That means there is no room for the type of misguided economic policy that characterised the 1970s and ’80s, for example, when Sweden used repeated devaluations in an attempt to rectify the situation. Such failures must be avoided at any cost. Against this background it is not remarkable that the discussion about economic policy with EMU has focused on stabilisation policy. Even so, it is important to start from a broader perspective. The issues to do with stabilisation policy have featured prominently in the Swedish debate. This has to do with a strong Keynesian tradition and the ability of Lars Calmfors and his former colleagues to place the so-called insurance argument in the centre of the whole discussion about a monetary union. The latter naturally has to do with the fact that the very dramatic crisis which hit Sweden in the early 1990s was so closely connected with stabilisation policy. It is hardly surprising that in many other countries the discussion took a very different course before they adhered to the EMU. It is extremely important that our discussion about economic policy – with or without the euro – does not overlook or play down the supply side of the economy. Countries that create conditions for a smooth adjustment of labour markets and a favourable development of productivity will almost certainly do well as members of the monetary union. Measures to this end are naturally warranted in any event – they promote prosperity.
Under these circumstances it will be exceedingly important to make a thorough scrutiny of the social security system’s design; this is a question that has been on something of a back burner, what with the crisis for stabilisation policy in the 1990s and the achievement of a more lasting solution to the issue of pensions. In such a discussion about social security systems that are effective and sustainable in the long term there is a place for the issue of cyclical stabilisation. Systems that are fully or partly funded, publicly or privately, can function well as stabilisers. Thus, it is mainly in this context that I would like to place the discussion that has taken place about various types of buffer fund. But the need to reform the social security system is primarily connected, not with stabilisation policy but with being able to guarantee a high quality of publicly financed services without raising the tax take. Measures for influencing the business cycle Finally there are the questions of whether a more active, discretionary fiscal policy would be advisable and whether, to function better in the future, it may need to be supported by new institutional arrangements. First, let me stress that, for reasons I mentioned earlier, I do not have much faith in fine tuning. Of course that does not rule out trying not to accentuate fluctuations as far as possible when measures are taken primarily for other reasons.