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Cultura Documentos
April2012
Highlights
Integrated European response to the financial crisis combined with reformsatthenationallevel Strong democratic mandate for structural reform and structural fiscal consolidation Anaggressivetwoprongedapproach: 1.Publicsectorreform:fiscalconsolidationanddiscipline Budgetausteritytowards2013 Strengtheningthestructuralfiscalframework 2.Privatesectorstructuralreform LabourMarketReform FinancialSectorReform PrudentapproachtoFundingandDebtManagement
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MacroeconomicOutlook
Since2011growthprospectshavedeterioratedworldwide National demand will impact heavily on overall growth, partially compensatedby thecontributionofexternaldemand
Macroeconomicscenario (Yearonyeargrowthratesinpercent)
2010
FinalConsumptionExpenditure Privateconsumption Governmentconsumption GrossFixedCapitalFormation 0.6 0.8 0.2 6.3
2011
0.7 0.1 2.2 5.2
QI
0.4 0.4 0.6 4.9
2012(f) QIV
6.2 1.1 3.6 6.2 3.1 1.4 8.0 8.8
NationalDemand*
Exportsofgoodsandservices Importsofgoodsandservices
1.0
13.5 8.9
1.7
9.0 0.1
0.8
13.1 6.0
1.9
8.8 1.3
1.4
9.2 0.9
2.9
5.2 5.9
4.4
3.5 5.1
Externaldemand*
0.9
2.5
1.7
2.7
2.2
3.2
2.7
GDP
Othermacroeconomicvariables
0.1
0.7
0.9
0.8
20.9 1.6 2.6
0.8
21.5 1.6 2.5
0.3
22.9 2.5 2.2
1.7
24.3 1.7 0.9
Unemploymentrate(in%) 20.1 21.6 21.3 UnitLabourcosts 2.6 1.9 2.0 Netlending(+)/borrowing()withRoW(%ofGDP) 4.0 3.4 6.2 Source:MinisteriodeEconomayCompetitividad andNationalStatisticsInstitute. *Contribution to GDPgrowth.
Thedeleveragingprocesswillcontinueinto2012
Nonfinancial firms have continued investing heavily abroad and deleveragingatahighpace The deleveraging process will be a temporary drag on private consumptionexpenditureduring2012
SectoralBalances. NetLending(+)/Borrowing() (PercentofGDP)
8 6 4 2 0 2 4 6 8 10 12 Public 1.3 2.4 Private 1.9 6.4 5.4 5.1 4.4 8 6 4 2 0 2 4 6 8 10 12
2.6
2.7 7.5
4.5 4.7 7.8 10.7 2005 2006 11.5 2007 11.2 2008 2009 9.3 2010 8.5
5.3
2011 2012(f)
Rapidadjustmentintheresidentialconstructionsector
Theadjustmentintheconstructionsector hasbeenespeciallyintense intermsoflabour Nominal price adjustment has been very heterogeneous between Regions,rangingfromdeclinesof35%to17%
15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 2000 2007 2009 2010 Employment(FTE) ResidentialInvestment Source:NationalStatisticsInstitute.
NominalPriceAdjustmentinIreland,UKandSpain (Index2005=100)
11.8%
12.2%
1.
10.2%
3m
120
illio nJ
100
ob s
8.0% 6.9%
80 60 40 20 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2011
Ireland
UK
Spain
Thelabourmarket
Clear sign of duality: hours worked per employee have increased while unemployment rises, mainly in the construction and industry sectors(89%oftotaljoblosses) Wageperhour worked did not react to shedding of labour. Only in 2010and2011itmanagedtostabilise
Unemploymentrateandhoursworkedperemployee
102 101 100 99 98 97 96 95 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 25 20 15 10 5
8% 6% 4% 2% 0% 2% 4% 2001
WagePerHourWorkedofEmployees (Growthrateinpercent,andmovingaverage)
2002
2003
2004
2005
2006
2007
2008
2009
2010
Hoursperemployee(Leftscale,2000=100) Unemploymentrate(Rightscale)
Source:NationalStatisticsInstitute.
Source:NationalStatisticsInstitute. 6
2011
Wagemoderationandlowerpricepassthrough
Since 2009 unit labour costs have contracted by 5.9% due to wage moderation andtheincreaseinproductivity Export prices have moderated their growth rate, despite growing energycosts
NominalUnitLabourCosts (Index2005=100)
120 115 110 105 100 95 2005 2006
UK
ExportPriceIndexes (Index2005=100)
135 130 125 120 115 110 105 100 95 90
2007
Spa i n
2008
2009
2010
Fra nce
2011
Ita l y
2005
2006
2007 UK
2008 Spain
2009 Germany
2010
2011 Italy
Germa ny
Source:Eurostat.
Source:BankofSpain. 7
Deleveraginghasalsoaffectedexportorientation
The gap between exports and imports of goods and services has diminished,postingasurplusinthelastquarterof2011 Spainhas maintainedtherelativesharevisvismainpeercountries duetohigherextensiveandintensivemarginsofSpanishexportingfirms
ExportslessImportsofGoodsandServices (InpercentofGDP)
40% 30% 20% 10% 0% 10% 20% 30% 40% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 8% 6% 4% 2% 0% 2% 4% 6% 8%
ExportsofGoodsandServices (Index2005=100)
140 130 120 110 100 90 80
2005 2006 2007 2008 2009 2010 2011
Exports(Leftscale)
Imports(Leftscale)
Balance(Rightscale)
UK
Spain
Germany
France
Italy
Source:NationalStatisticsInstitute.
Source:Eurostat. 8
TheGovernmentsfiscalpolicy:discipline&sustainability
The deterioration in economic indicators entailed a deviation in the 2011 target deficit:from6%to8.51%ofGDP 2/3 ofthe deviation was attributable to Autonomous Regions The new Government took office in December 2011 and adopted immediate measures byRoyalDecreetocompensateforthe2011deviationinthedeficittarget: 15bn(1.4%ofGDP)
Approvedon31/12/2011
8.9 bn cuts in spending: minimum wage & civil servants wage freeze, 20% reduction in subsidies to political parties and social agents, rationalisation of administrativestructures,nonewpublicemploymentin2012 6 bn in tax increases: temporary increase in Personal Income tax, selective taxrateincreaseonrealestate,oilsubsidiesremoval New Programme against tax evasion under evaluation: 8 bn additional revenueexpected
TheGovernmentsFiscalPolicy:FiscalConsolidationPath
NetLending(+)/Borrowing()oftheGeneralGovernment20112013
InpercentofGDP CentralGovernment AutonomousRegions LocalGovernments SocialSecurityAdministrations 2011 5.1 2.9 0.4 0.1 2012 3.5 1.5 0.3 0.0 2013 2.1 1.1 0.2 0.4
GeneralGovernment
8.5
5.3
3.0
Source:MinisteriodeHaciendayAdministracionesPblicas.
The commitment is to continue with the fiscal consolidation path in accordancewithrealisticandstrictprojections andassumptions FirmcommitmentwithcompromisesagreedatEUlevel Thepublicdeficitobjectivefor2013remainsunaltered Structural Balance commitments will be reinforced. In 2012, the adjustmentinstructuralterms willbearound4.0p.p. ofGDP
11
CentralGovernmentBudgetBillfor2012(I)
The consolidation effort of the Central Government amounts to 2.5% of GDP,approximately27billion.Itsthelargestfiscaladjustmenttohavetaken DraftPresented placeindemocracy 03/04/2012 Reduction in the expenditure of Ministries of 13.4 billion, a 16.9% reductionvs 2011Budget Eliminationofcorporatetaxrebates,taxesontobaccoandthetemporary increaseinPersonalIncometaxadoptedinJanuary2012(12.3billion) Income related measures and 40% of expenditureside measures are in placeandnotsubjecttobemodifiedbythebudgetaryprocess
NetFunding()/Borrowing(+)RequirementsinpercentofGDP 2011 2012 CentralGovernment 5.1 3.5 AutonomousCommunities 2.9 1.5 LocalGovernments 0.4 0.3 SocialSecurityAdministrations 0.1 0.0 Reduction 1.6 1.4 0.1 0.1
MeasuresadoptedintheCentralGovernmentBudget(%ofGDP) 1:IncreaseinIncome 2:Expenditurereduction(excl.Committedexpenses) 3=1+2:FiscalConsolidationEffort 4:IncreaseinCommittedExpenses 5=2+4:TotalExpenditurereduction 6=5+1:TotalAdjustmentinNetBorrowingRequirement 0.8 1.7 2.5 0.9 0.8 1.6
TOTAL
8.5
5.3
3.2
Source:MinisteriodeHaciendayAdministracionesPblicas.
Source:MinisteriodeHaciendayAdministracionesPblicas. 12
CentralGovernmentBudgetBillfor2012(II)
PersonalIncomeTax andCorporateTaxmeasures accountfor77%of totalincomesidemeasures In the expenditure side, most of the reduction stems from capital transfersandcurrenttransfers
Incomesidemeasures (In bn,budgetaryterms)
14 12 10 8 6 4 2 0 12.3 4.1 0.2
TaxDeferral
0.8
Amortisation Scheme
1.1
Financial Expenditure
2.5
Installments
0.8
Foreign Dividends
2.5
SpecialTax
0.4
Stampand DutyTaxes
Income tax
CorporateIncomeTax
OtherTaxes
Total
Currentexpenditures
Capital Expenditures
Source:MinisteriodeHaciendayAdministracionesPblicas.
Source:MinisteriodeHaciendayAdministracionesPblicas. 13
BudgetaryexecutionoftheCentralGov.uptoFeb2012
The cumulative deficit of the Central Government reached 20.7 billion (+49.3%yoy): Expenditure up by 27% yoy due to frontloading in current transfers among Public Administrations with zero net effect on General Governmentdeficit Income down by 5.7% yoy, pending full effect on tax collection of incomesidemeasures
0% 1% 2% 3% 4% 5% 6% Aug Apr Oct Nov Feb Sep Jun May Mar Dec Jan Jul 2010 2011 2012 1.94% 2.9%
5.5%
Source:IGAE.
Source:IGAE.
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DraftBudgetaryStabilityReform
Guaranteeing debt sustainability at all levels of government; 60% Draftproposedby debttoGDPtargetandzerostructuraldeficit by2020 Govt.on27/01/2012 Exantebudgetarycontrolvia: Tobeapprovedin
i. Expenditureceilings ii. ExpendituregrowthcappedbelownominalGDP
April2012
Reinforced monitoring system via quarterly reports of subnational unitsinNationalAccountingterms Expostauditing andsanctioningsystem
BudgetaryandFinancial Sustainability GENERALRULES: Budgetarybalanceorsurplus Nostructuraldeficits Expendituregrowthcapped belowheadlineGDPgrowth Expenditureceilingforalllevels ofGovernment Expenditureceilingsalso introducedattheRegionaland LocalGovernmentlevels Budgetsurplusestobededicated todebtreduction Correctionofdeficitsanddebt thresholds Earlywarningsystem adoption ofcorrectivemeasures Establishmentofsanctionsincase ofnoncompliance Reportingintermssimilartothe onesunderEDP Scopeofinformationtobe publishedbroadened BudgetaryPlanningandControl ReinforcementofBudgetary control PreventiveandCorrectiveArm AffectsalllevelsofGovernment: Central,Regional,LocalandSocial Security TransparencyandDisclosure Surveillanceatallstagesof budgetaryapprovalprocess
Source:MinisteriodeEconomayCompetitividad.
15
Additionalrelatedmeasuresadopted
FundforthePaymenttoSuppliers FFPP,upto35bn Approved 13/04/2012 Settlingtheaccountspayableoflocalgovernments Commercial debt is transformed into financial debt in favorable terms liabilitysideoftheFFPP Thetransactionwillinjectliquidityintotherealeconomy Designed for local corporations, but it may be extended for RegionalGovernments Approved ICOCCAA, 10bn,upto15bn 03/02/2012 Designed for regional governments. Two tranches: i) paying maturing financial debt ii) settling commercial debt of Regional Governments ProvidesliquiditytoRegionalGovernments Regional Governments that make use of the line, voluntarily acceptbeingsubjecttostrictfinancialandfiscalconditionality Transitorypartofpermanentsolution 16
17
Financialsectorreform:InitialSteps
Despitetheprovisioningalreadyconducted (approx.105bn,9.8%of GDP) the uncertainty associated with the valuation of land and real estateassetsrequiresfurtherconsolidationandprovisioning
2009 Creation of FROB
Liquidation of nonviable entities Support restructuring process of viableentities
2011 Regulatory Reform of the Savings Banks Law to Strenghthen CapitalBase and Confidence
RoyalDecree RoyalDecree Lawforthe Lawforthe Reformofthe Reformofthe FinancialSector FinancialSector Approvedby Approvedby Parliament Parliament 16/02/2012 16/02/2012
13.2% reduction in branches and 10.5% in staff sinceend2008 Numberofsavingsbanksdecreasedfrom45to15 Over90%oftheassetsmanagedbysavingsbanks transferredtocommercialbanks Improved Governance structure by means of new legislation
Quarterly reporting on real estate exposures and impaired assetssinceJanuary2011 Core capital equivalent requirements increased to 8%/10%. Process complete in September2011
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Financialsectorreform
RoyalDecreeLawfortheReformoftheFinancialSector
Incentivesto merge
Deadlines Main31st Dec 2012 Incaseofmerger: integrationplans submittedby31st May2012;If accepted,31st Dec 2013
Increaseinprovisions&capitalbuffersonrealestateexposures
Strongbalancesheetrestructuring duetosignificantpriceadjustment Implicitdeclineinthevalue ofcollateralconsideringtheaverageLTVof theportfolios:87%forlandand82%forhousingunderdevelopment
Provisions/buffertobeaddedtoexistingcoverage
Capitaladdon SpecificProvisions
(againstprofits) (againstretained earnings,capital increasesor conversionof hybrids)
GenericProvisions
(againstprofits)
Land (31%>80%) (73bn) Housingunder Problematic development Assets (27%>60%) (175bn) (15bn) OtherAssets (25%>35%) (87bn) Non Construction Problematic andrealestate Assets developers (148bn) normalportfolio
31%>60%
20%
27%>50%
15%
25%>35%
80% 20% 29% 31% 31% Land 23% 27% 27% Ongoing Developements 65% 15%
25%
FinishedProperties andHousing
7% 10bn
Source:MinisteriodeEconomayCompetitividad.
20
Thereformwillspurasecondwaveofintegration
Implementation calendar full on track. Milestones: March 31st: all institutions presented cleanupplans April 20th: deadline for the Bank of Spaintoassess all plans. if cleanup plans are not approved: banks will be required further measures, including the obligation to present a merger proposal May 31st: deadline for mergers proposals June 30th: mergers approved by the MinistryofEconomy December 31st 2012: end of process. Compliance with all the cleanup measures Strict conditionality of new integration processes Submission of integration plan to the MinistryofEconomybyMay30th tobefully operativeasofJanuary1st 2013 Resulting entity with balance sheet 20% higher thanlargestparticipatinginstitution Improvementsincorporategovernance Reduction of exposure to RRE and construction Increaseincredittoproductiveactivities butalsorenderingsomeadvantages Deadline forprovisioningandcapitalbuffer increaseextendedoneadditionalyear Writedown of impaired assets against equity allowed Extension of FROBs margin of action allowingforacquisitionofCoCos
21
Thelabourmarketreform:completeoverhauloftheregulatoryframework
MAINOBJECTIVES
Creatingeffectivemechanismsfor Improvingefficiencyandreducelabour internalflexibility;adjustinginternal marketduality wagebargaining,reformthecollective bargainingsystem Enhancingyoungworkers employability Incentivisingpermanent contracts
MEASURES
A)Reductionofdismissalcosts A.1)Clarificationofobjectivecauses A)Newtypesofcontracts forfairdismissal A.1)Permanentcontract A)Firmlevelwagebargaining A)TemporaryEmployment A.2)Unfairdismissal:severancepay directedatSMEswith50or 45daysupto42monthsto33days prevailsovernational,regionalor Agenciesauthorisedtoactas fewerworkersandself sectoragreements privateagencies peryearworkedupto24months employed A.3)Fairdismissal:severancepayof A.2)Parttimecontract 20daysperyear,upto12months A.4)Eliminationofproceduralwages B)Newbonusesforhiringof B)Improvedprofessional youngworkersandlongterm training;individualrightto unemployedandfor professionaltraining conversionoftemporary contracts
B)Extinguishedcollective agreementslimitedto2years
C)Enhancingadaptationto economicstancevia: C)PublicAdministrationsallowedto C.1)Functionalmobilityofworkers C)Internshipcontractfor workersunder30 C.2)Workingtimereduction dismissbasedonobjectivecauses C.3)Eliminationofredtapefor reductionofhoursworked
Source:Government ofSpain.
22
Morereforms:anongoingagenda
TransformationandsimplificationoftheNationalRegulatory Bodies, avoiding overlapping competences and fostering professionalismandlesspoliticalinfluence
ApprovedbyGovt.on 24/02/2012
Newmeasureswillbeadoptedtoincreasethecompetitivenessand flexibility oftheSpanisheconomy,andtostreamlinecosts. 10 bn savings in reforms aimed at improving the efficiency in the managementofthemainpublicservicessuchashealthandeducation Reduction of red tape and bureaucratic procedures, and removal of openinglicensesfornewSMEs Reinforcement of the internal market at national level, seeking a convergencetowardsacommonregulatoryframeworkinall17regions AcentralisedNationalAgencyfordebtissuance MeasurestobepresentedshortlyinSpainsNationalReform Programmefor2012
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Mainfeaturesoffundingstrategy
StrongcommitmentwiththePublicDebtmarket Rigorousadherencetoauctioncalendar Cateringtomarketdemand,atmarketrates 47%ofmediumandlongtermissuancealreadydone Manageable cost of issuance and debt outstanding, stable durationandaveragelife Prudentmanagementofrefinancingrisk
25
ProjectedDebttoGDPdynamicsin2012
The projected Debt/GDP ration at end 2012 increases by 11.3%, reaching 79.8% of GDP 6.0 p.p. of GDP are due to accounting issues: transformation of commercial debt from regions and local governments to public debt (FFPP), ICO line for regions (ICO CCAA),securitisationoftheelectricdeficit(FADE),imputation ofloanstoUEcountries underfinancialassistance,reductionofthedenominator,amongotherelements Inanycase,thelevelwillbebelowtheEMUaverage(90.4%)
130 110 90 70 50 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
DebttoGDPratioofGeneralGovernment (%ofGDP,EDP)
UK
Spain
Germany
France
Italy
Total
11.3
26
Source:Eurostat andOECD.
FundingProgrammefor2012
InlinewithinitialTreasuryestimates The bulk of net issuance carried out through medium and longterm issuanceinordertocontainrefinancingrisk Until April 4th the Spanish Treasury has already funded 40.4 billion (47.0%) of the total expected amount of medium and longterm gross issuance of 86 billion euro, well ahead of its funding programme for the year FundingProgramme.20102012
(Grossissuance,mediumandlongtermbonds,in billionEuro,*uptoApril4th 2012) 100
97.0 94.5 93.8 95.6
75
50 25 0
85.9
2010 Executed
2011 Executed
2010Jan Projection
2011Jan Projection
2012Apr Projection
2010
2011
2012
2012Apr Execution*
40.4
Mainfeaturesoftheexecutionfor2012
Despite volatility in European Public Debt markets, average cost at issuance andaverage costofdebtoutstandingremainsubdued Stabledurationandaveragelife ofdebtportfolio.
Costofdebtoutstandingandcostatissuance (AsofMarch31st,inpercent)
4.07 4.02 3.90 3.00 2.56
DurationandAverageLife (AsofMarch31st,inpercent)
6.55 6.37 4.32 4.22
3.69
2012*
AveragecostofDebtoutstanding
Averagecostatissuance
Duration
Averagelife
Source:SecretaraGeneraldelTesoroyPolticaFinanciera.
Source:SecretaraGeneraldelTesoroyPolticaFinanciera. 28
2012*
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2011
Changestoinvestorbasein2012Q1
Increaseinnationalinvestorparticipationin2012linkedtoincreased issuance during the first months of the year and liquidity measures adopted coupled with a reduction in the percentage of nonresidents holdings
Total unstripped Government debt by Holder (Registered. In percent of total portfolio)
60% 50% 40% 30% 20% 10% 0%
Credit Institutions Pension, Households& Spanish Insuranceand nonfinancials official MutualFunds institutions Nonresidents
2009
2010
2011
2012
Source: Secretara General del Tesoro y Poltica Financiera. * As of February 28th 2011.
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TreasuryManagementSystem
Redemption dates of medium and longterm bonds (principal and coupons)matchthebiggestinflows oftaxrevenues Excessliquidityislent inthemoneymarketeachmonththroughrepo auctions Liquiditylineswithbanks provideanadditionalbuffer
25 20 15 10 5 0 150 100 50 0
250 200
Aug
Aug
Apr
Oct
Apr
Nov
Oct
Feb
Sep
Jun
Nov
Feb
Dec
Sep
Jun
May
Letras
Bonos
Obligaciones
ForeignCurrency&Other
Source:SecretaraGeneraldelTesoroyPolticaFinanciera.
Source:IGAE.
May
Mar
Mar
Dec
Jan
Jul
Jan
Jul
30
MoreandupdatedinformationontheSpanisheconomy
http://www.thespanisheconomy.com
For data sources, please click links below each figure or table
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Thankyouforyourattention
igoFernndez deMesa GeneralSecretaryoftheTreasuryandFinancialPolicy SecretariaTesoro@tesoro.mineco.es IgnacioFernndezPalomero DeputyDirectorforFundingandDebtManagement ifernandez@tesoro.mineco.es RosaMoral rmmoral@tesoro.mineco.es LeandroNavarro lnavarro@tesoro.mineco.es PablodeRamnLaca pramonlaca@tesoro.mineco.es IgnacioVicente ivicente@tesoro.mineco.es Roco Chico mrchico@tesoro.mineco.es CarlaDaz cdiaza@tesoro.mineco.es Formoreinformationpleasecontact: Phone:34912099529/30/31/32 Fax:34912099710 Reuters:TESORO Bloomberg:TESO Internet:www.tesoro.es Formoreinformationonrecentdevelopments: www.thespanisheconomy.com
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