The economic situation in July 2010  70  Purchasing Managers’ Index in the manufacturing industry Index over 50 indicates growth  70  60  60  50  50 USA Euro area Sweden  40 30 00  10  20  30  5  10  5  5  0  0  -5  -5  -10  4 3  2  2  1  -10  -15  July  -15  -1  -20  -2  10  Inflation Annual percentage change  3  April  08  08  4  -10  06  06  5  -5  04  04  5  -5  02  -10 02  10  0  00  15  Households  10  00  0  -20  20  Companies  15  40  02 04 06 08 10 GDP Quarterly changes in per cent calculated in annualised terms, seasonally-adjusted data  Bank lending to companies and households Annual percentage change  1  CPI  0  12  5  0  CPIF  -1  CPIF excluding energy 00  02  04  06  08  -2 10  12  Sources: The Institute for Supply Management, Markit Economics, Statistics Sweden, Swedbank and the Riksbank  Figure 6.
A large financial system can be more readily versatile, i.e. provide investors and those in need of financing with a full range of options to choose from according to their requirements. What does all of this mean for financial stability in the euro area? First of all, I should like to remind you that the financial system of the euro area showed a high degree of stability during last year’s period of financial turbulence as well as during the rather dramatic structural shift connected to the changeover to the euro. In the former case, it is true that there was a significant spillover effect for the euro area markets, but they recovered quickly and without suffering any lasting damage. There was no disruption to any of the basic functions of the financial system, and public confidence in it remained strong throughout. Second, the foreseen structural changes require, as I mentioned earlier, the need for adjustment to be taken seriously by all participants in the financial system. This adjustment appears to have intensified recently: there has been an increase in merger activity, an establishment of alliances and an introduction of new products and services, often based on modern information technology. The process of structural change contains risks, but if these risks are identified early and analysed carefully, they do not present a threat to financial stability. After all, we are talking about decision-making and planning by people who are dealing with risks every day at the highest professional level.