In turn, job creation and growth are essential ingredients for progress on fiscal consolidation. Accordingly, economic policy-making should continue to be structured around two main goals: promoting competitiveness and growth, and restoring the sustainability of public finances. I shall briefly refer to these two major issues before analysing the Budget for 2013. Competitiveness and employment First, let us look at developments in employment and competitiveness, two closely interconnected problems. In terms of economy-wide unit labour costs, the cumulative loss to 2008 in respect of the 1998 level stood at 18%. In industry, and measuring competitiveness always in terms of unit labour costs, it was almost 30%. Naturally, labour costs are not the only explanation for the increase in unemployment, but they have undoubtedly been a major factor. That there were serious failings in the regulation of our labour market is something that practically all international economic organisations have been pointing out for years. The reform of our labour legislation was unavoidable. The changes made are essentially geared to increasing the flexibility of our labour market: the priority of firm-level agreements, limits on the so-called “ultra-activity” of agreements, new regulations governing dismissal for objective reasons and greater facilities for maintaining wage restraint at companies in difficulty are all elements of change aimed at preventing dismissals and higher unemployment from being the only option for many companies to stay in business.
The projected tax revenue for 2013 is subject to downside risks because it is based on the assumption that the revenue targets for 2012 will be achieved. However, on the information currently available, it cannot be ruled out that revenue performs worse than expected in 2012. If this risk materialises and is not countered by appropriate action in the remainder of the year, that would make it difficult to achieve the targets set for 2013, compounding the possible effects of a bigger decline in GDP than that assumed in the budgetary programming. Expenditure On the expenditure side, the weight of three items should first be underlined: Social Security system contributory pensions, unemployment benefits and the interest on government debt. In 2012, these three items are equivalent to 20% of GDP and will account for approximately 36% of total public spending. In 2013, these percentages will foreseeably increase significantly. 6  BIS central bankers’ speeches  Noteworthy among the measures considered on the expenditure side are: the freezing of civil servants’ and public-sector employees’ salaries, although they will recover their December extra payroll, which, together with not filling vacancies, will result in a very low increase in personnel costs in relation to serving employees of around 0.1%. Real investments are reduced by 46%, whereas the interest burden increases by more than € billion. In the Social Security system, spending on contributory pensions, sickness and other benefits will grow by slightly more than 5%, factoring in the raising of pensions by 1%.