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European Commission


Madrid, 1 October 2012


Thank you and good afternoon. It is always a pleasure to be in Madrid, even for a short and intense trip such as this.

I have had very useful and substantive discussions today with Prime Minister Rajoy, Bank of Spain Governor Linde and Minister De Guindos. We have discussed the Spanish and European economic situation.

Let me begin by saying that I am well aware how difficult the present moment is for Spain, for Spanish families and for Spanish enterprises. The macro-economic imbalances that built up in the eurozone over the first decade of the single currency were particularly acute in Spain. And the necessary unwinding of those imbalances was always going to be difficult and painful.

The reason I am here today is to take stock with the Spanish authorities of the current economic situation and the work underway to lift Spain out of the current crisis. This work is underway on a number of fronts – financial sector reform and repair; fiscal consolidation to restore sustainability to public finances; and structural reforms to enhance growth and employment. On all of these fronts, the Spanish authorities are in the driving seat. The role of the European Commission is to monitor progress and provide advice and recommendations where appropriate. That is precisely what we are doing and that is the main reason why I am here.

I will briefly outline where I believe we currently stand in each of these three areas.

Firstly, the implementation of the financial sector programme is on track and progressing well. The results of the bank-by-bank stress test published last Friday show that the capital needs of Spain’s banks are below €60 billion, and as such well below the €100 billion maximum made available by the Eurogroup in July for this specific purpose of bank recapitalisation. Over the course of the next two months, recapitalisation and restructuring plans for each bank will be presented to the Commission for approval, with disbursements of funding foreseen for November.

Spain needs a healthy and resilient, responsible and effectively supervised banking sector that can restart the flow of credit to the real economy. That is precisely what this programme is designed to facilitate. And as I said, it is on track.

Secondly, the fiscal consolidation underway needs to continue with determination. In Spain, as in many other parts of Europe, this implies hard choices. But those choices will only get harder if they are postponed.

On 10 July, the Council adopted a revised recommendation for Spain in the context of the Excessive Deficit Procedure. The objectives it set are ambitious but realistic. Compliance with these fiscal targets is essential for Spain to convince investors that its public finances are on a sustainable path. The Commission will analyse carefully the draft budget for 2013, and the other fiscal measures announced over the past three months, and will draw its conclusions in the context of our autumn economic forecasts, which will be published on 7 November.

Thirdly, there must be an unrelenting focus in the coming months on implementing the comprehensive structural reform programme announced by the government last Thursday. This programme builds on the very important progress already made. Implementing it and seeing it through will be critical to boosting economic growth and bringing down the current dramatically high levels of unemployment in Spain.

The programme effectively responds to the EU’s country-specific recommendations for Spain. In many areas, such as transport policy or measures to improve the functioning of the rental market, it goes further. Particularly welcome are steps to liberalise product markets, including professional services, and to reduce the fragmentation in Spain’s internal market.

It will clearly be essential to adopt all of these measures in the timeframe foreseen, maintaining their level of ambition, and to ensure effective implementation of these measures.

I also welcome the plan to assess the impact of the labour market reform adopted earlier this year and to enhance active labour market policies. The Commission has for a long time called for such decisive action to create a more dynamic, but also more inclusive labour market in Spain.

So let me conclude by telling you that I have full confidence in the determination of the Spanish government to take the necessary steps to restore the Spanish economy to health. And that I have full confidence in the resolve of the Spanish people to overcome the current challenges.

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