central bankers ’ speeches * * * the extraordinary measures introduced by the european central bank to supply liquidity to the market during the crisis led to a period of very low market interest rates in the euro area. spreads to the corresponding danish interest rates widened, leading to capital inflows and a tendency for the krone to strengthen. to keep the krone stable against the euro, danmarks nationalbank purchased foreign exchange in the market in the 1st half of 2010 and on several occasions lowered its interest rates unilaterally. from the spring of 2010, only the rate of interest on certificates of deposit and the current - account rate were lowered, while the lending rate was kept unchanged, so that the spread to the ecb ’ s benchmark interest rate remained 0. 05 percentage point. liquidity conditions in the euro area are now normalising, and euro area money market interest rates are, once again, approaching the ecb ’ s benchmark interest rate. to the extent that higher market interest rates in the euro area lead to pressure on the krone, danmarks nationalbank will follow its usual practice, including raising interest rates if necessary. this will apply to both lending and deposit rates. we have no plans to deviate from the principle of operating with a margin between the rate of interest on certificates of deposit and the lending rate. * * * public debate sometimes focuses on the high gross debt of danish households relative to gdp or to household disposable income. but the households ’ pension and housing wealth is also high. the fact that the assets are less liquid than the liabilities entails a certain degree of vulnerability. the high gross debt is primarily reflected in household mortgages. this, in turn, should be viewed against the background of the efficient danish mortgage credit system, which differs materially from those seen in most other countries. despite their high gross debt, danish households have weathered the financial crisis. losses in the banking sector have been limited seen in relation to the crisis in the early 1990s, and have only to a small extent been attributable to the household sector. mortgage arrears ratios are also low and declining. all the same, i believe that the resilience of the households should be strengthened on account of their high debt ratios. after all, tax cuts, special pension savings disbursements and very low interest rates might not be on the agenda the next time a crisis comes knocking on our door. high debt goes hand in hand with a

nils bernstein : challenges ahead for the danish economy speech by mr nils bernstein, governor of the national bank of denmark, at the annual meeting of the danish bankers association, copenhagen, 5 december 2011. * * * thank you for inviting me to speak here today. during the autumn, economic activity has dampened in the advanced economies, especially in the euro area, and the outlook has been adjusted downwards. but there are considerable differences from country to country. generally, growth remains reasonable in countries with sound public finances and external balances, such as germany and sweden, while it is low in countries with large internal and external imbalances, particularly the debt - ridden countries in southern europe. the downward adjustment of growth prospects reflects several factors. firstly, the european sovereign debt crisis has by no means been resolved, in fact it intensified over the summer, and in the usa there is great uncertainty about medium - term fiscal plans. secondly, consumer and business confidence has declined in many countries. households and firms continue to consolidate, partly in the light of falling stock indices and housing prices. thirdly, the combination of sustained financial turmoil, lower growth expectations and pressure from the financial markets means that several countries have had to speed up fiscal consolidation. viewed in isolation, fiscal policy is procyclical at the moment, which means that it contributes to further dampening of growth. on the other hand, more expansionary fiscal policy would push up interest rates. combined with large government debts this means that tightening is the only option. many countries are now paying the price for their previous slack approach to economic policy. among other things, this is reflected in an increase in unemployment to more than 10 per cent in the euro area and 9 per cent in the usa. in the hardest hit euro area member states unemployment now exceeds 20 per cent. especially young people find it difficult to gain a foothold in the labour markets, which favour those who already have a job. the near - term outlook is unusually uncertain. lower confidence among households and firms and in the financial sector often points to a decline in activity. and indeed, the latest forecasts from the oecd and the eu predict only a moderate upswing in the usa, while the euro area overall is expected to stagnate, with a risk of growth at or below zero. tackling the challenges in the heavily indebted member states is essential to dampening uncertainty and paving the way for growth in the euro area. and now let me turn to the