This is more than two and a half times the joint stock market value of the four major Swedish banks at the turn of the year 2012/2013. In Sweden, we succeeded in managing the acute phase of the financial crisis in 2008 and 2009 in a way that made it possible to limit the costs to society. One contributing factor was probably that the crisis of the 1990s was fresh in the minds of the banks and they thus limited their risk-taking more than might otherwise have been the case, at least with regard to their operations in Sweden. As we know, not all countries were as lucky. The negative effects of the crisis are still in evidence in large parts of the world – not least in several countries in central and southern Europe – and will probably remain so for some time to come. In retrospect, it is easy to note that the combination of shortcomings in the regulations and the profit motives of the participants on the financial markets contributed to one of the worst financial crises of the modern era. The details regarding the build-up of risk and the course of the crisis have been described several times and I will not repeat them here. It is enough this time to note that banks with a limited amount of capital and banks with a high degree of market funding proved to be vulnerable when the storm broke.
We have to demonstrate the same spirit with which the European Union was progressively developed over the past half-century: setting objectives, agreeing deadlines and mobilising the necessary political will within Parliaments. Europe’s governments are committed to pursue fiscal consolidation. Those within the euro area have formally declared that they will take “all measures needed to meet fiscal targets this year and the years ahead in line with excessive deficit procedures” (Euro area heads of state or government declaration of 7 May 2010). Some of them have made precise additional commitments to accelerate fiscal consolidation and ensure the sustainability of their public finances. Fiscal consolidation is being put in place at the same time as we strengthen the resilience of the European banking sector. Publication of the detailed results of a harmonised panEuropean stress test is an important step in the right direction. These tests will increase transparency and enhance investors’ confidence in Europe’s banking sector. They will also contribute to restoring the important intermediation role of the interbank market in channelling funds within Europe. 3. Where next? So where do we go from here? As I have indicated, collectively as European and global policy-makers, we need to ensure economic recovery and renewed confidence, while reducing fiscal deficits and remaking the financial system into one that supports the real economy. This needs to be our clear sense of direction. 1  Keynes (1937), “How to avoid a slump”, Article in The Times, 12 January 1937.