drop in the level of interest rates. the fall in real interest rates from the unhealthy heights of the 1990s indicates a reduction in economic risks, and it released debt - servicing expenditure for other uses. this was by no means an insignificant factor in finland ’ s recovery from the recession of the 1990s and the establishment of healthier public finances. finland ’ s emu report, produced in the 1990s by a professorial group under the leadership of jukka pekkarinen, stressed the need to improve our economy ’ s ability to adjust particularly to asymmetric shocks. when the exchange rate is fixed and a country surrenders its own currency, the economy ’ s most important channels for adapting are domestic prices and wages. the long recession following the financial crisis showed that there remains a need to strengthen 1 / 3 bis central bankers'speeches finland ’ s ability to adjust. the slow growth of the 2010s was marked by many headwinds, which the persistent problem of cost - competitiveness exacerbated, right up to the competitiveness pact. after the pandemic, we will be faced with the same issues relating to growth challenges and the sustainability of the public finances as before the crisis, but in respect of the public finances we could unfortunately be facing more difficult times. over the past 15 years, the finnish economy has lagged well behind the pace of the other nordic countries, and the current forecasts do not suggest that the situation is likely to turn more favourable. the other nordic countries are also operating in the same external environment as finland. so this does not explain finland ’ s weaker performance relative to our nordic neighbours. nor is it explained by finland ’ s membership in the monetary union. sweden is often mentioned as an example of how well we would be doing outside the euro area. at the same time, however, it is forgotten that sweden also differs from finland in many other ways : its production structure is more diverse, the demographic structure is more favourable, and sweden has progressed with structural reforms that improve growth and employment. sweden has been able to maintain its competitiveness. denmark, which has linked its currency to the euro, has also fared well. on the other hand, germany, ireland, spain and portugal demonstrate that it is entirely possible to improve competitiveness in the monetary union, too. ladies and gentlemen, the strong but necessary monetary and fiscal policy response to the pandemic has supported economic recovery. at the same time, the question is whether the measures

and growth – it is better to be safe than sorry, in other words to proceed gradually and step by step in monetary policy normalisation. monetary policy will be conducted in a consistent and flexible manner, maintaining the room for manoeuvre. the governing council will use all its instruments to ensure that inflation stabilises at its 2 % target over the medium term. ladies and gentlemen, the heightened geopolitical tension emphasises the importance of unity in the european union. when the covid - 19 crisis fades into history, the eu ’ s greatest challenge will be to strengthen its common foreign and security policy. in people ’ s everyday lives, geopolitics is now seen and felt in the form of higher energy prices and rising inflation. in these circumstances too, the economic stability of europe and finland is vitally underpinned by the european union and the common currency shared by 19 member states. i look forward to hearing the views of others here today on the challenges ahead, and shall be following the discussion closely. thank you! 1 bank of finland bulletin article koronapandemiasta toipuminen kiihdytti inflaatiota, mutta inflaation ennustetaan tasaantuvan ( ‘ the covid - 19 crisis fuelled inflation, but inflation is forecast to s t a b i l i s e ’ ). www. eurojatalous. fi / fi / 2022 / artikkelit / koronapandemiasta - toipuminen - kiihdytti - inflaatiota - muttainflaation - ennustetaan - tasaantuvan / 3 / 3 bis central bankers'speeches