This would hit the regions impacted by the crisis hardest and the number of industrial jobs would decline more rapidly. Another important question concerns the implications of the division of the economy for the Industrial Agreement’s normative role in wage bargaining, a role which has been very important during the most recent agreement periods. The Industrial Agreement has been a restraining force, contributing towards retaining the competitiveness of that part of the Swedish economy exposed to international competition and keeping inflation at a low and stable level at the same time as real wages have risen and growth in the Swedish economy has been strong – until the financial crisis. In the period ahead, a drawn-out recovery, weak labour markets and low price and wage increases are also expected internationally. The sector exposed to international competition is the area of the Swedish economy to be most tangibly and directly affected by these external conditions for wage developments within Sweden. This suggests that this sector should also play a normative role in this year’s collective bargaining. The service sector is not as sensitive to cost increases, but finds it easier to pass these on to prices. If the service sector plays a normative role in this year’s collective bargaining, it is likely that wage increases, and thereby inflation, will be greater than would be the case if the sector exposed to competition were to be normative. Another issue that may play a major role is uncertainty concerning the future.
This will offset the impetus to consumption and investment provided by the near-zero interest rates. 7. Some academics believe that the effectiveness of the quantitative easing policy in the US is also undermined by the fact that the US property market has not yet bottomed out and US households need to continue to de-leverage. Many policy measures introduced in the US recently aim to reduce the pain of households in a falling property market and slow down the process of foreclosures. Even though property prices have already fallen significantly, more than 50% in some places according to anecdotal reports, potential buyers still prefer to wait as they fear that prices may fall further once the huge stock of foreclosed properties are put back to the market or when interest rates return to more normal levels. In other words, while measures to slow the downward adjustment of the property market are well-intentioned and have their political merits, they could prolong the time needed for the market to reach a new equilibrium or find the so-called clearing price. In my view, this may delay a true recovery of the property market and create a negative drag on the repair of US  2  BIS central bankers’ speeches  households’ balance sheets, making the recovery of consumer confidence farther and farther away. 8. Finally I would like to share with you a few policy lessons learnt from the latest crisis:  (a)  Households, companies and governments alike must avoid excessive leverage or borrowing.