Nor can it be ruled out that the temporary tax increases approved this year may have to remain in place for longer or be replaced in time by other permanent measures. BIS central bankers’ speeches  3  I believe that in a country as decentralised as Spain, and in light of the deviations that arose in 2011, what was needed was to accompany budgetary consolidation with a significant strengthening of the institutional framework, so that all tiers of government might be called on to meet their commitments. Fortunately, the recently approved Organic Law on Budgetary Stability is a substantial improvement here. Moreover, it is fully attuned to the recent EU reforms on governance. Also, the agreement reached a few days back between the central and regional governments under the aegis of the Fiscal and Financial Policy Council on the deficit targets for 2012 and on the consolidation plans to attain these targets is excellent news. This lays the foundations for avoiding overruns such as those witnessed last year. What is crucial now is the swift and effective implementation of the instruments envisaged in this Organic Law, in particular the monitoring and control mechanisms for public finances at all levels of government, and those intended to enforce compliance with the targets set by all of them. The law proposes substantially improving general government transparency at the different stages of the budgetary process. In particular, timely detection of budgetary deviations is considered essential so as to adopt measures.
Consequently, it would be advisable to begin publication of the regional government monthly revenue and expenditure outturns as soon as possible, as envisaged in the Organic Law (Article 27.3). The law further includes coercive instruments to ensure compliance with budgetary targets by all levels of government. Such instruments can be effective in ensuring discipline if rigorously applied and if the appropriate procedures for overseeing the budget outturn throughout the year are set in place. But the pressure of everyday events should not make us lose sight of the medium and long term. Allow me to refer here to the major reform of the pensions system approved in July last year. This checked a pension spending dynamic that was endangering the sustainability of public finances over the medium and long-term horizon. But it should be recalled that this reform did not cancel out all the risks arising from population ageing. It would thus be desirable to properly define the so-called sustainability factor, so that the parameters of the system may adapt automatically to future demographic developments. Admittedly, the economic difficulties such as high unemployment and low growth that we face are most serious. But the main problem currently confronting the Spanish economy is the fall in all confidence indicators in recent months, exacerbated in recent weeks by the management of the latest banking crisis. Restoring confidence is the imperative at present, since without it, none of our problems will be resolved.