Speech
EU-LAC Summit, Madrid 18 May 2010
Mats Odell, Minister for Local Government and Financial Markets

The way out of the crisis, a new International Financial Architecture

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Mr. President, Your Excellencies,

My country, Sweden, is one of many in Europe who share Latin America's interest in enhancing trade and cooperation between us who live far apart, but share many common values. Sweden would welcome progress relating to trade between EU and LAC countries.

The same goes for investments. Enterprises in this part of the world are eager to invest in Latin American countries. Sao Paulo, for example, is one of Sweden's three largest industrial cities, if I may put it like that.

I don't have to remind you of how vulnerable we all are when it comes to financial crisis like the present one that erupted like an Icelandic volcano.

Most Latin American countries have experienced financial and fiscal crisis and today some European countries are struggling to get out of the hot soup.

It is however clear to all of us that irresponsible fiscal policies make countries vulnerable regardless if they belong to a monetary union or manage there own monetary policy.

Therefore we think that budget consolidation should be part of the national budgetary process, through robust fiscal frameworks with expenditure ceilings and firm budgetary targets.

A successful way out of the crisis should also contain structural elements, for example pension reforms, to safeguard sustainability of public finances.

Sweden also believes that we should use the present momentum for reform to curb excessive risk-taking in the financial sector.

We should consider globally coordinated principles to ensure that the financial system itself pays for the negative consequences it causes.

Therefore, we support the approach to financial regulation within G20.

We also support the idea of a stability fund, where the fees are based on banks' risk taking. This system, which has been used in Sweden for some time, would decrease risks and preserve a level playing field.

We have set up what you could call a state "bank-insurance company" outside the state budget, to safeguard that the tax payers will not get the bill for the next bank-failure.

Behind the headlines we can observe how ordinary people have been hit by the recession.

We know that individuals who loose touch with the labour market are at risk drifting into permanent exclusion.

Therefore it is vital that unemployment does not remain on high levels.

Early intervention, using education measures coupled with strong work incentives, are key to prevent this.

By promoting the employability of individuals today we lay the foundation for a more adaptable and inclusive labour market tomorrow.

Let us turn this crisis into a possibility for change and an opportunity for the future - we owe it to our people and to future generations.

Thank you.