Future challenges for wage formation The Municipal Workers' Union's termination of its collective wage agreement for 450 000 members before the third year and the demand for relative wage changes entail touchstone for wage formation. The union has for a long period watched its wages situation deteriorate in relation to industrial workers and other groups in the public sector. During the previous bargaining rounds, however, the LO unions were agreed that the Municipal Workers' Union should receive higher wage increases than the other member unions in order to improve its relative wages. However, the union is dissatisfied with the outcome so far, which it claims has given only 0.4 percentage points above the wage increases achieved through collective bargaining. This union's members are currently among those with the lowest wages in the labour market, with an average wage of approximately SEK 16 000. The Municipal Workers' Union's wage demands are not in themselves a threat to the inflation target, as long as other groups in the labour market are prepared to stand back in favour of this union's members. However, there is a risk that other trade unions will follow their example and also demand higher wages. Approximately 70 per cent of the employees in trade and industry have the possibility of renegotiating their agreements during the final year of the agreement. Already, there have been demands for compensation if the Municipal Workers' Union members should be given higher wages.
2  For the banks to manage the stress test their Tier 1 capital ratio, that is, their Tier 1 capital in relation to their risk-weighted liabilities, must not fall below 6 per cent. In the stress test the major Swedish banks were calculated to have Tier 1 capital ratios of 8.9–10.3 at the end of the test period. 4  BIS Review 109/2010  Strong GDP growth The Riksbank’s Monetary Policy Report from July forecasts relatively high GDP growth in the coming years: that Swedish GDP will grow by 3.8 per cent this year, and then by on average just over 3 per cent a year in 2011 and 2012. (Figure: GDP growth). We could also note that the first quarter of the year had been better than expected. It is particularly pleasing that the upturn was on a broad front – all of the components of GDP contributed to the upturn. Moreover, the Riksbank also saw good opportunities for a continuing recovery. Domestic demand is being maintained by a continued expansionary economic policy, combined with an optimistic view of the future in both the household and corporate sectors. In addition, growth abroad is expected to rise during the forecast period. This will contribute to an increased demand for Swedish export products, which in turn will benefit business sector investment as resource utilisation rises. Our picture of a recovery in the Swedish economy is also supported by new statistics published after the Monetary Policy Report.