eva srejber : a reunited europe – the roles played by sweden and the riksbank speech by ms eva srejber, second deputy governor of sveriges riksbank, to the baltik financial network, stockholm, 13 february 2002. * * * thank you for inviting me here to speak of and discuss this important subject with such a knowledgeable public. the enlargement will change europe and sweden and will also affect the riksbank. for those of us in western europe, this is an important opportunity to regain the right geographical, economic and historical perspectives. we talk about " eastern europe ", despite the fact that prague and ljubljana lie west of stockholm, we forget that riga and tallinn are actually closer to stockholm than gothenburg. we often still have a mental curtain where the iron curtain once prevailed. now this division will soon be at an end. a hundred million europeans, who lived under a totalitarian communist dictatorship for half a century, can now finally return to a single european community. the political dimension is undoubtedly the most important. the new community confirms democracy and thereby guarantees peace and stability throughout europe, which will in turn provide a good foundation for growth and development. today i intend to say a few words about an important facet of the eu enlargement, namely the economic consequences, which will affect the work of the riksbank more directly. before i go into the major socio - economic contexts, i thought i might begin with an anecdote from a smaller context, a personal experience from one of my most recent visits to hradec kralove, in bohemia, czech republic, the region where my relatives come from. every time i return there i am pleased and surprised at the changes that have taken place, but during my most recent visit last year i was quite astonished. there, in the small provincial town of hradec kralove, with only around 100, 000 inhabitants, they now have a shopping mall worthy of stockholm's smartest shopping area, as well as a couple of large discount stores and a d. i. y. store, all selling goods of better quality but a fraction of the price of those in sweden, and all full of shoppers. when i left the shops loaded up with shopping bags to take home to sweden, i remembered how things used to be, when we in sweden sent parcels to family and friends containing clothing, medicine and even decent soap and washing powder, along with various other things

course of events then lie in talking with bank executives and informing the financial supervisory authority. moreover, our series of financial stability reports can no doubt exert a more continuous influence in this respect. in the longer run the riksbank can also contribute to stability through international cooperation, as well as by participating in sweden in work on new legislation and the promotion of structural changes in various systems. i should like to stress the importance of international cooperation between authorities in different fields, particularly now that problems in one country tend to spread to other countries more quickly than before. the riksbank accordingly participates in the work of the group of ten, the bank for international settlements, the international monetary fund and so on. the recurrent crises in financial markets clearly show that work on strengthening systems is a continuous endeavour and that much remains to be done. banks and other financial institutions have admittedly done a great deal to improve risk management, not least as regards loan portfolios. but the pace of developments in the financial sector is so rapid that neither financial institutions nor authorities can rest on their laurels. it should also be realised that the extensive work in progress on reinforcing the financial system does not mean that in future the system will be completely immune to problems. moreover, our knowledge of phenomena of this type is limited. it may be asked whether it will ever be possible to predict financial crises. the models with leading indicators that are being tested at present tend to be too blunt. they sound the alarm about things that never happen and are silent about those that actually occur. the authorities must therefore focus on doing everything so that banks and other financial systems have such good systems for risk management that the probability of financial crises is reduced to a minimum. we must also work to mitigate any effects and try to ensure that crises which do occur are not as extensive and economically costly as those we have experienced in recent years. the objective, in other words, must be to combine the necessary regulation and supervision of the markets with the benefits that a well developed financial system can confer. the regulation and supervision of financial firms are necessary for various reasons. but these functions must be carried out in such a way that they do not throttle the potential that can contribute to greater prosperity in the global economy. conclusion many countries have deregulated their financial systems in the past two decades. for the first time since the outbreak of world war one, capital is again more or less free to move across national borders. moreover, major changes in communications