Our main concern is that across euro area countries domestic vulnerabilities are still very large, which implies a limited ability to withstand adverse external shocks and to kick start a new phase of sustainable growth. The vulnerabilities of many euro area countries are related to the high stock of debt, both public and private, and to a number of structural rigidities and institutional bottlenecks that prevent an optimal allocation of resources across factors of production, and thus limit total factor productivity growth. The current environment not only urgently calls for the implementation of structural reforms, but also provides the right conditions for their implementation. With our monetary policy, the ECB is greatly contributing to an environment favourable to implementing structural reforms: our accommodative monetary policy stance helps countries to gain time, time to implement the necessary measures to increase resilience and thus support sustainable growth. However, there is only a limited role for demand-side policies. Fiscal space is limited and monetary policy cannot carry the burden of the adjustment alone. For the euro area to become more resilient and sustain stronger growth, national governments need to bring about further structural change 1. Work in this regard has already started, and the reform wave of the countries hardest hit by the crisis is showing some initial results, such as a GDP recovery related to comprehensive labour market reforms. Other reforms, mainly on product markets, are expected to bring about GDP gains, but they need to be implemented in full.
Lars Nyberg: The Riksbank and the property market Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at a lunch meeting, arranged by Connect Skåne, Kristianstad, 6 November 2006. *  *  *  To begin with, I should like to thank you for the invitation to come here to Kristianstad to speak about developments in the property market. This is a subject that certainly engages people, not merely us economists but also people who are not usually interested in economics or what the Riksbank does. The main interest is probably due to a house purchase being the largest individual investment most of us make in our lives. The Riksbank’s interest in the property market is based on the two tasks we have been set by the Riksdag (the Swedish parliament). One is to ensure that inflation remains at two per cent a year, with a tolerated deviation interval of plus/minus one percentage point. The other task is to "promote a safe and efficient payment system”, as it says in the text of the law. We wish to avoid the type of catastrophe Sweden experienced during the bank crisis at the beginning of the 1990s and we usually call this safeguarding financial stability. As I shall discuss a little later, developments in the property market can be significant for both these tasks and this is the reason for our interest.