It is desirable that the interaction of fiscal and monetary policy continues to function well. There are strong reasons for adhering to the rules that have been established. An increase of 1 percentage point in the level of interest rates weakens the budget balance by about SEK 10 billion. A continued amortisation of the sizeable government debt will create much-needed room to manoeuvre in economic policy. There will be more scope for stimulating increased demand in future slowdowns. At the same time, tax cuts would clearly benefit the Swedish economy in the somewhat longer run. But the cuts must then be concentrated to just those taxes that play a major part in the workings of the economy, where changes can help to raise potential output. Together with other measures that improve wage formation and the functioning of the labour market, such tax adjustments could lead to the creation of new jobs without an acceleration of inflation. The more steps that can be taken in this direction, the better will be the conditions for a continuation of a good economic development in Sweden. This BIS Review is available on the BIS website at www.bis.org. BIS Review 77/1999  8
•  Timetables could be improved - linking them more closely to national processes. •  Using the now more developed measures of cyclical balances could also be useful in this context. In general, I think it is important to enable the Commission to dig deeper into these areas and to increase the comparability between different countries. On the basis of this work the Commission’s role should be strengthened as regards giving “early warnings” and proposing measures. I also believe that the Commission should have the task of emphasising its analyses and going public more than it does today, thereby being more effective in the general debate in the individual member states. III. My third point has to do with consolidating the fiscal institutions and regulations at national level. Here a lot more can be done. One aspect that too often seems to be forgotten in the debate on the pact is that a balanced, countercyclical fiscal policy is not just a common European interest; it is in the individual interest of each country. Some politicians contribute to this misunderstanding when they depict the commonly adopted criteria as an unreasonable burden from “accountants in Brussels”. One manifestation of the same attitude is the recurring problems with the data that are sent to the Commission. Instead of having a transparent process, increasingly unrealistic figures are being delivered. There are several examples of governments reporting data before an election that after the election proved to be misleading.