The Fund, which has since changed its name to the Government Pension Fund Global (GPFG), has grown to almost NOK 3 000 billion. Its rapid growth was neither expected nor planned and was due to the sharp improvement in government finances during the economic upturn from the late 1990s. After the turn of the millennium, the rise in oil prices also provided a boost. The size of the Fund is now equivalent to approximately 18 months’ mainland GDP and may double in the next five to ten years. Total public expenditure is equivalent to less than half of total GDP. If the government spends 4 per cent of the Fund annually – the expected real return – this will finance close to 20 per cent of public expenditure ten years ahead. The return on the Fund will by then have become such an important source of funding that it is difficult to imagine that the government authorities would find any sound arguments for drawing on the accumulated capital. It is also a flow of revenues that does not have an adverse effect on private sector production capacity, unlike taxes. (See Chart: Pension obligations and the Government Pension Fund.) However, only a share of future pension payments will be matched by revenues from the Government Pension Fund. The Government Pension Fund is estimated to cover around half of the national insurance scheme’s retirement and disability pension obligations. 16 (See Chart: Pension costs and expected fund returns.)
Financial union is essential in a single currency area where cross-border capital flows can lead to credit booms and other imbalances – and where the negative effects of a bust can spread rapidly to other members. One essential part of financial union is a single banking supervisor. As you know, the European Commission has recently proposed that the new supervisor should be based at the ECB. This is important to ensure consistency across the euro area and to prevent regulatory capture. Day-to-day tasks, however, would remain with national supervisors who have the competence and resources to implement them. But financial union does not have to imply the pooling of deposit guarantee schemes, an issue that I know is of concern in this country. Organising and funding deposit guarantee schemes can remain a national responsibility, with comparable effectiveness. In the longer term, all four pillars are equally important. They are the bedrock for the enormous potential of the single currency for Europe’s citizens. Completing economic and monetary union would give citizens greater security against any future crisis. It would create the foundations for sustainable growth and employment. For all citizens of the euro area, it is therefore essential that Europe’s leaders stay on course. Thank you for your attention. BIS central bankers’ speeches  5