President of the Government. Good afternoon. I am here before you to explain this important European Council that has just concluded. I will give you a summary of the main agreements reached by the Heads of State and Government of the Eurozone; agreements that reflect the decisive political will of the seventeen countries comprising the Eurozone to move towards greater economic integration to enable the Monetary Union to operate smoothly.
We have decided to strengthen both the institutional architecture of the European and Monetary Union and the stability mechanisms to counteract the sovereign debt crisis. These are significant additional steps to those we have taken over the last eighteen months since, in the spring of 2010, the debt crisis in the European markets started to significantly worsen.
With regard to the institutional strengthening of the Eurozone, I would like to highlight the so-called 'fiscal pact'. This pact has a clear objective: to improve the efficiency of fiscal supervision, to guarantee fiscal consolidation processes and seek a budgetary equilibrium, a fiscal equilibrium, so that in the future we do not suffer from sovereign debt problems in the Eurozone.
I would highlight two important measures in this fiscal pact. The first is the incorporation of the so-called 'golden rule', in other words, the principle of budgetary equilibrium that will be incorporated into national constitutions or legislation of equivalent rank which, by the way, has already taken place in Spain through a reform process of our constitution, of which you are aware, with the agreement of the two major political parties and which undoubtedly demonstrates an element of confidence, of guarantee and of compliance with this new fiscal pact for the Eurozone.
Secondly, the excessive deficit procedure will be endowed with more automatic aspects so that there is greater control, greater supervision and, in short, also greater forethought to avoid excessive deficits.
The other main raft of measures, together with the institutional strengthening of the Monetary Union, together with institutional strengthening through the fiscal pact that I have just mentioned, relates to the stability mechanisms, or if you will allow me, the protective mechanisms, or so-called 'firebreaks', to fight the risks of the crisis or of the problems deriving from sovereign debt.
We have always defended this principle and we have always defended Europe providing itself, progressively and in a stable manner, with an adequate mechanism which guarantees the sustainability of the debt of all the countries in the Eurozone and also guarantees against possible attacks on the same.
To that end, we have decided on certain important things. Firstly, to bring forward to July 2012 the entry into force of the European Stability Mechanism, the definitive mechanism, in other words, the European network for financial security, that will be of a permanent nature and that will substitute the Facility that has recently been put into operation to tackle the crisis in Greece, Portugal and Ireland and which will have an effective loan capacity of five hundred thousand million euros.
We have thus agreed to speed up the decision-making process to make it more effective, moving from a unanimous majority to a qualified majority with 85% representation of the countries required to activate it and apply it at any given time.
And the most important thing, from my point of view, is that we have reaffirmed, in a resounding manner, the exceptional nature of the case of Greece as regards the participation of the private sector. On some occasions, in this room and in other places, you have heard me assert that the consequence of the so-called Deauville Summit, where the door was opened to private sector participation in the process of assuming the sovereign debt crisis, the restructuring of private debt was undoubtedly a decisive factor for this extension or this systematic situation which, to a great extent, we have gone through and are going through in the sovereign debt crisis of the Eurozone countries.
That is why I particularly wish to highlight, because this is a fundamental message, that Greece is an absolute exception, that this will not be contemplated again and that, hence, this should be a factor of confidence for investors in respect of the commitments that the various countries of the Eurozone have in relation to our sovereign debt.
The fundamental basis of the political agreement on these important questions is the seventeen member countries of the Eurozone, the seventeen countries that make up the single currency; but it is not limited to these seventeen countries. It is a reasonable forecast that the vast majority of the other ten countries subscribe to this political agreement, that will be translated into an inter-governmental agreement that has to be made and completed prior to March 2012 as regards its specific content. In fact, in the next two or three weeks there will be an initial rapprochement, an initial definition of the content of this fiscal pact which will lead to an inter-governmental treaty of the seventeen countries and, in all probability, of the vast majority of the other ten countries of the European Union.
These are the two major agreements reached at this European Council. They are two agreements that should bolster confidence, that reaffirm the commitment of the Eurozone to itself, of all the countries of the Eurozone to the single currency, and which transmit greater confidence in the medium and long term because the Eurozone will undoubtedly be a zone of fiscal strength, of guarantees of the public accounts, of sustainability both of the commitment of each one of the Eurozone countries and of the added fundamental commitment of the guarantee of the whole Eurozone in partnership with the European institutions.
Allow me to also make reference to certain other aspects of the resolutions that are important and that affect the enlargement policy and the foreign policy of the European Union, specifically Croatia. Today we have welcomed Croatia after the signing of the Accession Treaty; furthermore, an important step has been taken, a positive vision of the possible candidature of Serbia, a matter which is also undoubtedly fundamental for the future and the stability of the Balkans, and the possibility of opening accession talks with Montenegro in June 2012 has been contemplated.
Iran. The European Council has also conveyed and received the text of the conclusions on Iran adopted by the Foreign Affairs Council on 1 December. In this way, the European Union has once again expressed, in the same way as it has done through the Council and its members as a whole, its condemnation of the events that occurred at the British Embassy in Iran; its concern at and continued monitoring of Iran's nuclear programme and, of course, in close coordination with its international partners, the adoption of additional measures which include those that may affect the Iranian financial system, as well as its transport and energy sector, as a response to the attitude of Iran.
These are perhaps the three most important matters, outside of economic matters, discussed at the European Council. I should make a few other comments at this Council and at this press conference, which is rather unique for reasons you are undoubtedly aware of.
The first of these is that we have worked in full collaboration with the Spanish Partido Popular, as is only proper, since this is an acting government working with the political party that is going to govern Spain. Specifically, there has been ongoing dialogue with Mariano Rajoy, the last occasion being this morning, on the progress of the Council, with extensive information regarding the various positions maintained and, above all, on the task which, as you will have deduced from the information that I have just referred to, we have at hand as a country in the coming weeks and months, very particularly to consolidate this inter-governmental treaty.
Hence, I would like to express my satisfaction at the degree of collaboration, at the degree of coordination, which simply goes to show how work should be done and how a serious country should operate, a Member State of the European Union and the Eurozone, such as is Spain.
This is the last European Council that I will attend as President of the Government, as you are well aware. I believe I have attended a total of 44 European Councils and Summits of the European Union; hence this is a sufficiently large number to be able to convey some kind of conclusion to you, some kind of sensation of this experience.
The first is that it has been an immense honour to represent my country at a forum such as this in Europe.
The second is that I have always worked with the belief that strengthening the European Union means strengthening Spain; the future, the well-being and the wishes of the Spanish people.
The third is that I arrived here with the wholehearted vocation of a pro-European, with a pro-European conviction, and after all this time and after the last two years, which have been times of difficult decisions and of intense debates, including some into the early hours of the morning, such as yesterday, my vocation and conviction as a pro-European is stronger still. The present and the future of Spain, of its well-being and of its economic recovery depend to a great extent on the strength, determination and political will of unity that we have as Europeans.
Finally, I would like to sincerely thank all of you who have followed me habitually at these press conferences for your attitude, your tone and your intelligent questions, from which I have undoubtedly learned on many occasions. I wish you well in carrying on with this task and that you renew and maintain your pro-European faith.
Q. You mentioned the Deauville agreement as one of the key moments in the debt crisis over the last few months. Do you believe that things, aside from these slippery times, could have been done in another way? Could Europe have given more support to other economies that, in principle, shouldn't have been affected by the crisis? Would you reproach any of your European colleagues?
President of the Government. We probably lack perspective to make a definitive conclusion in this respect. Our starting point is a clear and indisputable fact: the European Union has had to face the toughest, most serious, most difficult crisis since its inception. This is a great test which we must overcome. I believe that we are, as yet, only halfway there.
If I were asked "what has been done over these three years?" I would respond that we have tried to find a response, sometimes the right one, sometimes the wrong one; we are halfway there but there is still work to be done to guarantee the sustainability of debt, to guarantee economic recovery, which is our objective, together with job creation, and to perfect the whole architecture which was necessary for the Monetary Union from the time of its conception. On many occasions we have debated whether a single currency without fiscal union, without a common defence mechanism, is susceptible to problems.
And hence, we lack perspective.
What I can verify is that, since April/May, since the spring of 2010, the effort has been enormous and, although it is true that the debt problems have spread to various countries, we should not forget that it is the first time in history that a political union, a region, an economic union, has faced this challenge, and where a good number of the countries in the Eurozone, and also in the European Union as a whole, have to explain to their people that money is being loaned to other countries. This did not form part of the plans of the pro-European creators, of the founding fathers, nor of those who designed the Monetary Union; this was not the case and yet we have had to build it into our plans, sometimes doing so in the right way, sometimes in the wrong way.
You remember it because I asserted it, that the moment when the door was opened to the participation of the private sector for Greece was the most difficult time. You can argue in favour of this decision due to the huge volume of Greek debt and the difficulties in assuming this huge volume because, assuredly, according to what Greece represents in terms of GDP in respect of its number of inhabitants, the volume of its public debt commitments have reached levels… An example will do: for the IMF the programme with Greece is the largest programme in its history. Hence you can see the scale of the problem.
At this time the main thing is that the light, albeit far away, can be seen at the end of the tunnel and the first step is the recovery of confidence in international economic players, in investors, because if the market tensions regarding sovereign debt continue indefinitely then economic recovery, which is the key to job creation and to us calmly paying our debts, including those that have been hard to finance, will be much more difficult.
Q. Two questions. Firstly, the Spanish Partido Popular yesterday announced that it wants to increase from 85% to 90% the number of votes necessary to activate the new bailout fund. I would like to know if you passed on this request and why it hasn't been seen fit to include it.
Secondly, after 44 Summits, you are leaving; Europe is dominated by the centre-right; austerity is the main driver, although perhaps not the only driver of this Europe and progress has been made on inter-governmentalism. I would like to know, against this backdrop, what you think has been the main achievement of the Government of Spain in European policy and also what is the decision or measure, if you can quote a specific example, that you would most like to have seen but which has not been taken.
President of the Government. As regards the qualified majority, I explained this earlier very succinctly so that it could be understood what we were talking about. When the rule on unanimity was established, countries like Spain, and some others - you can imagine which countries; it would be very easy to make a list - expressed our concerns, because it is a very strict rule regarding when this fund can intervene and lend money. It is an important step forward that this rule on unanimity no longer exists.
It is true that this gives rise to a secondary problem which, in my opinion, has another dimension - an increase from 85% to 90% would mean that Spain, by itself, would have a right to veto. But the objective of a country like ours, rather than vetoing, is to facilitate the possibility that the mechanism can operate.
And hence, I understand the request, and I have shared it, I have proposed it, to increase it to 90%; in fact I have proposed it on two occasions: principally yesterday, during the evening and early morning, but there was a criterion, which was followed, for the figure of 85%, and that was to follow the same rule as the IMF. There was a clear consensus on that. There was a basis: 85% was the amount demanded by the IMF and 85% is what was maintained.
And I explained this to Mariano Rajoy this morning and I believe he understood it perfectly. Although we may have wanted this 90%, to have, let's say, this possibility of veto, which assuredly we would never have used because naturally our country, as a whole, is in favour of the application of the Stability Mechanism.
Which countries have had to be drawn into this position? Germany, Holland, Finland…, the countries that are always much more demanding in these matters and at this historic time of applying all the funds that are designed to safeguard us, to serve as firebreaks, in light of the sovereign debt problems.
As regards achievements, that matter corresponds to others, to you, who are the ones who assess and analyse. I believe that Spain, during all this time and ever since our accession, can be characterised as a country loyal to constructive pro-Europeanism. That is the line I have followed, that I have maintained, and I believe it is the best approach for Spain.
Q. It would seem that strict fiscal discipline is now being imposed. I wanted to know how this could favour economy recovery in Spain. Do we not need, perhaps, a commitment to some kind of stimulus? Wouldn't this slow down economic growth?
President of the Government. Let's also put this into some kind of perspective. Will we return to imposing fiscal discipline or fiscal rigour, seeking a budgetary equilibrium? From 2004 to 2008, Spain had a budgetary surplus. The Government I headed understood that this was good for the Spanish economy. It is true that, when you are facing a crisis of such severity, scale and size, you inevitably need to resort to fiscal stimuli. That was clearly the decision at the end of 2008 of the European Union and the G-20, until these fiscal stimuli generated a problem of sovereign debt as a result, in particular of Greece and its possible systematic effect.
Anybody who looks at how the public purse should be managed would support, and reasonably so, the fact that income and expenses should be balanced; that there are exceptional circumstances in which you can act, with limits, according to the economic cycle; but that what is known as the structural deficit needs to be strictly controlled because, if it is not strictly controlled, when an economic recession strikes, a fall in revenue, the debt problem strikes with great virulence, putting many things at risk; putting at risk the fiscal capacity of the State and also the economy.
What kind of stimuli does the economy need at this time? The fundamental stimulus is that the market tensions ease up dramatically and that the banks return to a situation of available liquidity. That is the greatest stimulus.
Just imagine, if we observe what has happened since May 2010 in Spain, there are almost two parallel lines whereby, when the markets tensions have re-emerged, our economy and employment levels have been hit immediately. Why? Because the banks find it harder to provide funding, because companies find it harder to obtain liquidity, they find it harder to ask the banks for funding, their investment plans are cut, they have to reduce costs and this affects the economy.
Hence, the most important stimulus needed at this time in the Eurozone, and in particular by the Spanish economy, is confidence, standing, sustainability. We need to find it easier to obtain funding as an economy than we do at the present time, there needs to be liquidity available in the banks so that they can loan money to SMEs, so that the latter can create jobs and so that, by creating jobs, the Spaniards' spending power, and hence demand, is increased; that is the fundamental stimulus. There are also still some reforms pending, as is to be expected, although many of these have already been implemented.
In short, financing capacity and standing for the financing of the economic system of the Eurozone as a whole and of Spain, that is the greatest stimulus. When this is recovered, there may be other stimuli, which may be of a different nature: fiscal, monetary, etc., but this is the most important stimulus at the moment.
Q. Mr. President, I haven't heard you - perhaps I missed it - assess the agreements adopted at this Summit. It is clear that you go away from here with an agreement, but with an inter-governmental agreement, outside of Community procedures, which is what Spain has always backed. I would like to ask you for an assessment.
I would also like to ask you for an assessment of these results in light of precisely what you have just brought up. In other words, do you feel that this agreement will restore confidence in the sovereign debt of the Eurozone countries and will it contribute to alleviate market pressures? Will the fact that all the Eurozone countries, and some others, have adopted very firm commitments and very strict policies on fiscal and budgetary discipline help to activate other mechanisms? For example, so that the European Central Bank can intervene without its hands tied, in the same way that other central banks in other countries intervene? Can we now expect this to complement budgetary discipline?
Finally, you have indeed stated that this is your last European Council. I don't know if you have had the opportunity to say farewell to some of the other leaders with whom you have shared a large number, if not all 44, of the European Summits.
President of the Government. That's a lot of questions - almost a press conference in itself.
An assessment? My assessment is positive, but we have experience of European Councils, and this positive assessment will only be consolidated when all of the economic players - I am not only talking about investors and the markets, but rather about the major economic powerhouses and leading international bodies, such as the IMF, the United States, China, the emerging countries - back and support this and see that these are the decisions that lead us in the right direction. We will see this in the next day or two. As always, we have experience of these Councils and hence, this last assessment is reserved.
Secondly, the vast majority of countries, if not all bar one, would have opted for a treaty, or for a reform of the treaties. This could have a greater or lesser scope, accompanied by further legislation deriving therefrom or not; but there was one country, out of a total of twenty-seven, which is Great Britain, which said "no". It said "no", because it asked for other things in parallel, but that is another matter. But this is not going to stop us because of just one country, that is clear, and, as we have another reasonable alternative, that is sound, which is an inter-governmental treaty, above all because the Eurozone countries need it, it is very positive that things are moving in that direction.
The European Central Bank. We should respect what the central bank does and what the central bank says. On Wednesday it took some very positive measures for the liquidity of the banks, and even some which are unprecedented in the levels they reached. I have no doubts that the European Central Bank knows that it has to contribute to the stability of the monetary union, but it acts independently and it takes its own decisions, with its own evaluations and its own analyses.
As regards future proposals, we debated the subject of the Eurobonds in depth on Thursday. Although this has not been finalised it was debated in some depth. I believe that - I will no longer take part in this discussion - this will be discussed next year, without a doubt, and it will continue to be discussed, and my impression is that its scope will be extended.
Finally, yes of course I have said farewell to all my colleagues, to some with whom I have logically worked here for various years. In particular, I spent some time this morning with the President of the Council, Herman Van Rompuy. I have shared a few words with everyone. You know that in these exchanges people are extremely warm. That's how it was.
Q. I wanted to ask you in particular about your conversation with Mariano Rajoy. Did you talk about the subject of the Eurobonds, because you said that you will continue talking and it is supposed that Spain will continue to advocate them? Did you specifically talk about this matter with Mariano Rajoy?
How was the request taken, if indeed it was made, that the European Central Bank, while evidently maintaining its independence, should be more flexible when helping countries in difficulties, such as Spain, to overcome the debt crisis? It has done this but have the rest of the countries accepted this Spanish request, if indeed it was made?
President of the Government. As regards the matter of the Eurobonds, I have not specifically spoken with Mariano Rajoy about this today, but I undoubtedly will at some time; I will give him an extensive account about the whole course of the European Council so that he is aware of the different positions and about why I have said that the Eurobonds will be discussed next year.
As regards the European Central Bank, this is one of the major debates. I have explained on various occasions - yesterday I did so during the course of the very long dinner - that, if you look at the major economic regions of the world, you can see something significant, and that is that the Eurozone has less debt and a lower deficit than the United States, the Eurozone has less debt and a lower deficit than Great Britain, and the Eurozone has less debt and a lower deficit than Japan, and yet, it has much higher interest rates; the average interest in the Eurozone stands at just above one percent - two for the rest and an average of five for us. This is surprising. A lower deficit, less debt but higher interest rates to receive financing.
You can also compare other parameters and what do you find? That the Eurozone is an area in which the central bank has less public debt by a long shot. Compare this with the United States or with Great Britain, which has the highest level, or with Japan.
That is where we get into the eternal debate - I say "eternal" because this has been debated on many occasions - which is that the European Central Bank, according to the treaties, has a mandate, this is true, to guarantee inflation. And it has no other mandate. In the end, it is very clear that there is a debate that is basically conceptual, economic, about what is the response to a serious economic crisis that affects the stability of the public accounts and the needs of debt: a pro-active policy, which some would describe as inflationist, or a policy, let's say, that is more passive and that may have other advantages. There are many examples in history of responses that lie in one or other direction. Sometimes an expansive policy has worked, a monetary policy, a so-called policy of injecting liquidity, and sometimes it hasn't worked.
Hence, I believe that we will continue to have this debate, because it is a debate of all the economic schools and of all known experiences. As almost always happens, assuredly none of the extreme positions is the right one, but rather we need a balanced position where central banks act in certain circumstances without monetizing debt excessively, because we know that this gives rise to inflation in the short or medium term and this also generates problems for economic growth and assuredly for employment.
Thank you very much and until next time.