President of the Government. Good afternoon to you all and welcome once again.
I am here to briefly explain the results from a meeting I just had with the Prime Minister of Finland, Mr Jyrki Katainen.
First of all, allow me to take this opportunity to thank Prime Minister Katainen for this official visit to Spain. Finland is an important European partner with which we maintain close contact and strong ties that have been, and I hope continue to be, highly important for both countries and the European Union as a whole.
As you know - you have been direct witnesses in fact - I have held meetings with numerous major European partners in the last few weeks in order to exchange opinions on the situation in the European Union, particularly in the Eurozone, and the future that, together, we must continue building for ourselves. Today, I exchanged opinions on these issues with Prime Minister Katainen.
Within this context, we were able to analyse the difficulties being faced by our respective countries since this economic crisis began. I took this opportunity to explain to Prime Minister Katainen the situation that Spain is currently going through and the measures we are implementing in this country. In this regard, I told the Prime Minister about the clear pro-European stance adopted by my Government and our overwhelming desire to do everything within our power to help both Spain and the European Union overcome this current economic crisis.
Finland has been a fine example of effort and a desire to overcome adversity. The Finnish people have made their economy one of the most competitive in Europe; an epicentre for innovation and technology on our continent. I hear they are now undertaking considerable fiscal consolidation efforts as well. Therefore, allow me to congratulate the Prime Minister on the important contribution by Finland to our common efforts and on the firm commitment his country has been showing.
We are convinced that the challenges we now face, which are of a global nature, must receive a national and European response. In this regard, the main challenge we are facing today centres on the Euro, and we know we can only overcome this challenge through unity and coordination from all Member States and European institutions.
Our common history tells us that only the pro-European attitude that Finland and Spain both share will enable us to progress and guarantee the prosperity and stability we have been enjoying since the European Union was created; something that undoubtedly represents the story of our collective success.
With that pro-European attitude, Spain is making decisive progress down the path towards fiscal consolidation and structural reform. The days when European governments looked the other way while hoping that any difficulties would simply pass them by must be left behind us. I am convinced that the fiscal consolidation measures and structural reforms we are currently implementing will have an enormously positive impact, not only for our country but for the European Union as a whole.
Spain, and I said this to Prime Minister Katainen, will not shirk its responsibilities nor hide in the face of adversity. That is why, and I reiterated this today, we will continue with our reformist agenda that is so necessary for both Spain and for Europe. In this regard, I am very glad to be able to say we have the support of Prime Minister Katainen.
The Prime Minister and I agree that we are living through a decisive time for the European Union, times that require determination from us all: Member States and institutions. In this regard, we are taking important steps to safeguard the integrity of the Euro.
The measures announced last week by the European Central Bank are a clear sign that coordinated action from all European institutions, as well as from the Member States, will be decisive for categorically dispelling any doubts that the markets may have over the continuity of the Euro project and making it quite clear that we will do everything necessary, at a European and national level, to definitively resolve the Euro crisis.
Therefore, based on the conclusions adopted at the European Council meeting in June, we must work together on helping the European institutions to define a "road map" that can enable us to make determined progress towards a banking union and a fiscal union, as well as strengthen the economic and political union.
As a staunch defender of European integration, Spain has already presented its proposals. These proposals have been warmly received by the institutions and I had the pleasure of discussing them today with the Prime Minister of Finland.
The last sixty years of our history are a story of common success.
Our continent has never enjoyed such prosperity and stability as we enjoy now. Today we face some difficult times but, as has been the case in the past, I am convinced that we will strive to overcome these difficulties, leaving aside our differences and, once again, using the tools of integration and solidarity that have been and will continue to be key to our success.
Thank you very much. I now pass you over to Prime Minister Katainen.
Mr. Katainen. Thank you, President of the Government Rajoy. Today has been an excellent day. Thank you very much.
During our conversation over lunch, I think that at least I personally have learned a great many things about the opinions held by the Government of Spain, about what it thinks and about the concerns of the Spanish people, what they feel.
Finland went through a very serious economic crisis in the early 90s. We were forced to make adjustments worth 10% of our Gross Domestic Product in a very short time. We can therefore feel sympathy and empathy for the situation that many Spaniards are going through today.
We can also feel sympathy towards where the Government currently stands and what the Government is having to do because of this crisis. We understand the situation, which presents an enormous challenge and we can participate in the search for solutions.
In Europe, we already have enough political forces trying to take advantage of the crisis. Rather than offer a solution, they simply present a list of problems. Any responsible political players must seek solutions. To present problems simply doesn't help anybody.
Among other things, we had the chance to talk about what the people in various European countries feel right now. I understand that people in many European countries believe it unfair that nothing their country does, regardless of what the country does to stabilise the economy, seems enough for the risk premiums to fall.
On the other hand, there are people in Finland who think it unfair that they have to suffer because of the economic crisis even though they and their country followed the rules.
Being aware, knowing and understanding those feelings, what people think, is important.
The Euro is very important to Finland, both economically and politically. For that reason, Finland is one hundred per cent committed to consolidating the Euro in order to reform its principles so that it can be even stronger in the future than it is now.
The Euro is not a temporary experiment; it is a European currency that needs to be strengthened from its very foundations.
In our opinion, there are various aspects to a solution to this crisis: the first is the action taken by the European Central Bank, and I will go no further on that because it is an independent body; the second is the commitment made by the Member States to sort out their economies; and the third would be a joint, common solution, one for Europe as a whole, to enable this over-exaggerated panic in the financial market to be dispelled.
I think the situation faced by Spain is rather unfair because the actions taken by the Spanish Government are not being valued correctly, because the markets are scared of suffering a domino effect and we have to seek a joint solution to this programme.
The Government of Spain, led by Mr Rajoy, has acted well and has chosen its actions well to reconcile the economy. Above all, we believe those structural reforms aimed at increasing Spain's competitiveness are highly important. Competitiveness, in other words, the way of making the economy grow, attracting investment and creating jobs, is even better today than it was two years ago.
The fact that you have to make adjustments during a crisis affects economic growth but it is an essential requirement for creating confidence. Structural reforms are essential to growth and confidence, and all that will lead to more growth.
I am convinced that, once that panic situation dissipates, economic growth in Spain will take off, jobs will be created and investment will arrive. The Spanish market is interesting, attractive, large, more competitive than before and there is confidence in the Spanish government.
Dear Mr President of the Government, dear representatives from the media,
I am very pleased with this day, with the conversation we had and with the chance to have spoken today with students from Spain and other countries, and with influential people from the economic sector. I was able to gain a sense and listen to their opinions and their impressions in Spain.
Q. I wanted to ask you both whether any disagreement remains regarding the decisions that were taken at the Summit in June; disagreement or issues requiring clarification.
President of the Government. I don't think any disagreement persists because, among other things, the decisions that were taken at the Summit in June were decisions adopted by everyone there. No voting takes place there; it is a place for taking decisions by mutual accord and I think the most important of everything that was agreed in Brussels in June was to make progress on European integration.
A clear commitment was made, ahead of a report made by the President of the Council, Mr Van Rompuy: we are going to make progress on banking union, on fiscal union, on political union and on economic union. Based on that, Mr Van Rompuy was commissioned by all the Heads of State and Government present at the meeting to make proposals to the European Council that we will also attend in Brussels in December, and we will probably touch on those issues beforehand at the informal meeting in October, albeit informally.
Obviously, there will be discussions at that meeting. Everyone will put forward what they think appropriate and suitable and, as has always been the case during the project to build Europe, I am convinced we will eventually reach an understanding and an agreement.
But I think the message from the European Council in Brussels was clear and shared by all: we are committed to more Europe, because that is best for the well-being and prosperity of our people.
Mr. Katainen. I would just like to say I agree with what President of the Government Rajoy just said and would like to add a little more. Right now, we are focused on finding solutions.
There has been much discrepancy in Europe during the course of this crisis over the shape the solution should take. That is normal, after all this is politics. But there has also been a fall in confidence, which has got even worse. However, I still say the same thing: we have to find solutions, not present a list of problems. We need more Europe, to develop a financial union, to strengthen the Commission and improve the rules; while, at the same time, we need more social responsibility. Both things are important, it is not a choice between one or the other.
Q. I have a question for Mr Katainen. If a new Memorandum was needed in the European Union for the countries with problems to be able to take advantage of a bailout from the European Central Bank, would Finland be prepared to block that proposal from the Government or from Parliament? And, in particular, if such aid were to be provided by the Central Bank to those countries, such as Spain, that are thinking about asking for a bailout, what extra conditions do you think should be imposed on these new countries?
I also have a couple of questions for Mr Rajoy. Last night, you said on Televisión Española that you are not willing to accept instructions from Europe as to where budget cuts need to be made. Does that mean that the Government won't accept any conditions if you eventually ask for the European Central Bank to step in?
I would also like to ask, if you don't mind, that you explain what your announced tax increases mean in terms of the "green taxes" and capital gains. Can you provide further details?
Mr Katainen. Finland thinks what the other Member States think about the new financial aid packages, so they will be assessed when the time comes. The important thing now is to find ways to avoid any need to implement these new aid packages. It is not important that we maximise the number of packages but rather trade success to prevent them being requested.
As regards the conditions that would be applied, they form part of any healthy economy. The essential thing is for a country to commit to putting its own economy in order; anything else is simple assistance. Those conditions are aimed at reducing the deficit but, above all, at structural reforms to improve competitiveness.
Competitiveness is key here. You can do as much as you like with the budget but if the country is not competitive, revenue flows will not arrive.
These reforms are the important ones. The labour reform, the social stakeholder reform, all of them are highly positive reforms, although I admit they are difficult to apply and easy to criticise.
However, the simple fact is that they need to be made. Both cutbacks and structural reforms need to be made to achieve growth and competitiveness, and to sort this out once and for all.
President of the Government. You asked me two questions, one on bailout terms and another on capital gains and environmental taxes.
As regards your first question, it's actually an extremely difficult question to answer because all that exists in reality at the moment is a willingness, which is a very important step forward, from the European Central Bank to buy up bonds on the secondary market if those countries that deem it necessary ask it to do so, and it establishes the procedure whereby such action would take place.
As everybody knows, we have not yet taken any decision in this regard. Therefore, with that in mind, it makes little sense to talk about what could happen in the future.
That said, I would remind you of one thing: Spain is committed to a process of reducing its deficit and undertaking structural reforms, firstly, because we believe in them, in other words, because we think it's the right thing to do, we believe it fundamental and essential for achieving economic growth and jobs in Spain and, secondly, because it is a rule that affects everyone who belongs to the club we call the Euro.
Therefore, we have assumed a series of commitments, that this year means reducing the public deficit, as you known, to 6.3%, to 4.5% next year and to 2.8% the year after. We have already told the European Commission what we are going to do in 2012 and we are doing that, of course; we will shortly present our Budget for 2013, and then for 2014. Obviously, there are more details with regard to 2012 although the action for 2013 is also very detailed.
The information on what we will do in 2014 goes into less detail because that is still a while off.
But we are committed to meeting the deficit targets and many things can be done to reduce the deficit. Mr Hollande announced the other day a plan to reduce his country's deficit worth thirty billion euros and he said: "of those thirty billion, twenty billion will come from revenue and ten billion from cutbacks; and from those twenty billion, one half will be from taxes on companies and the other half from taxes on households". We have chosen to say: 50% revenue and 50% cutbacks. But the objective is the same in both cases: to reduce the deficit.
At the end of the day, that is what it's all about: reducing the deficit and meeting our obligations, which are also the same as, I repeat, "our obligations", as our requirements, given that, as I've already explained on numerous occasions, spending what one doesn't have is never a good idea; it's not a good idea for anyone at any time but it's even worse at a time when one is experiencing financing difficulties and, obviously, an obligation to pay back their loans.
In response to your question on taxes, there will be an environmental tax in line with the taxes that already exist in the European Union and in accordance with the recommendations from the Commission, which we will detail in due course when we present the Budget, and there will be a capital gains tax.
What will the capital gains tax consist of? When you sell shares, for example, you don't pay the same rate as Personal Income Tax, whatever that may be, but rather pay a rate that was previously 18% and now, if I'm not mistaken, stands at 21%.
Before the reform that was implemented in 2006, any sale of shares was taxed at 18 or 21%, except those sales made within the first year because it could be said that it made no sense for someone to buy one day, sell the next and only pay 18 or 21%. So, all capital gains generated in the first year will be taxed at the rate of Personal Income Tax and all the capital gains generated subsequently will be taxed at a different rate, which is the rate currently defined by the legislation in force today.
In other words, this is about undoing the legislations from 2006 which stated that everything (even though it took place over the space of half an hour, I mean, you bought shares and sold them half an hour later) could be taxed at the lower rate. Any transaction that takes place within the first year is now taxed at the rate of Personal Income Tax.
Q. I heard that the Finnish Embassy has received individual complaints from Spaniards saying that Finland has not shown enough solidarity towards the Spanish people. What do you think about that?
Are you concerned by the division that people have been recently saying exists between northern and southern Europe?
President of the Government. I have no knowledge that any citizen has gone to the Finnish Embassy to complain. However, in any case, the Government of Spain has not done so, among other reasons, because it would be unfair to complain about a country that recently supported us on the financial assistance we asked for from our European partners. I therefore think any such complaint would be unfair. I am happy with the support given to us by Finland, as we for example gave to Greece in its day. Spain accounts for over 11% of the Eurozone and Spain provided 11% of the support to Greece, which is another basic principle that underpins the European Union - solidarity among all members.
As regards the north-south divide, I frankly find it to be a little absurd. Look, Spain had a surplus in its public accounts only five years ago, a surplus. And five years ago, Spain had a public debt to GDP ratio of 40%, which was among the lowest, if not the lowest, in the European Union. We are now going through a temporary situation, just as any other European country could experience difficulty at any given moment in its history.
If I'm absolutely frank, and because I know about the European Union, there are serious, competent Finnish citizens who work hard, just as there are serious, competent Spanish citizens who work hard. The same can be said for Germany, Italy and all the other countries. All sorts can be found everywhere and I don't think that debate will take us anywhere useful. The debate that will bring us positive results should focus on this: let's work hard, set targets and build more Europe, because a united Europe has progressed much further than a divided Europe.
Listen, I am going to say something I like to tell people: the Treaty of Rome was approved in 1957, 55 years ago. Just go away and compare the history of Europe over the last 55 years since the Treaty of Rome with the history of Europe before the Treaty of Rome was signed. I think you will find an unequivocal demonstration that European unity, which must be worked for, is something that has been good for all of us and I hope that remains the case in the future.
That is all. Thank you very much.