Stefan Ingves: Coming stronger out of a crisis – lessons from Sweden Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at the Brussels Economic Forum, Brussels, 18 May 2011. *  *  *  “If in debt, you are not free.” This expression was widely used by Göran Persson, Sweden’s former prime minister, to explain the need for the extensive fiscal consolidation process that Sweden underwent after the crisis in the 1990s.1 In 1997, a three-year nominal expenditure ceiling was introduced. This was an important step towards increasing budgetary discipline and strengthening the long-term perspective of the budget process. In addition, as part of this fiscal consolidation process, a new fiscal policy framework that included a budget surplus target of 1 per cent over the business cycle was introduced in the year 2000. With these instruments in place the debt to GDP ratio fell from 56 per cent in the year 2000 to 35 per cent today. Recent developments in many European countries remind us of Göran Persson’s words: small, open economies are vulnerable to crises of confidence when financial markets are in turmoil. They need to stand on very solid economic foundations and be supported by a credible and sound fiscal-policy framework. Sweden was lucky enough to be in this position when the recent crisis struck. This was indeed fortunate as the crisis had a major impact on the Swedish economy. GDP fell by more than 5 per cent in 2009 – the largest fall since the 1930s.
NASP has engaged actively with us in this effort, and I'll explain why we're committed to building on our partnership through and after the crisis. Before going any further, though, let me note that I am expressing my personal views and not necessarily those of the New York Fed or the Federal Reserve System. I would also point out that the FOMC will hold a monetary policy meeting next week, which puts us well into the blackout period. This means I'll steer clear of discussing our policy outlook, and I won't be able to take any questions, but I look forward to the day when we can gather in person again for a twoway conversation. Context: The Unequal Impact of the COVID Pandemic I'll begin by describing the context. Everyone here is painfully aware that the pandemic has hit the most vulnerable segments of our society the hardest, leading to highly unequal outcomes. Labor market damage has been concentrated among people of color, lower-wage workers, those with the least education, and people with disabilities. Even after recent improvements, unemployment rates for Asian, Black, and Hispanic Americans all remain in the double digits, rising a cumulative 8.7, 7.6, and 6.6 percentage points, respectively, from their pre-pandemic lows. Reductions in labor force participation for those without a college degree have been more than twice as large as those with a degree.