This is also evident in the KfW-ifo-Mittelstandsbarometer. Germany is an open and integrated economy, so it is not surprising that a slowdown in the rest of the euro area has an impact here. Intra-euro area trade amounts to around 40% of  BIS central bankers’ speeches  1  German GDP. And around 65% of foreign direct investment in Germany comes from other euro area countries. But it is less often noted how problems in the wider euro area affect the financial situation in Germany. It is the weak euro area economy that is keeping interest rates here at very low levels. And it is the crisis of confidence in some euro area countries that is causing safehaven flows of money into Germany, depressing interest rates even further. This highlights the fact that countries in a single currency area are connected like communicating vessels. A change in one vessel creates an equal change in all the others. As interest rates rise in countries in difficulty, they fall in strong countries like Germany. As TARGET2 liabilities increase in some countries due to capital outflows, TARGET2 claims increase in Germany due to capital inflows. Financial developments in Germany are the mirror-image of financial developments in the rest of the euro area. And this means that measures to ensure the stability of the euro area as a whole will also be to the benefit of Germany. So let me now turn to the actions being taken by governments to achieve that goal of stability.
5 The current economic situation in Sweden In my review of the economic situation in Sweden I will focus on five areas: GDP, the labour market, inflation, the current account and public finances. My experience is that these variables usually provide a good picture of a country’s economic situation. Signs of a turnaround, but the recovery will be weak The Swedish economy has also been hard hit by the international economic downturn. We forecast in the Monetary Policy Report that GDP in Sweden will fall by more than 5 per cent this year (see Figure 12). However, during the spring there were several signs that the deep recession may have bottomed out. The financial markets have begun to function better, which creates opportunities for an economic recovery. World trade, which is very important for the Swedish economy, has also shown signs of stabilising during the spring. At the same time, we believe that the recovery will be weak. This is usually the case following serious financial crises. Our forecast is that GDP will not reach the same levels as prior to the start of the economic downturn in the second quarter of 2008 until 2012. Since the most recent monetary policy meeting there have been further signs to support the view that the worst is now over. The preliminary national accounts published on 31 July indicate that GDP remained unchanged between the first and second quarters of this year after four quarters of falling GDP (calendar-adjusted).