sector. it can take time before such a deterioration translates into lower output and employment. but when the turnaround does occur, it tends to be swift and hard - hitting. it now appears that a new period of downscaling is under way. several factors point to this : first, productivity growth is higher in manufacturing than in other industries. this has resulted in a trend decline in the numbers employed in manufacturing in norway, as it has in other oecd countries. second, manufacturing costs have increased sharply since 1998. up to the summer of 2000, this cost increase was to some extent offset by a weaker krone. the appreciation of the krone has highlighted and exacerbated the deterioration in cost competitiveness. on balance, it appears that cumulative wage growth in norway will be a good 15 per cent higher than in other countries from 1998 to 2003. the krone is now about 7 per cent stronger than the average for the 1990s. third, as a result of the fiscal guideline, the internationally exposed sector is subject to additional pressure. over time, the phasing in of petroleum revenues will lead to restructuring and the transfer of resources from the exposed to the sheltered sector. fourth, the response patterns in stabilisation policy function in a different way from previously. under the “ solidarity alternative ”, the response pattern consisted of countering labour market pressures and strong wage growth by reducing growth in public spending ( or, if appropriate, by strengthening government revenues ). this had a beneficial impact on manufacturing industry. today, monetary policy shoulders more of the burden. this may sometimes result in a strong krone exchange rate. fifth, growth in the global economy is sluggish while, at the same time, oil prices are high. the fall in share prices curbs economic growth among our trading partners. markets for norway ’ s export industries are stagnating, but at the same time high oil prices are providing a stimulus for some sectors of the norwegian economy. interest rates were assessed by the executive board of norges bank yesterday. interest rates were left unchanged. norges bank ’ s key interest rate, the sight deposit rate, therefore remains at 7 per cent. according to norges bank ’ s assessment, with an unchanged interest rate, the probability that inflation two years ahead will be higher than 2½ per cent is the same as the probability that it will be lower. a sharp rise in labour costs is contributing to a relatively high rise in prices for goods and services

wider acceptance and legitimacy to make sure that the basis for strong multilateral cooperation and collective action is also in place when policies for reform and prevention are implemented. truly global challenges call for truly global solutions anchored in a multilateral and statutory - based system of representation like the bretton wood institutions. all countries, large and small, rich and poor, should be represented, even if only indirectly through constituencies. general government fiscal balances as a percentage of nominal gdp, 2000 – 2011 projections from oecd for 2010 – 2011 these are some lessons learned from the crisis. still, several unresolved questions remain. the chart shows general government fiscal balances as a percentage of gdp in selected countries. many countries had negative fiscal balances through the last decade despite moderate to high economic growth. spain seemed to be in a different position with a positive fiscal balance, though this was mainly due to unsustainable high growth in the construction sector. this illustrates the first question, which is how to solve time inconsistency in fiscal policy. it is easier to follow the prescriptions of keynes in bad times than in good times. this asymmetry may lead to an increase in budget deficits and sovereign debt over time, also referred to as the fiscal bias. as a result, many countries ( piigs, uk, ) have to tighten policy in a period when the real economy would certainly benefit from further stimulus. the crisis caused fiscal balances to deteriorate by 8 – 10 percentage points. there is an immense difference between encountering a shock of this magnitude from a positive fiscal balance of 4 per cent and encountering it from a negative fiscal balance of 4 per cent. from a negative balance of 4 per cent, fiscal balances end up at a 12 per cent deficit! then it is imperative to tighten policy. a similar time inconsistency problem, the inflation bias, has been a much debated issue in monetary policy. the solution has been central bank independence. so the question is, is there something to be learnt from monetary policy? ragnar frisch the fiscal bias is not a new phenomenon. and a number of possible solutions have been tried. as far back as in the early 1930s, the norwegian economist and nobel prize winner ragnar frisch had the following suggestion : “ it might be an idea to establish a cyclical council to make such decisions, a council that could operate with an independent status similar to that of the supreme court. the council should comprise members