Another problem is that the difference between rates on different euro countries government bonds has increased, at the same time as one can envisage substantially increasing deficits in public funds and thus an increased supply of government bonds. Concluding remarks My main messages today have thus been that so far Sweden has been able to handle the problems that the global financial crisis has caused the Swedish financial system. However, the negative consequences for the Swedish economy will be considerable over the next two years. And the global financial system needs to be reformed to reduce the likelihood of new financial crises. The new information received since the most recent monetary policy meeting at the beginning of December indicates lower growth and inflation at the end of last year than we had forecast. However, the krona has weakened further, which can lead to some inflationary impulses. But more information will have come in by the time we are to make our next monetary policy decision in early February. Not until then will I take a stance once again on the future direction for monetary policy.
The Icelandic bank Kaupthing experienced problems in Iceland and the Riksbank granted the Swedish subsidiary Kaupthing Bank Sverige AB liquidity assistance in October 2008. Carnegie Investment Bank AB also received liquidity assistance in October when it had problems finding funding. Given the financial market turbulence, the Riksbank’s assessment was that a suspension of payments by one of the banks could entail a risk of a serious disruption in the financial system and could undermine confidence in the payment system. Finansinspektionen (the Swedish financial supervisory authority) later revoked Carnegie’s licence to conduct banking activities. The Swedish National Debt Office took control over Carnegie and Finansinspektionen therefore changed its decision regarding the revocation of the licence to instead giving the bank a warning. The Riksbank’s liquidity assistance has been repaid. The Riksbank has also participated in the international cooperation to strengthen financial stability in Sweden's neighbouring countries. In May 2008, the Riksbank and the central banks in Denmark and Norway entered into a euro/Icelandic kronor swap agreement with the central bank of Iceland. The aim of this swap agreement is to support the Icelandic central bank in its efforts to safeguard macroeconomic and financial stability. Sweden's part of the swap agreement amounts to EUR 500 million. The agreement was extended in December after the IMF had drawn up a programme for financial assistance for Iceland. Latvia has negotiated a support package with the IMF and the EU which will make it possible for the country to retain its fixed exchange rate against the euro.