Speech by President of the Government and ensuing Q&A session at the closing ceremony of the 17th Congress of the Family Business Institute

17th Congress of the Family Business Institute, Alicante

Ladies and gentlemen, a very good day to you.

First of all, allow me to thank Javier Moll, president of this institution, for his words of welcome and to all of you for having invited me again to share the closing ceremony of this event.

On this occasion, you have returned to Alicante, the city where, 17 years ago, this type of 'tour' began that takes you to different points of our country when holding your congresses. I hope that you have had the opportunity, during these few days of hard work, to travel this land and observe the changes that have taken place and the intensity of economic take-off over the last few years.

At this 17th National Congress of the Family Business you have been honoured by the presence of our King, Felipe VI, at the inauguration of the event yesterday. His Majesty, with the insight that characterises him, has once again known who to meet with, what to say to them and, in particular, what to ask of them. I will not repeat his words from yesterday, but I believe he hit the mark by underlining family businesses as key players in the fight against unemployment.

By highlighting the distinguishing characteristics of this type of company and combining them with innovation and entrepreneurship he sought to place special emphasis on the creation and maintenance of jobs. That is today's fight and everything else is merely an instrument to this end. We have come out of recession, but we cannot make an outright assertion that we have exited the crisis until such time as the unemployment figures have been significantly reduced. For that reason, I can but add my own stamp to the words of His Majesty and request that all of you make a renewed effort in the fight against this blight of unemployment.

Ladies and gentlemen,

The closing words of my speech on 7 April last were more or less the following, "…and I reiterate that, if you are kind enough to invite me to your assembly again next year, we will have the opportunity to verify what I have proposed here today". Well, not even a year has passed, not even seven months in fact and I am here again with you, not at one of your assemblies, but at one of your congresses. I am meeting the commitment I made with this institution back in 2012, when I had recently taken office as the President of the Government, when I reminded you of my words from the year before, "…if the people of Spain place their confidence in us, you will not have me here once a year at your congresses, but on a permanent basis, ready to listen to you, to share your concerns and to talk about your proposals".

But the shortened period between my appearances creates a difficulty for me: each year I have looked back with you and commented out loud on the progress of the Spanish economy in the 12 months since my previous visit, with the well-known rhetoric of, "12 months later… is our economy the same, better off or worse off than then?" As I said before, not even seven months have gone by, but I believe this is enough time to seek confirmation of what I said to you at the start of April this year.

So, back in April, we talked about the change in cycle, of how the Spanish economy had put the recession behind and was starting to move into an expansive cycle. While this expansion was still budding, it was grounded on firm foundations, laid with the sacrifices and efforts of the people of Spain as a whole. Firm foundations that are the result of more than two years of reforms; from the labour reform to the reform of the financial sector; from the energy reform to correcting the public sector deficit; from the reform of the public administration services to a great number of other measures to increase the competitiveness of our economy.

So, can we say today that this process is being consolidated? Let's look at some figures.

The third quarter of this year in terms of economic activity has seen growth of 1.6% in Spain in year-on-year terms; the second quarter saw growth of 1.3%, also in year-on-year terms; the first quarter saw growth of 0.7%; the fourth quarter of last year of 0.1% while we were still in recession in the third quarter of last year, with the Gross Domestic Product contracting by 1% in year-on-year terms.

Hence, we are growing and, moreover, in a progressive and continuous manner. Hence, compared with a drop in the GDP as a whole last year of 1.2%, this year will see a rise, according to the government's forecasts, of 1.3%. And allow me to pause for a moment on this point; we are not only going to grow by 1.3%, which should still seem little to us all; we are going to grow by 1.3% against a backdrop of a fall of 1.2% the previous year. In other words, we are growing instead of shrinking, we are progressing instead of declining, and we are improving instead of worsening. A volte-face of 2.5 points is not only welcome news but the confirmation of a change in course.

This dynamism is in contrast to the situation in other major European countries, where economic recovery is losing steam. From among the larger countries, it is Spain that has enjoyed most growth in the last year and the one with the best outlook for growth for the year to come. As we said before, in the third quarter of 2014, Spain has grown by 1.6% year-on-year, more than Germany (1.2%), France (0.4%) and Italy (-0.1%). Looking ahead to 2015, the official forecast for growth for Spain, made by the Spanish Government, is 2%, while for Germany, by the German Government, it is 1.3%, for France, by the French Government, it is 1%, and for Italy, by the Italian Government, it is 0.6%.

This not only states but indeed confirms that the information published by the International Monetary Fund not long ago: Spain will grow more than the other major economies in the Monetary Union.

We have been made aware of the Commission's forecasts today. According to these, Spain will grow this year by 0.4% more than the Economic and Monetary Union - the Eurozone; next year by 0.6% more than the Eurozone, and in 2016, by 0.4% more.

And this growth in activity has translated into job creation. In the last two quarters, 553,400 net jobs have been created in Spain. This figure has, moreover, a complementary feature: with the exception of agriculture, there has been growth in the services sector, but also in the industrial sector (128,500), and even in the construction sector (80,400 new jobs). Hence, activity is growing, assets have grown in these six months and two sectors are starting to lift their heads above water - industry and construction - which had got us used to seeing nothing but bad news for quite some time. The recent news that industry in the Eurozone has grown slightly in October should not thus come as any great surprise, but with a contrast between growth of countries like Spain, Ireland and Germany, and the declines posted in Greece, Austria, Italy and France.

It should come as no surprise that this has happened, given that in a sector such as car manufacturing, which some people thought was about to leave Spain, the transformation has been radical and, if there are presently more than two million vehicles manufactured per year in Spain, in France there are around 1.7 million, in the United Kingdom around 1.6 million and in Italy around 600,000 per year. And all of this without those factories based in Spain benefitting from the "headquarters effect". The" headquarters effect" in our country is called competitiveness.

Ladies and gentlemen,

Also here, on the issue of employment, we can confirm that the change of course is consolidating in Spain; I repeat, the change of course. Until just a few years ago, in order to generate net employment it was necessary to have growth in activity in excess of 2%, nowadays, with figures that are still lower than this, we are seeing employment increase and, at the same time, unemployment fall: there are 505,600 fewer unemployed in the second and third quarters of this year. A fall in unemployment has been seen in the services sector, but also in the construction sector and in industry, and - allow me to be especially pleased with this figure - among those who lost their job more than a year ago.

But still, even now, and this mustn't be forgotten, our unemployment level is literally unbearable (23.7% of the active population), and it has fallen by more than three points since the first quarter of 2013. In these last two quarters, more than 6,000 people have found a job each day and 5,500 have left the dole queues.

Just this morning we have been made aware of the recorded unemployment at the former INEM and the National Insurance contributor figures. As is traditional in the month of October, unemployment has posted its seasonal surge, of more than 79,000 people, on the figure for September; a figure which, at any event, is less than in October 2013; or from October 2012, when there were 128,000 more; or from 2011, when there were 134,000 more. In seasonally-adjusted terms, the way in which economists, as you are aware, prefer to handle these figures, recorded unemployment fell in October by 19,393 people. In year-on-year terms, there are currently 284,579 fewer unemployed recorded in Spain than a year ago, which represents the largest year-on-year fall in the month of October since 1998. And, if we compare today's figures with the unemployment highs in recorded unemployment, which were reached in February 2013 (5,040,222) we can see an overall fall of 10%, which equates to 513,418 people.

Hiring continues to significantly improve and most particularly, and this is also a very important statistic, permanent employment.

As regards National Insurance contributors, the number has risen again in October by close on 29,000 people to almost 17 million contributors in total. In year-on-year terms - October of this year compared with October last year - the number of contributors has risen by 330,147, at a rate in excess of 2%.

A further ratification of what represents the change of cycle, at this point last year, contributor numbers had fallen at a rate in excess of 2%, with the loss of 375,000 contributors in 12 months. In other words, following nine consecutive months of growth in the number of National Insurance contributors, we can certify that the change in course is also undeniable in terms of contributor numbers.

In the foreign trade sector, despite the difficulties - and this is a worrying issue - felt by the stagnation in the Eurozone, the dynamic nature of our goods exports is noteworthy, continuing to hit new records month after month. Hence, in the first eight months of the year, this grew by 0.9% year-on-year, to 157,192 million euros.

Our exports have also shown their strength in the services sector, both in the traditional tourism sector and for other services. Specifically, exports of non-tourism services grew by 6.8% in the first half of the year.

And in terms of tourism, Spain remains one of the main tourist destinations in the world. To September this year, 52.4 million inbound tourists have visited our country, a 7.4% increase on the same period last year. By the way, almost 10% of these tourists, more than 5 million in total, came here, to the Region of Valencia. And tourist spending has also risen correspondingly- by 7.3% in the first nine months of the year - to exceed the figure of 50 billion euros.

This dynamism in the foreign trade sector, which we have been seeing since 2012, is being driven by the significant recovery in the competitiveness of the Spanish economy. Our prices are controlled, thus allowing us to export our goods and services at increasingly competitive prices.

In Europe, Spain heads up the improvement in the competitiveness indicators for last year (2.3%), clearly ahead of Germany (1.1%), France (0.3%) and Italy (0.9%). If you look at the progress since we came to power, Spain stands out even more so: the improvement is of 8.3%, when in Germany, in fact, there has been a certain decline and in France and Italy there have been nominal changes (0.4% and -0.4%, respectively.

In another scheme of things, and after the far-reaching clean-up of the financial sector implemented in Spain - I can assure you that this has been one of the most complex operations undertaken in recent times - the latest European stress tests have shown the good state of our banks, which have obtained a more than noteworthy level of solvency. In fact from among the major economies, the Spanish and Dutch financial sectors, are the only ones in which no financial institution has failed the tests.

The results of this exercise clearly show that the balance sheets of the Spanish institutions rigorously reflect the value of their assets and that the impact of an adverse scenario on their solvency would be relatively limited. For this reason, I can say to you that the clean-up process, the reform and the restructuring of the Spanish banking system undertaken in the last few years has led to positive results, and that the Spanish institutions can face the future with healthy balance sheets and an acceptable position in terms of solvency.

It should be pointed out that BBVA and Santander have obtained the best results from among the institutions which, for their size, are considered of systematic importance in the Eurozone with a 9% and 8.9% core capital ratio respectively in an adverse scenario. This is a very positive figure; all we need now is for more credit to flow and flow faster than in recent times.

Moving on to fiscal consolidation, our commitment remains valid: since the start of the legislature we have met our European commitments and this year won't be any different. Moreover, I would like to highlight that in Spain we are continuing to reduce the public deficit (from 6.3% in 2013 and we expect to 5.5% in 2014) and we have made maintaining a responsible fiscal path compatible with growth in economic activity and with a tax reform that will help support recovery. Meanwhile, other countries anticipate ending 2014 with a public deficit in excess of that registered for 2013.

Another factor, and I give this its due importance, which serves to ratify the change in course, and that is that the latest figures on tax revenue in Spain show sustainable growth in the tax bases of small- and medium-sized enterprises, an unequivocal sign of the progressive extension of growth and employment. In the 10 first months of this year, growth in Value Added Tax revenue of SMEs has amounted to 9%.

All of this leads us to an unprecedented improvement in the perception of our economy in the international markets and that allows us to presently receive financing at less than 1% at five years and around 2% at 10 years. In 2012, today's 2.15% was then 7.1% in financing at 10 years. This also allows us, in times of turbulence in the markets, such as a few weeks ago in light of the scare of a European slowdown and of the problems of certain countries to exit their bailout programmes, with Spain receiving a penalty that is clearly less harsh than for other Member States and, moreover, for a shorter period of time.

Hence, all these efforts and reforms that have been carried out in the last few years are starting to bear fruit and - most importantly - place Spain in a better situation to tackle the future.

Congress members of the Family Business,

I ask you to forgive me if I have been a little excessive in my use of figures but there are issues in which, as the guru Ortega said, "either you state it accurately, or you produce literature, and if not you should be silent". Economic issues require precision and, furthermore, we are not here today for mere rhetoric.

In short, ladies and gentlemen, in response to the question as to whether we are the same, better off or worse off than a few months ago, or to the question of whether we have been able to consolidate the change in course, I believe that we can assert that the response in both cases is in the positive. On 7 April this year, when I said to you at your Annual Assembly that the winds of change were clearly perceptible, I was doing no other than confirming a climate of greater confidence that was spreading among our business sectors.

In fact, the Barometer of the Family Business, which you run, showed in June that 63% of Spanish family businesses had either a positive or a very positive view of their situation in the short term, which represented a very significant increase on the figures for six months earlier. Your companies, your family businesses, were telling us that in the last six months their billing had increased and their workforces had either remained stable or increased, and that this opinion was clearly above the European average. When two thirds of your companies expressed this kind of view compared with the previous six months, they were right, as we have been able to verify with the figures we have seen to date.

Confidence is a key factor in this: confidence founded on constant work in which everyone, I repeat everyone, has known how to maintain the course steady.

In contrast to those who say that these improvements are not being seen in society, the so-called Consumer Sentiment Index clearly shows the opposite: in October this index reached 86.8 points, compared with 65.3 points the previous year and 44.8 in October 2012. And the most positive sign is from the Expectations Indicator which was below 60 in October 2012, had risen to close on 80 in the same month last year and it now stands at 99.3.

Those who have made sacrifices, those who have made an effort, those that continue to do so, feel that things are improving, although many feel that this is happening more slowly and with less intensity than they deserve.

Well, ladies and gentlemen, in order for this not to be a flash in a pan, we must maintain all these actions and policies that have allowed us to straighten our course and start, and I mean start, our recovery. We cannot afford to be self-complacent, among other things because the unemployment figures that we were talking about earlier, although diminished, remain, as I also said in this speech, at unbearable levels.

For that reason we must push on. In April, at your Assembly, I said the following, "we will maintain everything that is already under way, but we will take further steps, because this term of office, as I have said on other occasions, must be an ongoing process of reforms". And I mentioned some of the reforms that would be implemented during this year, from the tax reform to the Law to De-Index the Economy, the termination of the regulatory implementation in the electricity sector and the new mechanism to set energy prices, the reform of the gas market, the de-regulation of the railway market, the new Intellectual Property Act, the boost to business financing, a new professional drive for employment and the incorporation of the Plan to implement the youth employment guarantee. Many of these measures have already been published in the Official State Gazette, others are in their passage through Parliament and the few remaining ones are about to be submitted to Parliament.

Congress members of the Family Business,

When we came to power at the end of 2011, our intention was to get Spain out of the rut into which we had fallen, straighten out our path and put our economy in a condition to grow in a sustainable and stable manner and, above all, capable of creating jobs and reducing unemployment. This effort has been ongoing and, if we are not yet satisfied, which we are not in any shape or form, we can at least feel motivated by what we have achieved so far.

Just two years ago I was being asked about when I was going to ask for a bailout; not whether I was going to ask for one, but when I was going to ask for one. No-one understood why we didn't ask for a bailout. We were accused of being inactive because we didn't ask for a bailout. The Euro was given a lifetime of three, four, five or six months. There was talk of there being two types of countries with two different types of Euro and it doesn't need saying in which of the categories we were in. The whole world was saying "we will remain in recession" and every quarter was another quarter in recession and every quarter we saw how unemployment rose.

Well, ladies and gentlemen, that was two years ago. There is a certain trend, which I will not subscribe to, to not live in the reality. It would have been very irresponsible and unrealistic of me to tell you two years ago how well things were going, in the same way as it would be very irresponsible and unrealistic for me now, two years later, as many people do, to tell you that things are the same now as in 2012.

Every so often we should return to an old tradition of talking well about our country. Spain is a great country, with one of the most important economies in the world, one of the countries with the highest per capita income in the world, with a welfare system like no other. When someone in Spain is attended for an infectious disease it is not necessary, as in other countries, to take a cheque to the hospital for 500,000 dollars. No not here, because here there is a welfare system, the one that you all know.

When I recently went to visit one of the most important countries in the world, I commented that in Spain the Spanish Government spent 40% of its budgetary resources on maintaining the public pension system, while there they spend precisely nothing. Spain has a welfare system like no other, along the lines of some other countries in Europe which are the only ones that can even compare theirs with ours.

Spain has infrastructures like almost no other. Spain has companies that have known how to do many important things outside of Spain, which today are constructing some of the most emblematic public works being built around the world. Spain is the second leading country in the world in terms of inbound tourist numbers; that's not because they find inconveniences or because they are forced to come here but rather it is because we have a good tourist sector, good public services and good infrastructures.

Spain is the country in Europe to receive the most Erasmus students, more than Germany or France. There must be a reason for that, because I don't know any student from any country in Europe that is forced to come under the Erasmus programme to Spain.

That is Spain; along with many other things. So, I for one am not going to sign up to those events that take place every so often in our country, where nobody exactly knows why it is that we seem to have to punish ourselves mercilessly, and I ask you not to either.

There are many good things in our country, there are very capable people, there are business owners that are capable of overcoming difficult situations. We have overcome many things; we have gone through a very complicated period. There are still people having a tough time, we must carry on making an effort, but, having said that, Spain is a great country, a great nation. And right now it is mine and it is yours.

Thank you very much.

Q&A session with the President of the Government

Q: The questions are mainly of an economic nature, but there are also some, as is to be expected, that are political, and perhaps it is a good idea to start with this one. Bearing in mind the current territorial debate in our country and the question of the consultation in Catalonia, are you in favour of starting a process of constitutional reform, as some political parties have called for? And if your answer is yes, in what way? How far would you go?

President of the Government: Really, this question, as you all know, is probably the most important today for all the people in the whole of Spain, and undoubtedly for the Government of Spain. It is a subject of enormous importance for all the reasons that none of you are unaware of.

Also, I don't want to go on for too long in my explanation, because we are faced with a subject that could give rise to - and in fact has done so - speeches that may never end; because this subject can be approached from very different angles and with very distinct points of view. So, as the question is whether I am prepared to undertake a reform of the Constitution, I will limit myself to the Constitution and will not enter into other considerations on other subjects that have arisen in recent months.

I would like to give you a brief reminder of the past, you know what the situation was, but from time to time it is good to have a reminder. In 1978, not without difficulty and after a period of nearly forty years of an authoritarian regime, the Spanish people of the time - and I also voted, I was twenty-three - were capable of reaching an agreement to approve a Constitution. They were people with different political and even existential points of view on many things; people who had been part of the previous regime, even as ministers; people who had been living outside Spain for many years, in exile; others who were in the opposition. Their way of looking at things differed. But a major effort was made and a text of the Constitution was drafted that set out the rules of the game. It was a constitutional text that neither one side nor the other liked very much, but that was its great virtue: that neither one side nor the other liked it very much. It was a constitutional text that in the end served everyone with respect to their future.

What did this Constitution mean for Spain? This Constitution meant democracy. Today democracy appears something normal, but at that time it wasn't; it was democracy, which is no small thing. Democracy is the guarantor of our freedom, of our fundamental rights. The model of State was also established, and that is very important: a territorial organisation of the State, a model of State that is absolutely different from what existed at the time.

For that model of State at the time everyone yielded ground in their proposals. There were people who did not want a State of Autonomous Regions to exist; they wanted a centralised State and nothing more. And there were others who would probably have wanted to go further, as was the case, for example, of the Basque Nationalist Party, which abstained for that reason. But in the end, a decentralised political system was created that I can tell you, apart from the case of Canada, and it is debatable because it is a matter for debate, is the most decentralised in the world.

In other words, what we have in Spain does not exist in any other part of the world. The Government I head up only spends 20% of total Spanish public expenditure. It carries out economic policy, foreign policy, defence, home affairs, but not in all the autonomous regions, and major infrastructure works. The autonomous regions account for between 38% and 39% of total public expenditure, close to double the amount spent by the Government of Spain; then there is a very important expenditure item, which is pensions, and I'm not counting it here, and the local authorities account for 13% or 14%.

So we have a State with a much greater level of decentralisation than in the United States, much greater than in Germany and much greater than the few - and they really are few - federal states as they are called, that exist in the world.

Can this Constitution be modified? Yes, we have modified it twice, on two occasions: one of them was to give the vote for foreigners, EU residents, in municipal elections; and the last time was not long ago, when we incorporated into the Constitution the European Union Fiscal Compact to control the deficit and public debt, and to act with a balanced budget. My party voted for these two reforms, and it voted for them, basically, because they were sensible and very positive reforms; and because if not, we could not have done what was necessary for Spain.

Now you say to me "there are some parties that want the Constitution to be reformed." There is nothing bad in that. There are things that it is good to adapt in life, and time has passed since the Constitution was approved in 1978. You say to me: "Are you prepared to?" I am; I am prepared to talk, but I would like you to tell me one thing: what is it that people want to reform? In other words, if I know what it is that these political parties want to reform, I am prepared to talk about a reform of the Constitution. I have asked some of these parties that want to reform the Constitution, what do you want to reform in the Constitution?

And now I am going to ask some questions. The first: Is this to please someone? Is it to prevent a problem that has been generated in recent times in Spain? Is it for that reason? I don't know. Would this reform be of use to keep that person satisfied, or would it be of no use, as some people think?

And given that, what are the questions that have to be asked? What is it that people want? A reform with more powers for the autonomous regions or with fewer? If it is with more, what powers? What powers does central government have to give up? The major infrastructure works, even though they run through five autonomous regions? Foreign policy, defence policy or economic policy? Do they want more powers? Do they want fewer? Because there are political parties that ask for central government to take back some powers. These are political parties that are represented in the Lower House of Parliament.

What should we do with the model of financing the different Spanish autonomous regions? Do we all agree on the Agreement and the Compact? Because there are some political parties in the Lower House of Parliament that want them to be withdrawn. Should we extend the model of the Agreement and the Compact to all the autonomous regions or only some? Are the powers equal for all the autonomous regions, which is what one assumes a federal state means; or on the contrary, should we go for what some call an asymmetrical federalism, though these are two words that appear contradictory? Are we moving towards equality, as some people want, or towards difference, as other political parties want? In what laws are the "differential traits" between the different autonomous regions enshrined? These are some of the questions that have to be asked.

Is it possible, do you believe, to forge a Constitution at this point in time with the same level of consensus as the Constitution of 1978? Do you believe that is possible? I believe that it is possible that the People's Party (Partido Popular) and the Socialist Party can reach an agreement, I believe that is possible. But do you believe that it is possible that those who want the right to self-determination are going to support this process? Or do you believe we should incorporate the right to self-determination into our Constitution; something that does not exist in any written constitution in the world? It did use to exist in the constitutions of Yugoslavia, the Soviet Union or Ethiopia.

These are the questions that have to be asked, and they are not minor issues. Does that help resolve anyone's problems? Are we going to resolve them with a reform of the Constitution? And what is this reform? Do we do away with the principle of equality of all the people of Spain, or not? Symmetrical or asymmetrical federalism? More or fewer powers for central government? Is this the right time now? Are we going to have a Constitution in Spain with more or less consensus than the previous one?

Let me be sincere: I appreciate this debate, I understand this debate, I understand everyone. Everyone knows what undoubtedly has to be done; the problem is that I have the responsibility that the president of the government of a country has.

So I am prepared to listen; but I am still waiting to see from those who suggest a reform of the Constitution any details rather than simply a discourse; there is nothing wrong in that, but there are no details. There are people who say: "Look, let's open up the can of worms - if you pardon the expression - and see what happens." Well, what are we going to debate there? The form of State? Is this debate good for Spain at the present time? Are we going to debate whether national sovereignty is national or is divided, unlike what happens everywhere else? Are we going to debate whether we continue with the process of European integration, which I believe all the Spanish people want; or instead, while some are moving along the path of integration and union are we going to begin with a different process here?

These are the major questions and this is an issue in which I believe slogans have no place. What is important is content. In general, this is the case in any facet of life, but in an issue of these characteristics such as the rules of the game, which is what a Constitution is, I believe that it is even more so.

To sum up, I am prepared to listen to all the proposals for reform of the Constitution that are made; all of them. But I would like them to be expressed and I would like them to involve a minimum of consensus, because I believe that at this point in time a Constitution for only two parties is not how we best serve the interests of Spain.

Q: Many reforms have been carried out. Some were mentioned in your speech, and others have been analysed in our internal vote in the Lower House; but it is clear that there are still reforms that have to be tackled. If you are re-elected as President of the Government in more or less a year's time, what will your priorities be in this respect?

President of the Government: In this case I do see proposals because, for example, I see that some people want to abolish the Budgetary Stability Act; some people also want to do away with the labour market reform; I suppose that isn't the case with the restructuring of the financial system, because I don't know precisely what operation would be chosen instead; and there is also the reform of the electricity system and many others.

My ideas are based on the following: when we came to government, in the first speech I made in Parliament I said that in my opinion five things had to be done; first of all, to try to put a stop to the danger we were facing - I'm talking about early 2012; and then, take stock and begin to achieve some economic growth and then job creation.

They were five points. First, fiscal consolidation. Believe me, it was very difficult to carry out fiscal consolidation, to reduce the public deficit, in a period of recession, because of course Spain in 2012 had a negative growth of 2.1%, and in 2013 of 1.2%; and during this time we had to reduce the public deficit by three points. It wasn't easy, believe me, but we did so while maintaining the core of the welfare system, as I said in my speech earlier. So first, control of the public deficit. In the future, we will continue to control the public deficit. We would like it to reach 5.5% this year and the target for 2015 is 4.2%. I hope that, despite the fiscal reform, which reduces tax revenue, we can do so. That is the first priority.

Second, structural reforms. Parliament and the Government have carried out some important structural reforms in this term of office. Such structural reforms are not a feature of governments that are inactive; this Government has acted, it has acted a great deal doing things that are necessary. We are going to continue with the structural reforms. I also explained in my speech in April, when I appeared before you all at the Casino de Madrid, because the General Assembly was held there, I announced what we were going to do this year. Nearly everything has been carried out. Well, the Fiscal Reform Act enters into force on the first of January, there is the De-Indexing Act, some Regulations still have to be implemented, certain things in the energy sector, gas… but we are going to continue with major structural reforms, as we have done throughout this year.

There is a third subject that is key. Perhaps we don't realise it, but it is a very important subject. The structural reforms have to be carried out in Spain, but also in Europe, and in Europe there is still no internal market, there just isn't one: there is no internal energy market, because there are no interconnections; there is no internal digital market, and there is no financial services market. So we have to continue along this path, which is the third idea.

The fourth idea is that Europe has to continue its process of integration. This process began many years ago, way back with the Coal and Steel Community, and then with the Treaty of Rome in 1956. It has gone well; some very decisive steps have been taken. For example, the single currency has left us without foreign-exchange and monetary policy and now, just recently, Banking Union has been approved. That is certainly not a minor issue, as everyone knows. I believe that we have to start to talk about Fiscal Union and that is also very important for resolving the economic problems of the people of Europe. It would be wonderful if those who could were able to spend, it would be great; others can't but some can and it would be great if they spent. It would be great if there were a European budget - because what there is now is a much more modest affair, though significant - a European budget. I believe that we have to make progress on this issue; I don't suppose it is easy, there are 28 of us.

And there is another subject, the fifth, which is monetary policy. The European Central Bank has done things, but I believe that the European Central Bank has an obligation. I am not going to talk now about what the European Central Bank has to do, because it is an independent institution, and anyone can talk simply for the sake of talking. The only thing that I would like to say is that the treaties state it is good for inflation to be around 2% or a little less; and inflation in Spain is -0.1% while in the Eurozone it is +0.3%. So I believe there is some margin.

These five areas that we are working on over time will therefore make up the election manifesto at the elections next year; there is still a long year to go.

Q: Talking precisely of this question, Mr President of the Government, the closeness of the elections makes us appear to be immersed within the type of election cycle we all understand; and some people, including international bodies, have warned of the danger that the electoral cycle may reduce the speed of application of some of these structural reforms. Specifically, there are some concerns that fiscal consolidation, this clear path designed to reduce the public deficit, could be relaxed because the elections are not far away.

President of the Government: That concern has some logic behind it, but it won't be like that. This year, 2014, we had a target for reducing the deficit to 5.8% and we said ourselves that we are going to try for 5.5%. Next year the target is even more difficult, if possible, at 4.2% and we also have a tax reform that will enter into force on 1 January. This reform we reckon will involve a reduction in tax revenue of around nine billion euros, though this is a difficult figure to calculate. There is a significant cut in income tax, as you know, and another significant cut in corporate income tax.

But having said that, the Government has the will and the determination, above all because it is good for Spain, for our country, and because we are not going to tell people that what was good two years ago is not good now that we are in an election period. No, this is good for Spain, Spain needs it and it is the Spanish people who have to judge and see what each of us has done and the reasons for it all.

So our commitment to reducing the public deficit is being maintained; and believe me, it is not easy, because we have a high level of public debt, and we have had to undertake operations such as the Regional Liquidity Fund and the Supplier Payment Fund. Because, of course, as well as having a public deficit of 9.2% when we came to power we had many invoices pending on the books, which you have probably heard about; commercial debt that has in the end become what is now public debt. So the operation to reorganise the system of finance that has been carried out here and, in general in the Spanish economy, has been extremely important.

But we are going to continue with the structural reforms. In fact, we are in the midst of structural reforms. First, the tax reform is being debated in Parliament, which it is true is not particularly uncomfortable for the Government; but then there is a reform of the public administration. The survey we have seen here has caught my attention and I will make an effort to explain with more dedication, energy and correctness than I have so far. I would like it to be better appreciated.

I can tell you that we are now, in 2014, at the same level of public-sector employment as in 2004. I can tell you that the reform of the public administration is one of the most complex, difficult to carry out and undoubtedly most ambitious operations that we have undertaken. It is very difficult to explain the reform of the public administration; it is very unlikely for the reform of the public administration to appear on the TV news headlines or make front-page news in the papers, or that anyone makes the effort to study it and explain it. It is certainly unlikely, but I can assure you that this is one of the most important operations being undertaken in our country, and one that will continue into the future.

There is another reform that is also under way at this time, that of market unity, which is very difficult because some people do not accept it. At root, it depends on what the priorities of each of us are in this life. These priorities, or mine at any rate as a member of government, are that people should prosper. That is all that I want. That you should earn money, create jobs, that you raise the wages of the people you employ, that is obviously my priority. For others it is more important to have powers and exercise them.

I believe that these things can be talked about; and, of course, taking into account that we are talking about moving towards a single market in Europe, well of course I would like Spain not to have 17 markets and for there not to be different regulations on the environment or transport. Steps are already being taken in the right direction; but this other operation, that of market unity, is as colossal as the reform of the public administration.

Also under way is a change in the model of training, a subject that is far from minor and where it is not easy to make friends. It is not an issue for making friends in any sector of society.

So we are at the present time engaged in a process of reforms and we are going to continue to implement them. And let there be no doubt that I am absolutely convinced that the most important point of these reforms is not that we may grow half a point more than France; the most important is that we are laying sound foundations for the future. Look at it this way: if the labour reform had existed - and I have already seen some efforts made by some people - we would probably have lost a million fewer jobs under the 2008-2011 government. Now, if in the end we want to abolish what are good reforms for reasons of purely ideological prejudice, we will all end up having problems as a country.

Q: Mr President of the Government, you know perfectly well that the Spanish economy is enormously interdependent with the European economy in general; with the European Union and in general the European economy. In the face of these worrying symptoms of economic slowdown in Europe, what should our position be, both internally and externally, at the level of economic policy?

President of the Government: I have already said that on more than one occasion. One of my main political goals is for France, Germany, Italy, the United Kingdom and Portugal to be doing great, better than us, for a reason that everyone understands - they are our main customers and suppliers. Our biggest customer and supplier is France, then Germany; and then Portugal, the United Kingdom and Italy, about equally.

It is true that our exports have diversified in recent times. I don't recall the figure precisely, so don't pay too much attention to it; in other words the figure is not certain, but I have in mind that when I took over government, around 66% of Spanish exports were to the Eurozone while now the figure must be just over 50%. They have fallen, which is good because we have found new markets. Spanish enterprises, both small and medium-sized, have really made a huge effort. That is a very positive fact; it creates a culture and also it anticipates events, because like it or not, within a short time the world will become much more global than it is now, and it is already very global.

That is true, of course; but even so, our biggest customer and supplier is France, and so the better things are going for the French and the more consumption there is in France, the better; and the same is true of Germany. I talked before about continuing to work on integration: as well as Banking Union, Fiscal Union. I would like Germany to consume a little more, which can be done.

In fact, this figure, the balance of trade, is now not so good, not as good as last year; among other reasons because as consumption is increasing, imports are rising. Let me give you some figures: sales of foreign cars have increased this year in Spain by 44%, that is to say, car imports; exports have increased by 20%, which is a magnificent figure, but of course if consumption rises and we begin to buy cars from abroad… Look, we also make some great cars here.

Well, to return to my main theme, because this is a digression. What should be done in Europe? I have said so before, but I am going to tell you by starting at the end. First, monetary policy. The European Central Bank has in recent times carried out three operations that in my opinion were well thought out: first, anyone that deposits money in the European Central Bank pays; in other words, there is a negative return; second, it has carried out a four-year loan operation to financial institutions at 0.15% to provide them with liquidity and allow them to lend to the real economy; and fourth, it is going to buy mortgage-covered bonds and asset-backed securities from SMEs, and that is important.

Now, the European Central Bank has to decide, and I am not the person to tell them, as I mentioned before, whether its inflation target, which is set by the treaties, is being met or not; in other words, if inflation which is at 0.3% is complying with the target of 1.5% or 2%. That is what it has to think. That is important, that is what some in Europe think, but not all.

Second, we have to continue with integration, and I have talked to you about fiscal integration, so I won't bore you any more about that.

Third, we are continuing with the internal market. Energy is a key issue. We have recently had an Energy Council meeting. In Spain, energy is more expensive than in any other country; I know that some people do not agree, but that is in fact the case. And energy is a colossally important factor for competitiveness. Next year sees the Climate Summit in Paris, in 2015, and in Europe we have set out a position and a criterion for increasing renewables to 27%, for more energy efficiency, reduced emissions and fewer purchases of emission rights. But we really should be supported by some minor players in this international arena; minor like, for example, China, India or the United States.

So we continue with economic union. Then there are reforms, which is another of the things that should be done in Europe so that the European economy improves. Not only European reforms, but national reforms, because of course some of us had to carry out reforms and others had them imposed, simply because they were subject to a bailout. But those for whom it is difficult to implement reforms because of who they are should also carry out reforms from time to time.

And then fiscal consolidation, which we should all carry out. Obviously as President of the Government of Spain I am not in the best position to give lessons to anyone about the public deficit we have had and still have at this time. But it is good that we should all apply ourselves to continue reducing the public deficit.

I believe that this is what has to be done, and many other things as well: for example, it would be good to close the free trade agreement with the United States soon; and it would be good to continue to conclude free trade agreements with other countries; but anyway, I believe that if we apply these five points Europe can improve.

One more point and I will conclude; it's really very important. Europe has something that I referred to in my speech, which is a welfare system that does not exist anywhere else in the world. Maintaining this welfare system obliges us to be enormously competitive because, of course, there are countries that we say are growing, and they are growing, but there is nothing there, there is no Welfare State, which is also a clear sign of the level of civilisation there is in our countries. We should not forget that Europe, about which everyone is so critical, accounts for 25% of the world's gross domestic product and there are not many places in the world where people live as well as in Europe, however many problems we have had, above all in recent times.

Q: One very positive piece of news, which is well known and emerged in the speech, is that tax revenues have been growing since the first quarter of 2014 and I would dare to say that they are growing spectacularly or notably well. If this trend continues, with the guarantee of complying with the target of budget consolidation, would this allow us to expand or anticipate the speed of tax reform overall?

President of the Government: As is the case with so many things in life, this question revolves around where the line is that separates the sensible from the foolhardy?

Revenues are growing well, meaning 5%; with inflation below zero, which is a very important point. I think I have referred before to SMEs and the VAT from SMEs is rising by 9%. Look, things are moving. But of course, we are also in a phase, as you know, of wage moderation. In other words, with inflation below zero and with wage moderation, revenues are growing at over 5%.

You will understand that my political views do not include having high taxes and I believe that at this point in time taxes in Spain are high. That is why we are cutting them now and we want to cut them more. The fact is that we think that this is not the right time. Ten days after taking office, I had to raise taxes, but the alternative was bankruptcy. Neither I nor the People's Party in its election manifesto included the nationalisation of banks among our proposals. Did anyone believe that the People's Party was going to nationalise banks? No one ever nationalised a bank in Spain, I seem to remember; there was the Banesto affair and some smaller matters. But no one thought that a centre-right Spanish party was going to nationalise the banks. Reality often forces us to do things that we don't like. But of course, we do it to change reality.

To the extent that things get better, in my next term in office I will once more propose another cut in taxes, because I believe in it; because I believe that money is spent better when it is in the hands of the people, there is more growth, there are more revenues and so public services will be better. If there are no revenues, there are no public services worth mentioning and for there to be revenues there have to be people creating jobs, investing their money.

Q: For businesses to work well there has to be good strategic planning, not only in the short term, but also in the medium and long term, and to do that you need a stable legislative framework. We all know that it is obviously not in the hands of the Government, as I have already indicated, but what could we do to try to make sure that the laws have some kind of stability over time to allow a predictable working framework for our companies?

President of the Government: I'll tell you one thing, which is not the answer to your question. On subjects such as market unity, if we manage to progress on the subject of market unity, we will not only progress in market unity itself, but in how the law is and will be in the future. In other words, we will make progress on the two things at the same time. I believe that is important and that is why it is a subject to which we pay the attention it deserves and needs.

The question you have asked is a very good question. In purely theoretical terms, today in the world, and clearly in Europe, there are not so many ideological differences; in fact, looking around the world, debate in the world was political. There were democracies and the communist regime, and some said that the communist regime was fantastic and all that; they also defended it without any difficulty. Now some have recycled themselves and others not. There was a political debate, and in fact there were wars about these things. Today these are debates that we would not want to see and luckily they do not exist in Europe, but in other parts of the world they do, though no longer for reasons of pure political ideology. We see them in some parts of the world for reasons of ethnicity, problems of religion, race… These are the problems in the world and in Europe that should not, luckily, occur in the future.

In Europe, the major political parties are drawing closer, the important political parties. It stands to reason: we all have the same rules when it comes to the public deficit, whether socialists or conservatives, and these are the parties that have constructed Europe, that's the simple truth. The French are socialists and so are the Italians, but they have the same public deficit or public debt obligations that we have in the People's Party. We all have the free market, the internal market and free movement of people. In other words, there is a very significant convergence between the positions of the major parties.

Now, in these latest European elections, probably as a result of the crisis, we have seen in the United Kingdom that the biggest political party was that of Mr Farage; in France, the extreme right; in Germany a party has emerged that wants to end the Euro; in Spain various political parties have also appeared. The same has occurred in Greece; in Italy a comedian has achieved the second best position…. I believe that this is bad for Europe. A Europe and a world of major parties and parties whose political positions are drawing increasingly closer is the most positive, because the alternative to this is what we have experienced in some countries - of course I can't give you names - but where the major parties were penalised extremely heavily. In the end, other things happened and there are countries on other continents where since then they have not been able to start a recovery.

Perhaps we should all make an effort in this respect, because those who were governing in Spain for many years -and they have done so for even longer in Germany, in the United Kingdom, everywhere, that is normal, that is moderation, that is reasonable- can't have done everything so badly. After all, this country has over the last fifty years posted the fourth biggest increase in the world of per capita income. Sometimes we all have a certain tendency, as I said before, to chastise ourselves. You can rest assured that I will not be doing so.

Thank you very much.