Otherwise there is the danger that the burden of the adjustment will be born disproportionally by the traded goods sector that might have detrimental medium term consequences. While the near term outlook in the global economy is rather gloomy, the situation in Iceland is quite different. A prolonged growth phase was followed by one year, 2002, of a minor contraction, but at present we foresee a new period of growth when our task will be to maintain economic balance. The Central Bank is determined to keep inflation under control during the coming years of extensive activity in the economy, thus maximising the long term benefits of the extension of the export base. Ladies and Gentlemen The structure and diversity of the Icelandic economy has changed radically in recent decades and the legal framework has been modernized. Only a few decades ago the Icelandic economy had a narrow production base when fishing and fish processing were by far the most important activity. Today, the Icelandic economy has a broad base. Fishing continues to be important, but various industries have also developed, exploiting among other things the vast opportunities offered by the revolution in information technology. Strong companies successfully compete in the international market in various fields, including among other things communications and financial services. The liberalization and opening up of the economy demand close cooperation with other nations. In that respect it will be important to cooperate with businesses and public authorities in Europe, not the least in Germany.
Much reflection has also been carried out on the matter within the Swiss National Bank in order to better understand this difficult period in our own history. The postwar period was characterised by a fierce determination to start afresh, to avoid the reappearance of the misleading thinking that had led to pre-war protectionism, and to reconstruct the economies that lay in ruins. A phase of intensive work began, with the aim of reorganising the international monetary order. Still isolated, both economically and politically, Switzerland participated in the efforts without becoming a member of the Bretton Woods Institutions. The gradual liberalisation  BIS Review 40/2007  3  of payments and trade rapidly led to a period of prosperity but also to a situation of disequilibrium in the operation of the international monetary system. Inflation and speculative movements of funds became common features during the 1960s and the monetary arena was disturbed by multiple devaluations, particularly in Europe. Suspension of gold convertibility for the dollar, in 1971, hailed the collapse of the system of fixed exchange rates that had been put into place after the war. Faced with a massive flow of speculative funds, the SNB was forced to abandon stabilisation of the Swiss franc in 1973. The transition to sustained floating for the Swiss franc was definitely the most important change of direction in the monetary policy strategy pursued by our bank in its hundred years of existence.