Post on 06-Apr-2018
8/3/2019 111101 KoS Presentation
1/37
Upda t e on Po l icy m easu r es t ow ards a
sust a i ned and ba lanced g r ow t h p at h
November 2011
8/3/2019 111101 KoS Presentation
2/37
1
The reforms and macroeconomic developments in 2010 and 2011 are layingthe foundations of a sound and rebalanced growth for the Spanish economy
Two main questions:
Are reforms during the last 2 years tackling the underlying problems?
Existing evidence on fiscal consolidation, financial system reform, labourmarket reform, business environment says so
Still some existing challenges have fostered new policies demonstrating theabsence of reform fatigue and willingness to further underpin fiscal
sustainability and labour market reforms to foster growth
Can Spain grow? Spain has a diversified and competitive economy withenough resources to enhance growth in the future
Highlights
8/3/2019 111101 KoS Presentation
3/37
Reform strategy: fiscal, financial and factor markets
Structural and economic rebalancing
Funding and Debt Management
2
8/3/2019 111101 KoS Presentation
4/37 3
Fiscal consolidation (I )
Source: Stability Programme Update 2011-2014.In brackets: net of internal transfers among Public Administration units.
Approved 14/ 07/ 2011
Approved 27/ 09/ 2011
Objectives regardless of macroeconomic performance
Short-term: fiscal target of 6% deficit in 2011
Establishing a more transparent framework
Ensuring long-term fiscal stability
Instruments
On-going commitment to deficit reduction
Constitutional change limiting structural deficit and debt
New spending rule: public spending linked to economic growth Pension reform: higher age of retirement, greater relationship
between contribution and pension and sustainability factor Approved 21/ 07/ 2011
General Government commitments by unit (% of GDP)2009 2011 2012 2013 2014
Commitment ExecutionGeneral Government
Budget Balance-11.1 -9.3 -9.3 -6.0 -4.4 -3.0 -2.1
Central Government -9.3 -5.9 -5.0 -2.3 -3.2 -2.1 -1.5
(-6.7) (-5.7) (-4.8)
Autonomous Communities -2.0 -3.1 -3.4 -3.3 -1.3 -1.1 -1.0
(-2.4) (-2.8) (-1.3)
Local Governments -0.6 -0.6 -0.6 -0.8 -0.3 -0.2 0.0
(-0.4) (-0.5) (-0.3)
Social Security 0.8 0.2 -0.2 0.4 0.4 0.4 0.4General Government
Debt over GDP53.3 62.8 60.4 67.3 68.5 69.3 68.9
2010
http://ec.europa.eu/economy_finance/sgp/pdf/20_scps/2011/01_programme/es_2011-04-29_sp_en.pdfhttp://ec.europa.eu/economy_finance/sgp/pdf/20_scps/2011/01_programme/es_2011-04-29_sp_en.pdf8/3/2019 111101 KoS Presentation
5/37
-9.5%
-5.5%
-3.4%-4.6%
-10%
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2009
2010
2011
Fiscal consolidation (I I)
4
The Central Government up to September 2011 (EDP) deliverson its commitment
The cumulative deficit stands at 37.0 billion (-16.8 % yoy)
Additional measures:
- Changes in corporate tax, pharmaceuticals and wealth tax:Saving 2,980 M in 2011, 3,880 M in 2012, 3,800 in 2013
- Deposit Guarantee Fund privately funded to absorb FROB
losses derived from the recapitalization processDeficit(-)/ Surplus(+) o f the Central Government
excl. Autonomous institutions (EDP) (% of GDP)
Approved 19/ 08/ 2011and 16/ 09/2011
Source: IGAE. Net of internal transfers.Target of Central Government for 2011 (-4.8%).Autonomous Institutions add 0.2% deficit, as in 2010.
Approved 21/ 10/ 2011
http://www.igae.pap.meh.es/sitios/igae/es-ES/InformesCuentas/Contabilidad/Documents/Estado_M/2011%20mensual/Estado_2011-10_B_2008.pdfhttp://www.igae.pap.meh.es/sitios/igae/es-ES/InformesCuentas/Contabilidad/Documents/Estado_M/2011%20mensual/Estado_2011-10_B_2008.pdfhttp://www.igae.pap.meh.es/sitios/igae/es-ES/InformesCuentas/Contabilidad/Documents/Estado_M/2011%20mensual/Estado_2011-10_B_2008.pdf8/3/2019 111101 KoS Presentation
6/37 5
Fiscal consolidation (I II)Autonomous Communities
Execution: Deficit of 1.2% of GDP up to Q2-2011. RegionalGovernments exceeding a 0.75% deficit under evaluation
Monitoring: Authorisation for new issuance extended in threestages conditional on compliance with targets
Ongoing Measures:
Homogeneous reporting of approved regional rebalancingplans
Future reporting of budget execution on National Accountbasis
Approval of expenditure rules consistent with the approved
on July 1st for the Central government
Constitutional change to limit structural deficitCouncil agreements
27/ 07/ 2011
Published 18/ 10/2011
8/3/2019 111101 KoS Presentation
7/37
Financial sector reform (I)Restructuring:
13.2% reduction in branches and 10.5% staff since 2008
The number of savings banks has decreased from 45 to 15 in less than two years
Corporate governance:
Over 90% of the assets managed by savings banks transferred to commercial banks
Governance structure improved by means of a Law
Transparency:
93% of the financial sector in July 2011 stress tests.
5 institutions below 5% of CORE TIER 1
No Spanish institution requires additional capital on top of the existingcommitments as they count on enough paid-up mitigating instruments
Quarterly reporting on exposure and impaired assets since January 2011
6
8/3/2019 111101 KoS Presentation
8/37
Financial sector reform (I I)Solvency:
February 2011: solvency requirements increased to 8%/10%
March 2011: Identification of capital requirements by the Bank of Spain to reach these
new thresholds: 13 institutions which amounted to around 17 billion July 2011: 4 banks and 2 savings banks had already met their capital needs (4.5bn)through private funds. One saving bank has done so through public funds (2.8bn)
Three savings banks already listed (accounting for 50% savings banks' assets) raised
7
5.2b capital
September 2011: End of capitalisation process. 9 groups private capitalisation (7.0bn), 4groups FROB (7.6bn).
Source: Bank of Spain and CNMV.
Capital
Capital
ratio
required
Capital needs
( mn)Recapitalisation alternative Status
Bankinter 2,144 8.0 333 Instruments qualified as capital
Bankpyme 24 8.0 8 Integration with another institution
Barclays Bank, S.A. 1,005 8.0 552 Parent company
Deutsche Bank, S.A.E. 729 8.0 182 Parent company
Bankia 14,125 10.0--->8.0 5,775--->1,795 Stock market listing, July 2011
Banca Cvica 3,687 10.0--->8.0 847--->0 Stock market listing, July 2011
Caja Espaa 2,062 10.0 463 Integration with another institution
Catalunya-Caixa 3,148 10.0 1,718 FROB
Grupo BMN 3,343 10.0 637 Private investors
Novacaixagalicia 2,851 10.0 2,622 FROB Unimm 1,150 10.0 568 FROB
CAM 10.0 2,800 FROB
Liberbank 10.0 519 Private investors
http://www.bde.es/webbde/es/secciones/prensa/info_interes/notareformacajas210711.pdfhttp://www.bde.es/webbde/es/secciones/prensa/info_interes/notareformacajas210711.pdf8/3/2019 111101 KoS Presentation
9/37
The first challenge of the Spanish labour market is related to the distribution of workamong workers. Spain does not have a problem on the overall labour utilization
Measures to increase flexibility and reducing the Spanish traditional highresponsiveness of employment to negative activity shocks
Labour market reform (I)
8
Unemployment and labour utilization
Unemployment
Change vs
2003-Q1
(in p.p.)
Labour
utilization
Change vs
2003-Q1
(in p.p.)
Germany 6.8% -3.1 51.7% 2.4
Italy 8.7% -0.5 52.9% -1.5
France 9.6% 1.0 46.4% -0.7
Ireland 14.2% 9.5 52.3% -8.0
Spain 21.4% 9.4 48.3% -2.5
Source: Eurostat.
Note: Quarterly potential hours are defined as 13 weeksworking 40 hours/week.
Changes in unemployment and labour potential
(Quarterly hours worked/potential hours of pop 15-64)
Hiring and dismisals (Y ear-on-year grow th rates)
May June JulyAvg
2011
Objective 16.7 17.2 18.5 23.9Disciplinary 66.6 67.1 65.7 60.6Other* 16.8 15.7 15.8 15.4
Other 96.0 97.4 90.5 75.2German model 4.0 2.6 9.5 24.8
2009 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1
Collective
agreements**2.7 1.5 1.3 1.3 1.3 3.0
Real wage 3.5 0.9 0.2 -1.8 -2.5 -2.5Real labour cost 3.8 0.0 -0.4 -2.2 -2.8 -2.7Modification
collective
a reements( % w o r k e r s w i t h
a g r e e m e n t )
Pre-reform period
Dismissals(% over firings)
Post-reform period
Collective reestructuring
processes (% over total)
Wage developments
Avg rest 2010
20.565.114.4
75.224.8
8%
Some data on labour market reform
Source: Ministerio de Economa y Hacienda.
http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database8/3/2019 111101 KoS Presentation
10/37
Hiring:
Promotion Contrato de Fomento
Improved definition of causes of fair dismissal
Lower severance costs for employers at the moment of dismissal German Model: incentivises working-day reduction instead ofdismissal or suspension.
Internal flexibility: facilitates opting out from higher-levelcollective agreements if the company is under economic stress.
Training contract for young people
Elimination for next 2 years any limitation to roll over temporarycontracts
Collective bargaining:
Incentives for firm-level collective agreements
Incentives for renegotiating new collective agreements before theexpiration of the previous agreement
Labour market reform (II)
9
Approved 19/ 09/ 2010
Approved 22/ 06/ 2011
Approved 26/ 08/ 2011
8/3/2019 111101 KoS Presentation
11/37
10
Labour market reform (III) Unemployment rate is high (21.5%) mostly due to construction joblosses. Thus, the second challenge is to reallocate 2M workers
Even in the crisis trough high unemployment-employment flows: Quarter-to-quarter transition unemployment-employment 22%
25% for unemployed previously working in construction
Active labour market policies should enhance the reallocation:
Incentives part time hiring Personalised career advice Introduction of an unemployment assistance grant, conditional
upon training courses once unemployment benefit has run out Creation of private employment agencies
Approved 11/ 02/ 2011
8/3/2019 111101 KoS Presentation
12/37
11
Product market reformsSMEs:
Business angels: Exemptions on capital gains for entrepreneurialprojects up to 25,000
Taxation: Reduction of the corporate tax rate for SMEs, 20%-25%depending on their size
Liquidity: Payments to suppliers by municipalities have beenfacilitated. An ICO line has been set up to pay suppliers directly, with
the guarantee provided by local entities' future revenues
Enterprise incorporation: maximum time limit of five days for morethan 80% of companies
Bankruptcy Law: facilitates the viability of companies undergoingdifficulties through agreements with creditors
Extension of the free amortisation tax scheme for newinvestments
VAT for housing purchase reduced temporarily to 4% from 8%
Approved 03/ 12/ 10
and 07/ 07/11
Approved 23/ 08/ 2011
8/3/2019 111101 KoS Presentation
13/37
Airports Lotteries Telecommunications
Separation of airportoperation and traffic control
(Completed in February 2011)
New gambling law
Separation of regulationand operation
Regulation of on-linegambling
(Approved in May 2011)
Introduction of technologicalneutrality in the usage ofspectrum
Reallocation of the TDTextra-spectrum to telephone
services
Major airports concessionedto private operators
Postponed
Privatisation of 30% of theNational Lottery
Postponed
Spectrum auctionddddddddddd
Jul-Sep 2011
Privatisation of up to 49% ofthe National Airport System
1st quarter 2012
Expected revenues (in bn):
3-4
Expected revenues (in bn):
7-9
Expected revenues (in bn):
1.8-2.0
12
Sector restructuring and P rivatisation underway
8/3/2019 111101 KoS Presentation
14/37
Reform strategy: fiscal, financial and factor markets
Structural and economic rebalancing
Funding and Debt Management
13
8/3/2019 111101 KoS Presentation
15/37
0
100200
300
400
500
600
700800
2007
2008
2009
2010
2011
2012
2013
2014
Built for sale finished homes
Started homesNew homes stock
(Thousand units)
9.4%
11.2%
13.8%
10.4%9.3%
4.7%5.8%
9.2%
6.1%
4.4%
-1%
1%
3%
5%7%
9%
11%
13%
15%
1995 2000 2007 2009 2010
Residential Investment Employment (FTE)
14
Rapid downsizing of the residential construction sector Without the adjustment of construction the Spanish economy grew 1.9% y-o-y in 2011
Residential investment accounted for 4.4% of GDP in 1995 and it increased to 9.3% by2006. In 2011 this ratio is already below the 1995 level of 4.4%
Stock of unsold houses (estimated at 725,000 in 2010) will continue to shrink in 2011
Source: Ministerio de Economa y Hacienda.
Relat ive size of the construction sector(employment over total employment and residential
investment over GDP)
Source:
Housing: units started and finished
INE.
http://www.ine.es/jaxiBD/menu.do?L=1&divi=CNTR&his=0&type=dbhttp://www.ine.es/jaxiBD/menu.do?L=1&divi=CNTR&his=0&type=db8/3/2019 111101 KoS Presentation
16/37
15
Housing stock is shrinking and prices are adjusting A gradual reduction in the stock of unsold houses and trend housing demand (approx.350.000 units), will normalise the sectors macroeconomic impact
The adjustment in housing prices is more intense in the Mediterranean coastline as
well as in Madrid and its surroundings
Real price adjustment of used houses per Province(From peak in each Province to 2011-Q3 in percent)
Unoccupied housing stock per Province(2010, in percent of total stock in each Province)
Source: Ministerio de Fomento.Sources: Ministerio de Fomento.
Average
>
-30
-
-25
-2
0
-15
-10
-23.9
>
-
--30
-25
-2
0
-15
-10
0
Average
2.7
>
5
5
4
3
2
1
0
Average
2.7
>
5
5
4
3
2
1
0
http://www.fomento.gob.es/NR/rdonlyres/AEDC71E9-13C6-42A6-A4A1-D30E90B9EAB4/99219/ESV_09.pdfhttp://www.fomento.gob.es/BE2/sedal/35102000.XLShttp://www.fomento.gob.es/BE2/sedal/35102000.XLShttp://www.fomento.gob.es/NR/rdonlyres/AEDC71E9-13C6-42A6-A4A1-D30E90B9EAB4/99219/ESV_09.pdf8/3/2019 111101 KoS Presentation
17/37
-4.4-3.0
1.80.8
1.9
-4.5
2.4
-0.1
-11.2
-6.0
-9.3-7.8
-10.7-11.5
-4.7
6.45.4
2.6
-12
-10
-8
-6
-4
-2
0
2
4
6
8
2005 2006 2007 2008 2009 2010 2011f 2012f 2013f
Public Sector Balance Private Sector Balance
-6.9
-8.8
-10.7
-7.5
-1.7
0.61.0
6.9
3.8
-2.7-1.7
-2.6
-12
-10
-8
-6
-4
-2
0
2
4
68
2005 2006 2007 2008 2009 2010
Non-financial firms Households
Intense adjustment of households and non-financial firms High leverage was concentrated in real estate and construction
Non-financial firms have also invested heavily abroad, seizing opportunities of globalmarkets
Deleveraging process in households is compatible with moderate consumption growth
Credit growth will gradually approach nominal GDP growth
Source:
16
INE and Ministerio de Economa y Hacienda.
Sectoral balancesNet Lending(+)/ Borrow ing(-)
(% of GDP)
Balances of Households and Non-financial firmsNet Lending(+)/ Borrow ing(-)
(% of GDP)
Source: INE.
http://www.ine.es/daco/daco42/ctnfsi/dacoinst.htmhttp://www.meh.es/Documentacion/Publico/GabineteMinistro/Varios/29-04-11_Programa_Estabilidad_Espana_2011-2014.pdfhttp://www.ine.es/daco/daco42/ctnfsi/dacoinst.htmhttp://www.meh.es/Documentacion/Publico/GabineteMinistro/Varios/29-04-11_Programa_Estabilidad_Espana_2011-2014.pdfhttp://www.ine.es/daco/daco42/ctnfsi/dacoinst.htmhttp://www.ine.es/daco/daco42/ctnfsi/dacoinst.htm8/3/2019 111101 KoS Presentation
18/37
80
90
100
110
120
130
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Germany Ireland Spain
Italy France
80
90
100
110
120
130
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Germany Ireland Spain
Italy France
ULC Indexes relative to the Euro Area(Index 2000=100)
Source:
Recent trends in price competitiveness Between 2000 and 2008, Spain faced an increase in labour costs relative to itsEuropean peers
Price competitiveness has been improving due to the rebalancing and structural
adjustment of the Spanish economy
Eurostat.
Export price indexes relative to the Euro Area(Index 2000=100)
Source: Eurostat.
17
http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database8/3/2019 111101 KoS Presentation
19/37
-30
-25
-20
-15
-10
-5
0
5
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-2.9
-10.8-15
-10
-5
0
5
10
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Germany Ireland Spain
Italy France
are bolstering exports The net borrowing of 11.4% of GDP in 2008-Q1 has shrunk to 2.9% in 2011-Q2, partlyattributed to the adjustment in the residential real estate sector
The current account deficit is adjusting due to the strong export performance. Exports
are reacting to the downward pressure on domestic prices and labour cost moderation
Trade balance w ith respect to the EU-27(January to August of each year, in bn)
Source: Ministerio de Economa y Hacienda.
18
Source: Eurostat.
Current Account Deficit(Seasonally and calendar adjusted, % of GDP)
http://serviciosweb.meh.es/apps/dgpe/BDSICE/Busquedas/busquedas.aspxhttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://serviciosweb.meh.es/apps/dgpe/BDSICE/Busquedas/busquedas.aspx8/3/2019 111101 KoS Presentation
20/37
Spanish firms are competitive in a variety of sectors
Source: World Trade Organisation.
Share in world merchandise exports by product
Resilience of market share in world merchandise and of service exports other thantransportation and tourism-related services
Spanish exports are entering in new emerging markets: in 2009 (1999) 78.8%
(82.5%) went to OECD and 56.7% (60.2%) to the Euro Area
Source: World Trade Organisation.
19
Share in world exports of commercial services
0%
1%
2%
3%
4%
5%
6%
Agricultur
al
products
Fuelsand
mining
produc
ts
Manufactures
Ironandste
el
Chemica
ls
Machine
ry
Automotive
products
Textiles
Clothin
g
Other
manufactures
2000 2005 2010
0%1%2%3%4%5%6%7%
8%
Trav
el
Construction
Personal,
culturaland
recreation
al
Otherbusine
ss
services
Computerand
information
services
Communications
services
Transportation
Financial
services
Insurance
service
s
Royaltiesand
licensefee
s
2000 2005 2010
http://www.wto.org/english/res_e/statis_e/its2010_e/its10_merch_trade_product_e.htmhttp://www.wto.org/english/res_e/statis_e/its2010_e/its10_merch_trade_product_e.htmhttp://www.wto.org/english/res_e/statis_e/its2010_e/its10_merch_trade_product_e.htmhttp://www.wto.org/english/res_e/statis_e/its2010_e/its10_merch_trade_product_e.htm8/3/2019 111101 KoS Presentation
21/37
95
100105
110
115
120
125
130
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Germany Ireland
Spain FranceItal UK
During the last decade Spain has increased its labour potential enormously
Low share of workers above 50 years
Active population has raised significantly Educational attainment of the labour force has also increased significantly
20
while growth potential remains high: employment
Source: Eurostat.
Growth of active population(Index 2000-Q1=100)
Source: Eurostat.
Share of workers below 50 years 2011-Q2
66%
67%
68%
69%
70%
71%
72%
73%
74%75%
76%
Germany United
Kingdom
Italy France Ireland Spain
http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database8/3/2019 111101 KoS Presentation
22/37
4%
6%8%
10%
12%
14%
16%
18%20%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Germany Ireland
Spain FranceItal United Kin dom
During the last decade Spain has increased its capital labour ratio considerably withprivate productive investment is well above other European countries
Productivity measured by hours grew at a similar pace than the Euro Area. Recently catching up in levels and the change is structural since construction decreaseits weight in the economy
21
Growth based on capital and productivity
Private productive investment excl.
housing investment
(% GDP 2010)
Source: Eurostat.
90
95
100
105
110
115
120
125
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Germany Ireland Spain
France Italy UK
Source: Eurostat.
Productivity grow th of selectedEuropean Union countries
(Real labour productivity per hour)
http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_databasehttp://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/search_database8/3/2019 111101 KoS Presentation
23/37
22
A balanced and sustained growth path for the future
Sources: Ministerio de Economa y Hacienda.
* Potential output.
The combination of structural reforms and the correction of macroeconomicimbalances with the existence of a competitive body of firms and high labour potentialwill sustain a balanced growth path in the future
Recent macroeconomic developments show the structural change in the economy Despite lower growth for 2011, projections for Spain in the medium-run are in line orabove those for the Euro Area
Source: National Statistics Institute, Spain.
Comparison of grow th forecasts
IMF OECD EC IMF OECD EC
2011 0.8 0.9 0.8 1.6 2.0 1.62012 1.1 1.6 1.5 1.1 2.0 1.8
2013 1.8 1.52014 1.9 1.72015 1.9 1.72016 1.9 1.7
Spain Euro Area
Macroeconomic evolution(Growth rates, volume measures)
Q1 Q2
Final Consumption Expenditure 0.7 0.4 0.7 -0.2- Private consumption 0.2 0.9 -0.1 0.6
- Public Consumption -0.7 -1.3 2.9 -2.4
Gross Fixed Capital Formation -7.6 -1.3 -1.6 -1.0- Equipment 1.8 3.2 0.0 0.3- Construction -11.1 -4.7 -2.8 -0.9
- Other products -8.2 -0.6 -3.5
National demand* -1.2 0.0 -0.9 -2.4Exports of goods and services 10.3 8.3 5.8 -1.9
Imports of goods and services 5.4 3.0 5.0 -3.7
External demand* 1.1 1.3 1.3 2.6
GDP -0.1 1.3 0.4 0.2
20102011
2011 (f)
year-on-year quarter-on-quarter
http://www.thespanisheconomy.com/SiteCollectionDocuments/en-gb/Economic%20Outlook/110602_Macro%20forecasts.pdfhttp://www.ine.es/jaxiBD/menu.do?L=1&divi=CNTR&his=0&type=dbhttp://www.ine.es/jaxiBD/menu.do?L=1&divi=CNTR&his=0&type=dbhttp://www.thespanisheconomy.com/SiteCollectionDocuments/en-gb/Economic%20Outlook/110602_Macro%20forecasts.pdf8/3/2019 111101 KoS Presentation
24/37
Reform strategy: fiscal, financial and factor markets
Structural and economic rebalancing
Funding and Debt Management
23
8/3/2019 111101 KoS Presentation
25/37
24
Highlights of debt management
Substantial reduction of net issuance
Refinancing risk contained through longer average portfolio maturity
A solid and diversified investor base, instrumental in difficult times
Transparency and predictability highly valued by investors
8/3/2019 111101 KoS Presentation
26/37
120.6%
87.6% 85.5% 84.1% 81.1%
67.8%
0%
20%
40%
60%
80%
100%
120%
140%
Italy
Euro
Area
UK
France
Germany
Spain
2007 2009 2010 2011
4.8%
3.0% 3.2%2.6% 2.4% 2.3%
0%
1%
2%
3%
4%
5%
6%
Italy
Euro
Area
UK
France
Germany
Spain
2007 2009 2010 2011
Interest Expenditures(% of GDP, EDP)
61% at end 2010 Spains debt to GDP ratio was 25% lower than the Euro Areaaverage
A lower debt burden provides resiliency in terms of interest payments and refinancing
needs (1.9% of GDP in 2010, projected at 2.3% in 2011)
Debt to GDP w ell below EU average
25
Debt to GDP ratios
Sources: Eurostat. EDP Notification Tables October 2011.
http://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/excessive_deficit/edp_notification_tableshttp://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/excessive_deficit/edp_notification_tables8/3/2019 111101 KoS Presentation
27/37
0
-2.6
76.8
26.0
47.2
62 .1
47.2
61.6 58 .7
28.6
15.2
3 .4
-100
10203040
50607080
2010Jan
Pr
ojection
2010
E
xecuted
2011Jan
Pr
ojection
2011
Ex
ecuted*
Total net issuanceMedium- and long-term issuesLetras del Tesoro net issues
-19.1%
The funding programme in 2011 (I ) Funding requirement 24% lower than 2010 execution, in accordance with frontloadingof fiscal restraint measures
As of October 31st, the gross issuance of medium- and long-term bonds stands at
75.7bn, 80.5% of the initially projected figure
26
47.2
-46.6
47.2
93.8
0.0
47.2
588.0
5: Net increase in T-Bills
2: Redemptions of medium- and long-term bonds
6 = 5 + 3: Net change in outstanding debt7: Forecast Outstanding Central Government Debt at end 2011
Tesoro funding in 2011 (Billion Euro)
1: Funding requirement (=Net Issuance)
4 = 2 + 3: Gross issuance of medium and long-term bonds3: Net issuance medium- and long-term bonds
Source: Direccin General del Tesoro y Poltica Financiera.
Funding Programme. 2010-2011(Net issuance in billion Euro)
* As of October 31st 2011.
New fiscal restraint measures imply lower funding needs than initially projected in the
January 2011 programme
http://www.tesoro.es/doc/EN/home/estrategia/Strategy_2011.pdfhttp://www.tesoro.es/doc/EN/home/estrategia/Strategy_2011.pdf8/3/2019 111101 KoS Presentation
28/37
27
The funding programme in 2011 (II) Monthly announcements + potential off-the-run medium and long-term linesannounced Friday prior to the auction
Limit size per line: 16.5 bn for lines of 10-years and above
Tesoro Pblico is open to additional foreign currency issuance
Private placements/Schuldschein loans
New since July 29th: modification of the tax procedure to simplify the obligations ofnon-resident investors for the actual perception of their interest income free ofwithholding taxes. Investor identification obligations are eased and broadened in theirgeographical scope
Yearly calendar
Short-term
Medium- and
long-term Monthly announcement on 1st Thursday of every month
(Obligaciones of current month and Bonos of next month)
Auction
s
3- & 6-Month
Bonos del Estado3, 5-year benchmarks and off-the-run bonds
1st Thursday of every month
Obligaciones del Estado10, 15, 30 -year benchmarks and off-the-run bonds
3rd Thursday of every month
Letras del Tesoro
4th Tuesday of every month 3rd Tuesday of every month12- & 18-Month
8/3/2019 111101 KoS Presentation
29/37
3.98
3.69 3.72
2.55
1.01.5
2.0
2.53.0
3.5
4.04.55.0
5.5
6.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
Cost of debt outstanding Cost at issuance
01
2
3
4
5
6
7
8
9
10
2010
2011
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Amount Issued bn Bid-to-cover ratio
Avg. bid-to-cover 2010 Avg. bid-to-cover 2011
( bn) (Bid-to-cover)
Auctions of Bonos and Obligaciones(up to October 31st 2011)
28
Funding execution snapshots Around 82% of the funding programme carried out via auctions
On-going engagement with our investor base to update on the implementation ofpolicy strategy and economic and budgetary developments
Source: Direccin General del Tesoro y Poltica Financiera.
Cost of debt outstanding and cost at issuance(in percent)
Source: Direccin General del Tesoro y Poltica Financiera.* As of October 31st 2011.
http://www.tesoro.es/doc/EN/home/estadistica/14a18I.pdfhttp://www.tesoro.es/doc/EN/home/estadistica/03i.pdfhttp://www.tesoro.es/doc/EN/home/estadistica/03i.pdfhttp://www.tesoro.es/doc/EN/home/estadistica/14a18I.pdf8/3/2019 111101 KoS Presentation
30/37
346.5
100
150
200
250
300
350
400
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
5.5985.317
2.1332.938
01
2
3
4
5
6
7
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
ESP
GER
29
Recent behaviour of spreads and yields Spanish spreads have risen throughout the year mostly due to the compression inBunds
10-year yields have oscillated around 5.3%
Spreads Spain vs Germany 10 Year Bonds(in bps)
Source: Bloomberg.
Spain vs Germany 10 Year Bonds(in percent)
Source: Bloomberg.
8/3/2019 111101 KoS Presentation
31/37
2 3 4 5 6 7 8 9 10 15 302 3 4 5 6 7 8 9 10 15 303,0
3,5
4,0
4,5
5,0
5,5
6,0
6,5
7,0
30
SMP action has reduced yields and volatility
Source: Bloomberg
(June 1st August 7th 2011)
Tenors(in years)
%
August 8th September 28th 2011
Tenors(in years)
Median, 25th-75th percentiles, extremes of Spanish Government Bonds
8/3/2019 111101 KoS Presentation
32/37
7.25
6.80 6.73
6.446.30
5.0
5.5
6.0
6.5
7.0
7.5
France
Italy
S
pain
Belgium
Germ
any
6.736.70
4.344.28
1
2
34
5
6
7
8
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
20
11*
Average life Duration
31
Lengthening of average life has enabled a prudent debtmanagement
Average portfolio maturity has increased thanks to a reduced issuance of T-Bills andfocus on medium- and long-term supply
This effort helps reduce refinancing risk, enabling prudent debt management
Sources: Direccin General del Tesoro y Poltica Financiera and Bloomberg.
Duration & Average Life to Maturity of the Portfolio.As of October 31st 2011
(Letras, Bonos and Obligaciones)(in years)
Average life to Maturity. As of October 31st 2011.(T-Bills and medium and long-term euro-denominated debt,
excluding inflation-linked bonds)(in years)
http://www.tesoro.es/doc/EN/home/estadistica/03i.pdfhttp://www.tesoro.es/doc/EN/home/estadistica/03i.pdf8/3/2019 111101 KoS Presentation
33/37
32
A diversified investor base Non-resident investors have been of instrumental importance throughout variousperiods of uncertainty
The geographical distribution of holdings of government bonds has remained relatively
stable during the last two years
Total unstripped Government debt by Holder(Registered. In percent of total portfolio)
Source: Direccin General del Tesoro y Poltica Financiera.
* As of September 30th 2011.
0%10%
20%
30%
40%
50%60%
70%
Credit
Institutions
Pension,
Insurance
andMutual
Funds
Households
&non-
financials
Spanish
official
institutions
Non-
residents
2008 2009 2010 2011*
http://www.tesoro.es/doc/EN/home/estadistica/06i.pdfhttp://www.tesoro.es/doc/EN/home/estadistica/06i.pdf8/3/2019 111101 KoS Presentation
34/37
0
2
4
6
8
10
12
14
16
18
Ja
n
Fe
b
Ma
r
Ap
r
Ma
y
Ju
n
Jul
Au
g
Se
p
Oc
t
No
v
De
c
Letras Bonds and long-term loansSource: Direccin General del Tesoro y Poltica Financiera.
0
50
100
150
200
250
Jan Feb Mar
Apr
May Jun Ju
l
Aug
Sep Oc
t
Nov
Dec
Average seasonal index of tax revenues ofthe Central Government 2008-2010
(Index 100=average)
Source:33
Robust Treasury Management System Redemption dates of medium- and long-term bonds (principal and coupons) match thebiggest inflows of tax revenues
Transparency: regular and publicly available information about budgetary execution,
change in cash balances, non resident holdings, Issuance schedule based on very conservative assumptions about budget execution
Excess liquidity is lent in the money market each month through repo auctions
Liquidity lines with banks provide an additional buffer
IGAE.
Monthly maturity structure as of October 31st 2011(in billion Euros)
http://www.tesoro.es/en/home/estadistica.asphttp://www.igae.pap.meh.es/sitios/igae/en-GB/InformesCuentas/Informes/Paginas/publicaciones.aspxhttp://www.igae.pap.meh.es/sitios/igae/en-GB/InformesCuentas/Informes/Paginas/publicaciones.aspxhttp://www.tesoro.es/en/home/estadistica.asp8/3/2019 111101 KoS Presentation
35/37
16.9%
15.1%
14.0%
12.0%
8.9%
7%
9%
11%
13%
15%
17%
19%
Italy
Belgium
France
Spain
Germany
0
10
20
30
40
50
60
70
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2036
2037
2040
2041
34
Risk and refinancing measures
Source: Direccin General del Tesoro y Poltica Financiera.
Maturity structure of medium- and long-term bonds(in billion Euros)
Refinancing risk remains subdued thanks to a longer average life
Redemptions of Euro-denominated debt remain well in line with those of peers
Source: Direccin General del Tesoro y Poltica Financiera forSpain, Bloomberg for other countries and EDP Notification TablesOctober 2011, Eurostat.
Redemptions November 2011 to October 2012(in % of 2011 GDP, Euro-denominated bonds and T-Bills)
http://www.tesoro.es/doc/EN/home/estadistica/25I.pdfhttp://www.tesoro.es/doc/EN/home/estadistica/25I.pdfhttp://www.tesoro.es/doc/EN/home/estadistica/25I.pdfhttp://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/excessive_deficit/edp_notification_tableshttp://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/excessive_deficit/edp_notification_tableshttp://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/excessive_deficit/edp_notification_tableshttp://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/excessive_deficit/edp_notification_tableshttp://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/excessive_deficit/edp_notification_tableshttp://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/excessive_deficit/edp_notification_tableshttp://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/excessive_deficit/edp_notification_tableshttp://www.tesoro.es/doc/EN/home/estadistica/25I.pdfhttp://www.tesoro.es/doc/EN/home/estadistica/25I.pdf8/3/2019 111101 KoS Presentation
36/37
35
More and updated information on the Spanish economy
http://www.thespanisheconomy.com
For data sources, please click links below each figure or table
http://www.thespanisheconomy.com/http://www.thespanisheconomy.com/8/3/2019 111101 KoS Presentation
37/37
36
Thank you for your attentionJose Manuel Campa Secretary of State of Economy
Soledad Nez General Director of the Treasury and Financial PolicyDirectorTesoro@tesoro.meh.es
Ignacio Fernndez-Palomero Deputy Director for Funding and Debt Managementifernandez@tesoro.meh.es
Rosa Moralrmmoral@tesoro.meh.es
Leandro Navarro
lnavarro@tesoro.meh.es
Pablo de Ramn-Lacapramonlaca@tesoro.meh.es
Ignacio Vicenteivicente@tesoro.meh.es
Roco Chicomrchico@tesoro.meh.es
Carla Dazcdiaza@tesoro.meh.es
For more information please contact:Phone: 34 91 209 95 29/30/31/32 - Fax:34 91 209 97 10
Reuters: TESOROBloomberg: TESO
Internet: www.tesoro.esFor more information on recent developments:
www.thespanisheconomy.com
mailto:DirectorTesoro@tesoro.meh.esmailto:DirectorTesoro@tesoro.meh.esmailto:ifernandez@tesoro.meh.esmailto:ifernandez@tesoro.meh.esmailto:rmmoral@tesoro.meh.esmailto:rmmoral@tesoro.meh.esmailto:lnavarro@tesoro.meh.esmailto:lnavarro@tesoro.meh.esmailto:pramonlaca@tesoro.meh.esmailto:pramonlaca@tesoro.meh.esmailto:ivicente@tesoro.meh.esmailto:ivicente@tesoro.meh.esmailto:mrchico@tesoro.meh.esmailto:mrchico@tesoro.meh.esmailto:cdiaza@tesoro.meh.esmailto:cdiaza@tesoro.meh.eshttp://www.tesoro.es/http://www.thespanisheconomy.com/http://www.thespanisheconomy.com/http://www.tesoro.es/mailto:cdiaza@tesoro.meh.esmailto:mrchico@tesoro.meh.esmailto:ivicente@tesoro.meh.esmailto:pramonlaca@tesoro.meh.esmailto:lnavarro@tesoro.meh.esmailto:rmmoral@tesoro.meh.esmailto:ifernandez@tesoro.meh.esmailto:DirectorTesoro@tesoro.meh.es