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04 June 2014

BIS/Linde: The European and Spanish economic situation


Luis M Linde, Governor of the Bank of Spain, spoke on the possibility for a gradual and sustainable recovery in Spain - the outcome of the progress made in correcting the imbalances that had built up and of the structural reforms undertaken.

Following six quarters of negative growth, the euro area economy initiated a mild recovery in 2013 which has since continued. The recovery is essentially being underpinned by the gradual pick-up in domestic demand, after the strong adjustment it underwent during the recession. However, the latest GDP growth figure, for the first quarter of this year, illustrates the still-fragile and uneven nature of this economic improvement in the euro area.

Since the second half of 2013, the Spanish economy has perceptibly been experiencing a recovery, which began with positive, moderate quarter-on-quarter rates of change in GDP as from 2013 Q3 and which has continued in 2014 to date.

This recent improvement in activity rests on a broad set of factors: some, such as the drastic correction of the external imbalance, have been helping underpin production for some time; others, such as the progressive normalisation of the financial environment, are more recent. Here, both the easing of grave uncertainty, which at one point threatened the current configuration of the euro area, and the restoration of confidence in our banking system following the restructuring and recapitalisation drive undertaken, which culminated in January, have proved decisive.

In the more immediate future, the advances made by the Spanish economy augur a firming of the gradual path of recovery, underpinned by greater confidence, a progressive easing in financial tensions and a gradual improvement in the labour market. A crucial role will have to be played here by the re-balancing processes under way in the Spanish economy, especially the redressing of the private sector's financial position and fiscal consolidation. The successful culmination of these processes is pivotal for rooting the recovery in domestic and external confidence and for ensuring the external funding flows that are vital for making sustained medium-term growth possible.

In sum, for the first time after years of crisis, we can discern the possibility of a gradual and sustainable recovery, the outcome of the progress made in correcting the imbalances that we had built up and of the structural reforms undertaken, whose results we are beginning to see. The task is not complete and much work remains to be done, both in Europe and in Spain. Hopefully, however, the progressive perception of the improvement achieved will act as a powerful spur for us to persevere on the road we have taken.

Full speech



© BIS - Bank for International Settlements


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