For many years strong growth in domestic demand led to relatively high inflation. The persistent inflation and labour cost differential with the average of the euro area during the expansion has hampered competitiveness which will have to be regained. The present situation suggests a need for labour market reform and wage moderation in particular by discontinuing wage indexation.
Appropriate structural reforms will support a sustainable economic upswing and also the consolidation of public finances, which will be crucial not only in Spain but in the entire euro area, for confidence to be restored. Conclusions As I noted at the beginning of this speech, the current environment is clearly much more challenging than it was five years ago.