All indicators point to a general decline in confidence, both of consumers and investors. This decline is not unique to France; on the contrary, it is much stronger in our partner countries and particularly in the United States. Indicators, however, only provide information on the near future. Beyond one or two quarters, forecasts are based more on analysis, debate and judgement. In the present circumstances, this is particularly difficult. This is perhaps why, over the past few days, a current of opinion bordering on an intellectual vogue has prevailed, with a view that any banking crisis is bound to have far-reaching and long-lasting consequences. Along these lines, the optimists refer to the Swedish experience in the 1980s, which was marked by almost three years without economic growth, and the pessimists allude to Japan's "lost decade" following its banking crisis. However, a comparison is misleading. The situation today is profoundly different. First, as I have said, our banks, and particularly French banks, are financially sound. Furthermore, the reaction in terms of economic policy has been particularly rapid and vigorous.
This is shown by the fact that from the mid 19th century up to the late 1960s growth in Sweden was  BIS Review 80/1998  -2-  among the highest in the world. It is rather the case that the favourable outcome was promoted by low inflation and the stability this represents. The decades immediately after World War Two were particularly notable for high growth, low inflation, external balance and an optimistic mood that resulted in the Swedish economy’s successive expansion. That was a prosperous period with a good, stable economic trend, a rising standard of living and high employment. After the collapse of the Bretton Woods system in the early 1970s it proved difficult to establish an equally robust fixed exchange rate regime. A firm anchor no longer existed for economic policy in general and wage formation in particular. Sweden experienced a series of devaluation cycles, with an expansionary fiscal policy, inefficient wage formation and growing structural problems. With the deregulation of the financial sector the problems became all too evident. During the 1970s and 80s economic growth in Sweden became weaker than in other countries. But the economy still became overheated and this, together with an expansion of public sector activities, meant that unemployment was restrained for the time being. The situation was of course unsustainable. An inflationary, speculative bubble cannot grow indefinitely; sooner or later it is bound to burst. There was also a limit to the public resources for financing employment.