Brussels Economic Forum 2011: extracts from the keynote address by Stefan Ingves, Governor of the Sveriges Riksbank

Type: Speech - summary   Reference: I-069944   Duration: 10:03:09  Lieu:
End production: 18/05/2011   First transmission: 18/05/2011
High level decision-makers, economists and social partners gathered at the Brussels Economic Forum 2011 on 18 May 2011 to debate and exchange ideas on the new era of the EU economic governance. Stefan Ingves, Governor of the Sveriges Riksbank, the Sweden’s central bank, gave a speech at the Forum. He spoke about the impact of the recent financial crisis on the Swedish economy? and how a number of factors affected the development of the crisis in Sweden. He noted that the sharp decline and subsequent recovery in GDP was in part due to the fact that Sweden is a small, open economy and was therefore strongly affected by the decline and recovery in global trade relative to other countries. In addition, Sweden was able to recover strongly from the crisis as it had strong public finances going into the crisis. The sound public finances in Sweden were in part due to the fiscal policy measures put in place in response to the financial crisis in the early 1990s.

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10:00:05 Title 00:00:09
10:00:14 General view of the Forum 00:00:43
10:00:57 SOUNDBITE (in ENGLISH) Stefan Ingves, Governor of the Sveriges Riksbank: the degree of interconnectedness and the degree of interdependence is very high compared to let's say to the way things looked in the '90. And that means that whatever is happening in the rest of the world, whatever Swedish banks do in other parts of the world, that would affect the entire economy. So in that sense what has happened is that we now find ourselves in an environment where the banking sector prove to be fully capable of creating an externality that affected the economy as a whole; and that was something that was new and that required some very special measures when it comes to dealing with this. 00:00:29
10:01:27 SOUNDBITE (in ENGLISH) Stefan Ingves: there is a need for a greater focus on system wide risks, it's not enough to just look at single banks. We need to better understand what the system as a whole looks like. We need to get better at handling the interaction between macro prudential policy and monetary policy. And we need to figure out how to balance these two fields of policy in such a way that we are capable of doing this in a reasonable way. 00:00:03
10:01:30 Cutaway of the audience 00:01:33
10:03:04 SOUNDBITE (in ENGLISH) Stefan Ingves: first of all, there's a need to conduct a stable fiscal policy. One generation might get away with it but not the next, and if you don't have a stable fiscal policy, sooner or later, you run into a whole host of issues that need to be dealt with. We had our fair share of this in the nineties and it took us ten years to correct what we had created in the seventies and the eighties. And there are still enough people around who remember how hard it was, and let's hope that those memories will stay with us. Second issue is stable prices. If monetary policy is not conducted in such a way that you have stable prices, you introduce all sorts of distortions, and it's much more likely that you end up with a problem, lets say in the financial sector compared to if price developments are fairly stable. And then, finally you need some financial stability policies. This also varies over time but basically you need to ensure that the banking sector stays safe and sound and that normally means that one needs to watch out for leverage, because if there is too much leverage somewhere in the system when you go through the de-leveraging process, that is likely to hurt not only individual institutions, but also the banking system as a whole and eventually the economy as a whole. 00:00:05
10:03:09 Cutaway of the Forum 00:00:00
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