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 the 1990s, it was not the households that caused problems for the banks. as i mentioned earlier, the riksbank, like many other central banks, conducts a flexible inflation - targeting policy. in addition to taking account of price stability, monetary policy may in certain cases wish to take into account developments in the real economy as a whole. this can mean, for instance, conducting a less aggressive interest rate policy and thereby allowing inflation to return to the target gradually after a disturbance to avoid excessive fluctuations in production and employment. in connection with the build - up of household debt and price trends in housing, there could be a situation where households may have based their decisions on incorrect expectations and the trend may have proved unsustainable, or that we see a tangible risk of this situation arising. this could lead to an adjustment process, where house prices fell heavily and there was a decline in the real economy as a whole. we explained in a clarification of monetary policy published in 1999 that, if we choose to take these considerations into account, we will clearly motivate our decision. if flexible inflation targeting functions well, it leads to smaller fluctuations in production, without this causing average inflation to rise. the scope for conducting such a policy is determined by households ’ and companies ’ confidence in monetary policy. if they have considerable confidence, there is little risk that inflation expectations will be affected if inflation should deviate temporarily from the target level. at present, i cannot see that real economy considerations could lead to the riksbank wishing to deviate from the normal rule of thumb for monetary policy, given the current level of household indebtedness. my own assessment is that there does not appear to be any conflict between price stability and stability in the financial and real economy. the current situation before i summarise what i have said tonight, i would like to briefly comment on my current perceptions of future inflation. our assessment in the spring was that economic activity both in sweden and abroad would continue to strengthen this year and over the coming two years. inflation in sweden was expected to be relatively stable over the coming year and then to increase gradually as resource utilisation rose in sweden and abroad. the conclusion was that inflation would be in line with the target level two years ahead, and we therefore chose to leave the repo rate unchanged. at our meeting in august, there appeared to be reason to expect slightly more rapid growth in sweden and abroad, which then gave reason to assume a higher figure