The economy policy priorities specified for the years 2003-2006 in Europe are the following: (i) promoting economic growth, (ii) creating jobs, and (iii) sustainability of public finances. •  Economic growth in Europe has fallen behind its potential in the past three years. This again seems to point to the need for structural reforms. It is in the interest of Estonia that structural reforms targeted at improved efficiency in the use of resources would continue both in the recently joined countries as well as in the old EU member states. •  Regardless of the fears prevalent in the ‘old’ Europe, extensive labour influx from the new member states in the near future is unlikely. Therefore, the insufficient flexibility of the pan-European labour market has to be counterbalanced by as efficient as possible internal market, high mobility of capital, and as flexible as possible internal labour market. •  Estonia is building up a modern pension and health insurance system. This is an area where also the current ‘old’ member states will probably have to focus more on individualised contributions and securing more extensive employment. •  Yet the greatest problem the European Union faces is the budget issue due to the need to reform the pension system and in particular the healthcare system in the light of long-term sustainability and on account of the budgetary positions of the member states that deteriorated in 2003.
How we fulfil our tasks Ladies and gentlemen, in light of the high loss potential of mortgage and real estate market crises, the question is: How can systemic risks originating in these markets be contained? From a macroprudential perspective, three elements stand out: identifying the risks at an early stage, containing their growth, and strengthening banks’ resilience. I would like to explain these three elements in greater detail. Let me begin with the SNB’s risk monitoring, before speaking about the macroprudential instruments we have at our disposal. 5  Cf. the SNB focus article Household wealth in Switzerland: concepts and trends in an international comparison, available online on the SNB’s data portal: data.snb.ch/en/topics/texts#!/doc/focus_20210429 (consulted on 30 August 2021). Page 4/12  Risk monitoring  In identifying risks at an early stage, we are interested in vulnerabilities on the mortgage and real estate markets and in their possible consequences for the banking sector. Vulnerabilities manifest themselves primarily in inflated real estate prices and unsustainable mortgage lending. Both entail a heightened susceptibility to corrections in the form of sudden drops in prices and sharp rises in loan defaults. Our assessment of these risks is based on a broad range of data and methods. The fact that such a broad range is required reflects the high level of uncertainty involved in measuring these risks, as well as the different strengths and weaknesses of the individual indicators used. The more indicators there are pointing to a certain development, the clearer the assessment becomes.