5  The latest evidence suggests that the strong momentum of growth in Asia and other emerging markets is being maintained. In Asia, there are many indications that domestic demand has been a powerful driver of its recovery and that growth in this region is becoming more autonomous and less dependent on export demand from the western economies. In the US and Europe, the indicators are more mixed. Within the European Union, Germany grew very strongly in the first half of this year, recording the biggest rise in GDP since unification in the second quarter and more recently the lowest rate of unemployment since 1992. German unemployment has been falling since the mid-2000s, with the exception of the recession period, which points to an improvement in the structural performance of its economy, which should help to sustain consumer spending and investment. Some of Germany’s neighbouring economies – including the Benelux countries – are also sharing in this pattern of healthy growth. A strong performance from these “core” European economies should help to offset the dampening effect of financial and fiscal problems in countries on the European periphery, including Ireland. 5  In the decade to 2007, annual GDP growth averaged 3.1% in the United States and 2.3% in the European Union. BIS Review 134/2010  5  Currently, the United States appears to be in a “soft patch” where growth is disappointing. But the most recent indicators – including the widely followed Purchasing Managers’ Indices (PMIs) – still point to continued growth.
Apart from the measures taken by the Riksbank, crisis measures taken by the Ministry of Finance and the National Debt Office of course affect costs (spreads) on the credit market. Fiscal policy stimulation measures also affect the costs of credit risk and thus the price of credit. We should also remember that supervisory and regulatory measures that establish different forms of constraint, for example capital adequacy requirements for the banks, can indirectly affect the price of credit. A question that we are wrestling with just now is how serious the credit crunch is and whether there is a risk that it will hit the non-financial sector so hard that it will have major repercussions on the real economy over and above the credit crunch that normally follows a recession that undermines the creditworthiness of companies and households. On the one hand the supply of credit declines when the banks want to shrink their balance sheets. Many companies in the Riksbank’s company survey state, for instance, that they are finding it difficult to borrow at longer maturities. On the other hand, the demand for credit should also  BIS Review 41/2009  13  decline as a consequence of weak economic activity. What can be done about this and what is the role of the central banks in easing the credit crunch? The Riksbank's view is that it is the financial system that as far as possible should be strengthened in order to ease the credit crunch.