Unfortunately, the tensions we have once again experienced in recent weeks are a powerful reminder that the crisis is still far from over and that our economy’s situation remains a particular cause for concern in Europe. And this despite the fact that since the start of the sovereign debt crisis, and more forcefully so in recent months, Spain has implemented major reforms. A frequently voiced criticism of the ECB’s 3-year LTROs is that such an extremely generous provision of liquidity will tend to mask the underlying problems of the most vulnerable financial systems, thereby weakening the thrust of governments’ reforms in this area. This has not, of course, been Spain’s experience. A glance at the measures adopted in Spain shows that the process to clean up, restructure and recapitalise the Spanish credit system has lost no momentum whatsoever. Rather, the opposite is true. Throughout last year and in the opening months of 2012 the process has been stepped up to adapt it to changing circumstances, marked by a growing deterioration in economic and funding conditions. After resolving the governance and ownership-structure problems affecting the system in the initial stages of the tensions, efforts have focused recently on further strengthening banks’ capital and provisions, thereby keeping up the pressure for the necessary restructuring of the sector. In a different sphere, a labour market reform has recently been approved which affects core aspects of this market’s workings. On one hand, its aim is to decentralise collective bargaining and increase firms’ internal flexibility.
Secondly, the great harmoniser between the real and nominal convergence are the structural reforms. The more reforms one has implemented, the less costly the disinflation is and the stronger the longer term economic growth. I would finish up with the main point. The strategy on behalf of the European Union should be not to delay the entry of the candidate countries into EMU but to encourage the candidates to complete structural reforms. The cost of disinflation would be lowered and the long term economic would be helped. This is a win-win strategy as it helps the candidates and ensures the existing EU members that the new members would be economically stable and dynamic. Thank you very much. 2  BIS Review 1/2002