2  BIS Review 44/2010  In addition, real interest rates in Norway fell markedly through the 1990s from high levels. This was because the fixed krone exchange rate regime maintained through the period managed to bring down inflation and inflation expectations. Moreover, growth in public spending was rapidly reduced once business sector activity had recovered. Economic shift Over the past decade Norway experienced an economic shift. The cost level began to rise. This was related to the sharp improvement in Norway’s terms of trade at the time and a gradual pickup in growth abroad. Prices for Norwegian exports such as oil, gas, metals, minerals, fish and freight, rose markedly, while prices for imported goods fell. From 2003 to 2008, terms-of-trade gains alone pushed national income up by more than 20 per cent, or a good 4 per cent per year. Institutions and mechanisms had also been put in place to manage the sharp increase in income. Norway’s sovereign wealth fund, the Government Pension Fund Global, and the fiscal guidelines were established with the express purpose of making the mainland economy less susceptible to fluctuations in the oil price. Improved terms of trade, higher revenues and increased government spending contributed to a stronger krone and a shift in real resources towards sheltered sectors. At the same time, the fiscal rule provided a basis for growth in business sectors other than the oil industry and the public sector through the decade.
In the past year we regrettably posted once again the highest unemployment rate in the OECD; and furthermore, the speed at which joblessness in Spain is increasing during the current crisis is the fastest among all the developed countries. In countries facing a contraction in activity similar to that in Spain, the unemployment rate rose only slightly last year (e.g. by 0.2 pp in France), or even fell (Germany). We might argue that these countries show much lower increases in the labour force than Spain and that the expansion in their construction sectors was not comparable. The problem is that when we compare with countries that do have these two characteristics, such as the United States or the United Kingdom, Spain's unemployment increase continues to stand out. Specifically, the US unemployment rate rose by "only" 2.3 pp in 2008, somewhat more than in the United Kingdom, where the increase from January to October 2008 was 1.4 pp. These are very moderate increases when compared with the figure of over 5 pp for Spain in 2008. Evidently, the Spanish economy’s labour adjustment mechanisms are not working properly. Another harmful effect of an inefficient labour market is that it reduces the room for workers' real compensation to improve. In recent years, the Spanish economy has had to compete abroad on the basis of holding down its real labour costs, which was imposed by the economy’s low productivity.