Changing economic conditions. The economic policy environment has changed radically during the past few years. Not least in importance is the process of deregulation and internationalisation on financial markets. Interest rates are increasingly being determined on international markets. When stabilisation policy is being decided on, the risk of interest rate reactions cannot be disregarded. This has resulted in the price stability requirement being given greater political priority. Sweden’s central bank – the Riksbank – has a target of keeping inflation at around two per cent. The European Central Bank’s inflation target is that inflation should be no more than two per cent. The sharp reduction in inflation makes it possible to raise employees’ real wages although nominal wage increases are lower than in the past. Consequently, improvements in real wages can be brought about without unfavourable effects such as high interest rates and loss of competitiveness. A strong competitive position and a sound industrial climate as such create the right conditions for steady improvements in living standards and employment. A “virtuous wage formation circle” can be started in Sweden by this means, instead of the “vicious circle” caused by many years of high nominal wage increases that have pushed up and then eroded by high inflation. This weakened the competitive position of Swedish industry, and caused devaluations, unemployment, lower living standards, and resulted in insignificant improvements in real wages, or none at all. The creation of the European Monetary Union (Emu) has altered the conditions for monetary policy in all EU countries. The inflation rate and certain associated factors, as well as public finances, are all affected. All EU countries have introduced forceful fiscal policy measures to strengthen their public finances. As far as Sweden is concerned, these measures have been particularly far reaching, as a consequence of Sweden’s large budget deficit and high level of central government debt. The EU community is not only concerned with questions pertaining to economic integration. Great importance is also attached to giving the community a Social Chapter. With the object of drawing further attention to and, should the parties deem it suitable, seeking to influence the outcome of the steadily broadening European integration, the parties have agreed to set up an International Committee. Emu was formed on January 1st 1999. There is at present some uncertainty regarding whether or n...
