the framework largely addresses three areas : fiscal policy, wage formation and monetary policy. the first area, fiscal policy, had to be changed following the crisis of the 1990s as the problems with sweden ’ s public finances became acute. at the same time as austerity packages were implemented, great importance was attached to not ending up in the same situation again. the introduction of surplus targets, expenditure ceilings and the stipulation that municipalities should have balanced budgets also contributed to increased stability in public finances. a number of important reforms were also implemented that significantly improved the budget process. figure 14 clearly shows the positive effects of all this on the budget. the second area is wage formation, which has also improved considerably since the mid1990s. the industrial agreement and the setting up of the national mediation office are two important factors behind this improvement. nominal wage increases have been significantly lower over the last 15 years than in the 1980s. the development of real wages shows how much of the wage