reform efforts. measured on the basis of unit labour costs in the whole economy, the loss of competitiveness recorded between 1999 and 2008 in the countries worst hit by the crisis went from about 9 percentage points in greece and portugal to 12 points in italy, 19 points in spain, and no less than 37 points in ireland. considering only manufacturing industry and competitiveness indicators based on producer prices, the competitiveness losses ranged from 7 percentage points in italy to 22 points in portugal ( 14 points in spain, 16 points in ireland and 18 points in greece ). the rules for the public finances defined in the european sphere were not always respected. in 2007, almost a decade after the introduction of the single currency, only a few countries reported budgets close to balance in structural terms, i. e. not counting the effects of the economic cycle on revenue and expenditure. in some cases the public debt was still at an excessively high level in relation to gdp. for a long time the financial markets underestimated sovereign risks, thus confirming the doubts about their ability to provide timely incentives for the adoption of virtuous behaviour. until the outbreak of the crisis the spreads between government bond yields within the euro area were close to zero. in this framework, after the financial crisis in the united states and the very severe global recession in 2008 – 09, the full revelation of the unsustainability of the greek public finances produced tensions which then spread to the economically weaker euro - area countries, characterized by excessive public or private debt, a foreign trade deficit, poor competitiveness, and low economic growth. tensions grew with the bursting of the property bis central bankers ’ speeches bubble and the consequent disruption of banking in ireland. with the announcement of the involvement of private investors in restructuring greek debt in the summer of 2011, the financial markets suddenly became aware of the implications of the ban on interventions to rescue member states under the treaty on european union. there followed a very serious crisis of confidence in the ability of the single currency to survive, with negative consequences for the real economies of individual countries and for the area as a whole. the yield spreads between euro - area government securities suddenly increased in the second half of 2011 ; those between italian and german 10 - year government bonds, still below 200 basis points in the first half of that year, rose to 550 points in the following november. in the same period, in italy and the other countries affected by the tensions, there was a sudden worsening in wholesale funding conditions for banks

of the world gives reason for caution. asset prices, the willingness to take risks, and commodity prices have risen steeply in the past year. the third reason was that property prices risk rising further and with that households ’ indebtedness. in my opinion, encouraging a further increase in indebtedness through a rate cut of 0. 5 percentage points could lead to problems once rates rise. a mild economic downturn there are many indications now that the swedish and international economies have embarked on a stable upswing. this means that the recent economic downturn has been mild in an historical perspective. in 2001 the swedish economy grew by 0. 9 per cent, and in 2002 by 2. 1 per cent. last year the recovery was derailed slightly and the economy grew by 1. 6 per cent. during these three years production fell in only one quarter. for a downturn the rate of growth from 2001 to 2003 was high. this was also reflected in the labour market, where employment held up throughout the period 2001 to 2003. macroeconomic changes the mild economic slowdown is likely a result of institutional changes that have helped increase the stability of the economy. unlike the situation at the beginning of the 1990s the government finances are sound and monetary policy is transparent and predictable. this does not only apply to sweden but also to large parts of the rest of the world. stability has become a guiding principle in the economic policies of oecd countries, among others, and has entailed an increased focus on healthy government finances and stable prices. 1 the process has been helped by the absence of external cost shocks during the 1990s and beginning of the current decade such as the oil crises during the 1970s and 1980s. monetary policy has also benefited from a better government finance situation now compared with 10 - 20 years ago when there was a trend rise in debt ratios, i. e. government debt as a percentage of gdp, in the majority of oecd countries. healthier government finances are contributing to stronger macroeconomic performance. lower borrowing requirements in the public sector contribute firstly to lower real interest rates, which stimulate investment and growth. secondly, stable government finances boost the credibility of monetary policy. during periods of large deficits and burgeoning government debt there is always a risk from a lender ’ s point of view that the government will attempt to reduce the real burden of the debt by eroding its real value through increased inflation. the high interest rate levels that sweden experienced in the wake of the