In its December Economic and Financial Report, the AEB estimates that, in a more favourable international context, the outlook for the Spanish economy points to growth in 2014 close to 1%, combining a more sustained momentum in domestic demand with the contribution of the external sector, although the latter will be less intense. The activation of multipliers will initiate a new expansionary cycle with the capacity to generate net employment, which will gain greater intensity in subsequent years. This stronger momentum in activity will, in turn, facilitate the consolidation of public finances, the deleveraging of the private sector and the flow of credit.
This improvement is underpinned by the correction of some previously accumulated imbalances, the structural reforms implemented, the competitiveness gains achieved through the reduction in relative unit labour costs (internal devaluation), and the easing of tensions in financial markets in the Eurozone. Also noteworthy is the “clean exit” from the bank bailout after fulfilling all the commitments set out in the Memorandum of Understanding (MoU) and after drawing only 40% of the credit line initially made available, which has made it possible to clean up balance sheets and recapitalise the weakest institutions in our financial system.
Important measures have also been adopted within the European institutions that have helped to ease tensions in financial markets and to ensure a more stable macroeconomic framework. The ECB, which in November cut the policy rate by a further 25 basis points—bringing it to the historic low of 0.25%—has continued to ensure an unlimited supply of liquidity, has extended the duration of the asset purchase programme and has confirmed its intention to maintain low rates and an accommodative policy for an extended period. For its part, the European Union and the Eurogroup have incorporated new governance mechanisms aimed at ensuring macroeconomic stability, such as the Macroeconomic Imbalance Procedure and the prior assessment before the approval of national budgets.
For the AEB, it is particularly important to complete the Banking Union project, initiated with the Single Supervisory Mechanism, to be followed by a Single Resolution Mechanism and Fund and a Common Deposit Guarantee Fund. All these elements are essential to break the vicious circle between sovereign and banking debt, eliminate market fragmentation and ensure the transmission of the common monetary policy.
In any case, the AEB considers that, to consolidate and strengthen growth potential, it will be crucial to extend the institutional and structural reforms aimed at optimising the allocation of resources. To this end, it is essential to restore public finances in line with our commitments, undertake tax reform and reform of the Public Administrations under strict criteria of austerity and efficiency, complete the labour reform initiated in 2012, and ensure effective competition in factor, goods and services markets.
