111101 KoS Presentation

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


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


3/37

Reform strategy: fiscal, financial and factor markets

Structural and economic rebalancing

Funding and Debt Management

2


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.pdf


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.pdf


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


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


8/37

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.pdf


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_database


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


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


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


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


7-9


1.8-2.0

12

Sector restructuring and P rivatisation underway


14/37




13


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


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=db


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.pdf


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.htm


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


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_database


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


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)


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.aspx


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.htm


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


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


France Italy UK

Source: Eurostat.

Productivity grow th of selectedEuropean Union countries

(Real labour productivity per hour)


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.pdf


24/37




23


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


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_tables


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.pdf


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


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


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.pdf


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.


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


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.pdf


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)


* 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.pdf


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.asp


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


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.pdf


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/


37/37

36

Thank you for your attentionJose Manuel Campa Secretary of State of Economy

Soledad Nez General Director of the Treasury and Financial [email protected]

Ignacio Fernndez-Palomero Deputy Director for Funding and Debt [email protected]

Rosa [email protected]

Leandro Navarro

[email protected]

Pablo de [email protected]

Ignacio [email protected]

Roco [email protected]

Carla [email protected]

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:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.tesoro.es/http://www.thespanisheconomy.com/http://www.thespanisheconomy.com/http://www.tesoro.es/mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

111101 KoS Presentation

Documents

Transcript of 111101 KoS Presentation