Speech by President of the Government at inauguration of National Conference of the Association for the Progress of Management

Valencia

Mr President of the Regional Government of Valencia, Mrs Mayor of Valencia, public officials, Mr President of the Association for the Progress of Management, Director General, Mr President of the Association for the Progress of Management in Valencia, ladies and gentlemen, dear friends,

I will end my speech with the same phrase used by Rafael Miranda at the close of his speech - a phrase coined by Victor Hugo - because I believe it is very well employed and because I have seen it in the brochure presented by the Association for the Progress of Management. I wanted to say this at the start. You should never begin by saying how you are going to finish, but in this case I believe that the phrase sums up very well some of the attitudes that we should all adopt as we look to the future.

Dear friends, "Conquering the future"… It would have been hard to find a more appropriate slogan for your congress. If things aren't good today, the future is ours and that future must be conquered, day-by-day, with perseverance and with hard work. There are no easy solutions, miraculous measures or useless short-cuts. What is needed is to steer the right course and stick to it.

Before beginning, allow me to say a few words of thanks to Rafael Miranda for his presentation, to the Association for the Progress of Management, to all of you and those who came before you in over 50 years of history, for your dedication to this work - I agree with what your president said - that receives so little gratitude for the improvements it has made to our business world. I agree wholeheartedly with everything that Rafael Miranda said about business leaders and top executives in our country.

I would like to say to all of you that Spain will exit this crisis, but that the most important thing is the work that the business owners of our small, medium and also our large companies can do. That is the most important thing and it is absolutely necessary. And what the government aims to do and is trying to do is generate the right conditions so that you can carry on in the best way possible what is, among other things, a social duty of the first order, which is creating jobs and hence wellbeing and wealth for all of us.

Dear friends,

The basis for conquering the future is understanding our starting position well, in other words, today's reality. Without a good diagnosis, it is difficult to find the right solution. The Spanish economy, following five years of economic crisis, has close to six million people out of work. This figure, by itself, reflects the seriousness and gravity of the crisis that we are enduring. An advanced society, such as ours, cannot, under any circumstance, be insensitive to a situation such as this.

The government I lead, which has now been in power for ten and a half months, found itself faced with an extremely complicated situation, and I don't want you to see these words as an excuse. In politics, what you inherit is not by way of a beneficial list and one must work with what one finds.

This government has one essential objective during this legislature, which is the same as that which I stressed on the day I was elected as President of the Government and the same as that which I quoted prior to the elections during my investiture speech in Parliament last December. This objective is the same and it will be the same for these four years in office: to contribute to Spain exiting the crisis, overcoming this period of recession and returning to a path of growth and job creation. That is the objective and none other, and everything else is a mere instrument for attaining that goal. And that is something that shouldn't be forgotten.

Our starting point was an economy in recession with more than five and a half million people out of work, with more than three million jobs that had been shed in the private sector in the last four and a half years, the disappearance of hundreds of thousands of companies and independent contractors, with impossible public accounts to work with, a credit crunch and a generally discouraged nation. Two areas stood out as requiring immediate action: balancing the public accounts and the reform of the financial sector, as well as ever pending structural reforms.

I will not go on about figures and data that you are well aware of. But to give you an idea, at the end of 2011, the deficit of the Spanish Public Administration Services as a whole stood at 95.3 billion euros, or 8.96% of GDP. In other words, the Spanish Public Administration Services spent 95.3 billion euros more last year than they collected in revenue, in other words they become indebted by more than 15 trillion former pesetas in one year. If we add the aid to the financial sector, the deficit amounts to 100.44 billion euros, or 9.44% of our Gross Domestic Product.

Rafael Miranda spoke in his speech about values and referred to hard work and sacrifice. I believe in that. I believe that improving our values is one of our most fundamental objectives, not only of the government but also of all those who can contribute something to our society as a whole: hard work, the value of our promises, paying what is owed and not living beyond our means. Neither the Public Administration Services nor anyone else can survive by spending more than 15 trillion of our former pesetas per year more than they collect.

And so, that is the figure that existed at the end of 2011.

The public debt at the end of that same year was almost 70% of the Gross Domestic Product - 69.3%, in other words 736.47 billion euros. Our public debt almost doubled between 2007 and 2011.

These figures clearly show the severe worsening of our public accounts, and moreover, we found ourselves with a financial system that needed cleaning-up, with enormous problems to grant credit which directly affects the investment capacity of our companies.

The consequences of this situation are very easy to deduce: if the Public Administration Services are in debt, they use up resources that could have been used for investment or innovation under other circumstances; if the financial system is not healthy, there is no liquidity available; if households are in debt, they don't consume; if companies don't have access to finance they don't invest; if there are problems of competitiveness, the economy cannot grow, and if the economy is not flexible, production resources cannot pass from sectors with less demand to sectors that have the capacity to increase their market share. In such a context, the economy cannot grow and jobs cannot be created. To correct this situation the government has taken a series of measures. How have we done this? By combining essential austerity measures - I repeat, essential measures - with far-reaching structural reforms.

But furthermore, we are convinced, because that is how it is, that we will only overcome this crisis in the context of the European Union and on this basis, our agenda for action is founded on five pillars which I will briefly outline now:

First pillar, strengthen the structure of the European Union, in other words, build more Europe. The objective is to make progress in integration on four fronts: financial, fiscal, economic and political.

With the commitment of the European institutions and Member States, specific results are starting to be seen. In this respect, I wish to highlight the Report on the Future of the Economic and Monetary Union, the so-called "Document of the four Presidents", drawn up by the Presidents of the Council, the Commission, the European Central Bank and the Eurogroup. This report, drawn up at the request of the Council of Heads of State and Government, sets out a solid base for defining the path towards greater economic and political integration in the Eurozone. More specifically, this document will contribute towards the Heads of State and Government determining a work schedule to strengthen the economic framework of the Eurozone at the coming European Council in December.

Spain has actively participated in drawing up this document with concrete proposals for greater banking and fiscal integration.

Second pillar, and this is very important: the correct functioning of the Monetary Union, because access and, above all, the cost of financing is, for all of us, one of our main concerns. I repeat that this is an important matter on which the government is working very hard every day. The risk premium, financing and its cost are basic problems for the Spanish economy. And believe me when I say that this is not an easy matter to resolve, but believe me when I say that this is one of the keys to the future of the Spanish economy. I repeat that the second pillar on which we are working is the correct functioning of the Monetary Union.

Third pillar: structural reforms and integration of markets at a Community level to drive economic growth; a matter which has seen certain significant progress made here.

The fourth and fifth pillars of our economic policy have a strictly national scope, and constitute the commitment that we acquired as a result of forming part of the European project and which the various Governments of Spain have been endorsing ever since.

Actions at a national level have already been implemented. On the one hand, measures to contain public expenditure and increase revenue will enable us to comply with our fiscal consolidation objectives in such a way that, in addition to putting the brakes on the upward trend of our public debt, free up resources for the private sector in order to foster investment and economic recovery.

Many of these measures are painful. Nobody, I repeat, nobody wants to adopt many of these measures and many of these measures did not appear in our election manifesto and I am absolutely aware of that, but if we are unable to reduce our deficit and achieve balance in our public accounts then everything else will come tumbling down because we will have no money and no-one will lend us any money.

I repeat, we cannot spend more than 90 billion euros a year more than we collect in revenue; we simply cannot, and that is why we are taking action. And we are not only acting with a view to the short term, but rather making a commitment to our future, we are laying the necessary foundations for new sustained and stable economic growth.

On the matter of fiscal consolidation to correct the public deficit, we have approved the Constitutional Law on Budgetary Stability and Financial Sustainability, that ensures the budgetary control of all the public administration services; that prohibits any public administration service from incurring a structural deficit as from the year 2020 and ensuring that the debt of the public administration services as a whole stands at more than 60%.

We are all applying very tough budgetary adjustments. I will not go into more detail because it would take all morning, but I do want to say two things to you, so that we are all aware of what we are doing at this time: between 2012 and 2013 the expenditure of the ministerial departments of the government I lead has been reduced by 25.8%: 16.9% in 2012 and next year - 2013 - this is how it is reflected in the Draft Budget being passed through Parliament - by 8.9%. In order words, total expenditure will be reduced by 25.8%.

And let me give you another fact: the cost of servicing debt is greater than the cost of all the ministerial departments, with the exception of pensions and unemployment benefits. We spend more on servicing debt than we spend on all the ministerial departments, including Public Works, the Environment and the traditional investment departments.

A second comment, the autonomous regions are also making a great effort and are taking decisions that are tough, that are painful, that are complicated, that no-one wants to take and which, logically, many people fail to comprehend nor should have to comprehend. But I want to say that what the government is doing and what the autonomous regions are doing is essential. We knew that this was going to be very difficult and very complicated, and we can now see that; but this is essential and necessary, and this is what will enable us in the future to grow in a sustained and stable manner, recover levels of investment and increase the wellbeing and wealth of us all.

Just recently we have set up a Committee to Reform the Public Administration Services, something that has been pending since about 1978. Its aims include administrative simplification, the reduction or elimination of duplication, also of administrative procedures, since there is excess regulation in our country, and of course improve efficiency in the management of our public services.

Next year we will also implement new tools that will contribute to improve credibility in terms of fiscal policy, to guarantee compliance with the objectives of fiscal consolidation and confirm to the economic stakeholders our desire to contain our public sector debt. Among these new tools is the Transparency, Access to Public Information and Good Governance Act, which incorporates new public management and economic resource obligations, and the regulation of the Independent Fiscal Authority, that will oversee compliance with budgetary regulation and the early detection of possible deviations.

Ladies and gentlemen,

The results of these efforts, although we are still in recession, are starting to become visible. The State deficit has been reduced from 4.26% in August to 3.93% in September, and the deficit of the autonomous regions stood at 0.9% of GDP at 30 June, which is 43.6% less than one year ago. In short, the effort at containing expenditure and increasing revenue equates to 3.5% of our GDP, about 35 billion euros at the most, discounting the effect of the economic cycle and servicing debt.

We are hence making a historic effort in this country; one that is very hard to do but which needs to be done.

On a parallel basis, in terms of the fight against fraud - both tax and employment fraud - certain welcome results are also starting to be seen. Between January and September 2012, tax fraud collection was up by 8.5 billion euros. I want to say that the government is going to take, and is already taking this matter very seriously. Furthermore, more than 61,000 jobs in the hidden economy have also been detected.

Ladies and gentlemen,

In addition to the deficit, as I said at the beginning, another of the problems that we are tackling is the difficulty in accessing finance. There is no credit available, but we are establishing the conditions to change that.

The recovery of a healthy and solvent financial sector is an essential requirement in order for credit to once again flow to companies and households, and, with that, to foster the recovery of growth and employment. Thanks to the initial reform measures, the level of reserves of real estate assets has increased and the demands of an additional cushion of capital is being guaranteed. This thus contributes to reducing the uncertainty surrounding the financial sector, since the average coverage to real estate exposure has gone from 18% to 45% and the total amount of reserves has increased from 55 billion euros to 137 billion euros, out of a total balance of 307 billion euros.

Furthermore, with the Memorandum of Understanding that we have signed on the occasion of the agreement reached to implement the financing mechanism for banks, we have implemented a more ambitious process to tackle the restructuring of the Spanish financial system once and for all. This process is based on the independent evaluation of the recapitalisation needs of the banks, calculated at a maximum of 55.9 billion euros, the recapitalisation of entities and injection of public aid and the creation of the Asset Management Company, which will facilitate the definitive clean-up of the bank balances.

Ladies and gentlemen,

Another cause of the liquidity problems in our economic fabric was caused - and I should say is still caused, as you know better than anybody - by difficulties in collecting on invoices outstanding for services rendered to public authorities.

The extraordinary liquidity measures implemented by the government have alleviated the problem in part, although I am absolutely aware that there are still problems. Specifically, the Supplier Payment Plan has injected to date more than 27 billion euros to the benefit of more than 135,000 companies. A breath of fresh air for Spanish companies and independent contractors. This shows our commitment to those creating wealth and employment, because, at a time of budgetary consolidation such as this, the government has not thought twice about making more than 27 billion euros available to companies and independent contractors, an amount equivalent to 2.5% of GDP.

Furthermore, the State's financial agency - the Official Credit Institute (Spanish acronym: ICO) - is attending to key sectors and sectors with special needs. In the first nine months of 2012, the ICO has granted credit amounting to more than 23 billion euros.

At any event, in the same way as I said that resolving the problem of the public deficit is a priority, I would repeat the second assertion I made here: it is not enough in itself, but necessary that the financial sector once again fulfils its role, which is none other than channelling savings into investment, and we must remove, as soon as possible, this fundamental obstacle to economic recovery.

But more things are necessary. Resolving the problem of the public deficit, or of credit, is not enough; we need to set our minds to undertaking all the structural reforms that are necessary for our economy to gain in flexibility and in competitiveness.

In this respect, one of the first and most ambitious commitments of this government was the reform of the labour market. We couldn't sustain a job market structure that was incapable of adapting to the globalisation of the economy and, in spite of still finding ourselves in recession, the first results of having implemented this reform are starting to be seen.

On another note, we attended to greater salary moderation as well, which helps to stem the tide of jobs being shed and to foster new hirings. According to figures from the OECD, unitary labour costs fell by 0.4% and 0.7% in the first and second quarters of 2012, while they increased in the Eurozone by 0.3% and 0.4%, which undoubtedly favours the competitiveness of the Spanish economy.

Another key element is the training of workers. The figure of 50% unemployment among young people is closely related to the school drop-out rate, which is why the reforms being undertaken on education matters are a priority to help drive the economy.

I want to dwell for a moment, just a moment, on a reform that I consider to be key for the future of our young people and for our country. I am talking about Dual Vocational Training, also known as the "German model of Vocational Training", implemented just a few days ago.

Under this model, at least one third of training hours are carried out in a company, and the student, at the same time as receiving training for carrying on the functions of a job position, can receive a training salary. In this way, students can gain direct access to the job market and companies can train young people in the skills they require. To give an example of something close at hand, no-one knows better than Ford the training a young person needs to receive to work at their plant in Almusafes.

This professional training model is good for our young people because it improves their employability and the work and salary opportunities they gain access to; but I also believe it to be very good for our companies as it enables them to plan the learning they provide according to their own specific requirements. I encourage all of you, as executives and company leaders, to get involved in this project that aims to resolve one of the main problems in our productive system.

Another measure that we have adopted to promote the employment of people under the age of 25 has been the implementation and development of the Training and Apprenticeship Contract; a contract with maximum social protection, including unemployment benefit, and which offers 100% discounts in terms of national insurance contributions for those companies with less than 250 workers and 75% for larger companies. In this way, we are trying to incentivise collaborating companies to incorporate a productive system for those young people who abandon their studies and who need their first assistance in acquiring a qualification and securing a job position.

And I would like to say that, with the same intention, we will soon present the Employment and Young Entrepreneur Strategy aimed at tackling the problem of young people out of work. As I said at the beginning, the country's main need is to create jobs.

Ladies and gentlemen,

I don't want to abuse your kindness. Each one of the matters that I have referred to could merit a speech of one, two or even three hours, but I just want to outline three or four things before entering the final part of my speech.

The Market Unity Guarantee Act will soon come into force, aimed at ensuring the free circulation of goods and services throughout the country. This will be a law that directly emanates from one idea - freedom as a condition precedent for prosperity. We are starting, and we share this with business leaders like yourselves from many places around Spain, from the conviction that in 21st Century Europe, he who puts up a barrier impoverishes he who is on the other side; he who fragments markets ruins the opportunities of its entrepreneurs, and he who makes a society smaller ruins the future of its citizens.

We live today in a world that is opening new doors and we don't have to go far to see that. Right here, in the dynamic strip of the Spanish Mediterranean which extends from the south of Andalusia to the border with France at Girona, one of the strategic commitments of this government has been developed - an infrastructure made to last and to serve as a platform to help re-launch our economy: the Mediterranean Corridor. This is a first class initiative designed to meet the demands of our entrepreneurs that successfully and increasingly compete in an ever more inter-connected world and a borderless Europe. This is a sign of the times and Spain is not prepared to let anyone make us miss this train.

Ladies and gentlemen,

Along the same lines, I wanted to say to you that our status obliges us to have global ambitions. I would like to announce that, last Friday, Spain was granted observer status at the Pacific Alliance, a new integration process that is forging its way, made up of some of the more thriving countries in Latin America, such as Mexico, Colombia, Chile and Peru. We are the first European country to form part of this Alliance and this is a great opportunity for Spain, and specifically, for Spanish business leaders. It is a new door opening for our vocation for foreign trade that is not confined to Latin America, where the leading role of our companies is spear-heading the growth and development that a great part of the continent of America is experiencing.

The Pacific Alliance is particularly focused on Asia and this offers us a gateway to opportunities in Asia that we shouldn't miss out on. If our companies already lead the way in business areas on two continents, a third one awaits us which is closer than ever.

Spain is thus a good vehicle for tackling major global opportunities in the European Union, in America, and now also in Asia; a great vehicle where we all fit and where no-one is superfluous.

Ladies and gentlemen,

We are working along these five lines of action: controlling the public deficit, structural reforms, particularly restructuring the financial sector, structural reforms in Europe, greater European integration and a European solution to the problems of the risk premium, financing for all and the cost of financing.

We already knew, as I said at the beginning, that things weren't going to be easy and they are not easy. We have presented the General State Budget for this year 2012, where we stated that Spain was going to have negative growth this year of 1.7% and we said that there would be 600,000 more people out of work. We stated this in the most important document that a government presents to Parliament - the General State Budget - because it is better to tell the truth and face reality, and from then on start to operate and take decisions.

But in the same was as I say this, I will also tell you some other things: the increase in the competitiveness of our economy can already be seen in figures on the foreign trade sector.

The Spanish economy, as you know better than I do, has traditionally been characterised by its structural trade deficit; however, this situation is starting to be reversed. In the first eight months of 2012, the trade deficit stood at 19.46 billion euros, 26.4% less than in the same period of 2011. For the first time in our history, and this is a very positive figure, because of what it also represents in terms of our foreign trade debt, we have a trade surplus with the Eurozone, and within that, a trade surplus with countries as important as France, Belgium and Italy while the deficit with Germany is shrinking quickly.

To this positive data on the balance of goods must be added the traditional surplus in services, particularly tourism services. In the first eight months of 2012, the tourist surplus exceeded 22 billion euros, which represents a clear improvement on the same period of last year.

In turn, and this is also a very positive figure, the financing needs of the Spanish economy from overseas fell in the first eight months of 2012 by 42% on the same period of last year.

We are removing one of the nooses that has traditionally strangled the Spanish economy and in 2013, for the first time in history, Spain will have a foreign trade surplus.

It is not my intention whatsoever to show optimism. The situation is still very serious and the efforts to be made are still very great, but we do have certain positive figures that show that our traditional imbalances are being corrected and this is being done at a good pace.

The Spanish economy will return to growth in 2014. That is encouraging but it doesn't mean that our task is over; quite the opposite, we still have a long path of reforms ahead of us. But if we don't let ourselves become discouraged then I am convinced that we will reach our goal. Our course is set and I have no doubts about our ability to maintain this course; no doubts whatsoever.

This government's only interest is Spain's general interest, which is economic recovery and a swift return to growth and job creation.
Things are tough and, as I said earlier, it is hard to take certain decisions, and many battles need to be fought, not all of them here, because many very important decisions lie with the European Union. Rest assured that this government will do this because it is fully aware of its objective, of the course to take and of the instruments that it needs to set in motion.

I will finish now. "Conquering the future" - I will leave that job to this Conference. A Conference, Mr. President, for the presentation of which you have chosen this phrase from Victor Hugo, among other things, which I will read as well, as I said at the beginning, "The future has many names. For the weak, it means the unattainable. For the fearful, it means the unknown. For the courageous," which is what we must all be, "it means opportunity". And I say to you that we are obliged to convert challenges into opportunities and opportunities into success. That is what our commitment to Spain and the Spanish people demands of us, and that is what everyone expects of us.

These are difficult times, with serious hard work and sacrifice required, we are earning our right to hope; hope based on the conviction that we are capable of doing this. This country has gone through many crises; this is probably not the worst, or perhaps it is. There are opinions for all tastes. But we have always overcome crises. Thirty years ago, Spain was how it was and today, Spain is what it is.

We joined the Euro, and when we joined the Euro - I know this because I was a member of the government - there were twelve and a half million Spaniards in work; well today there are more than seventeen million, despite the crisis, with all its problems and difficulties. And if the Spanish entrepreneur has been capable, and he has been, because it wasn't the government that created any new jobs, of creating five, six or seven million jobs, then I am absolutely convinced that he will once again be capable of doing this in the future. And the way in which we do that is the way in which your president, Rafael Miranda, asked for it to be done when he said that - here it is as well - "it is not a question of sitting and waiting for the future to come, but of going out and conquering it".

Tomorrow is not yet written, our tomorrow, our common future, must be conquered and written by us all.

And the only thing I can say to you, in closing, is that you can rest assured that the government which, like any human being, and the government is made up of human beings, may get things wrong, but where it will not get it wrong and where it will not waver is in taking decisions that we believe are good for the general interest of the Spanish people.

Thank you all very much.