Within domestic demand, consumption slowed slightly in 2006 and construction began to show signs of decelerating in Q4, a trend that ran into early 2007. However, investment in capital goods underwent a significant increase which is holding in the year to date. 2  BIS Review 67/2007  Behind these developments in the Spanish economy, along with the improved external environment, is the continuing influence of the favourable factors that have underpinned its dynamism throughout this cyclical upturn. First, there is the impulse stemming from the Spanish economy’s integration into the euro area. That has been acting as a powerful spur to demand, as a result of the effects on confidence and expectations and, naturally, of the expansionary financial conditions that have continued to prevail in 2006, despite the change in the stance of the single monetary policy dating back to the closing months of the previous year. Further, there are the factors that have provided for growth on the supply side, including most particularly the growing demographic boost to the Spanish economy over the past decade, which is contributing, among many other aspects, to generating a substantial expansion in the Spanish economy’s growth capacity. Finally, the importance of reform initiatives in recent decades cannot be ignored, as these have promoted market flexibility and dynamism among agents and institutions. And pivotal too have been the recent macroeconomic and financial policies, which have been a guarantee for stability.
The setting-up of a common backstop, as mentioned in the European Commission’s communication of 11 October, is a promising avenue, which could take the form of a credit line granted by the ESM (the European Stability Mechanism). If it is placed within the ESM's remit, the rules for triggering this backstop could be introduced during the ESM governance review. Furthermore, this avenue could provide a partial response to the issue of the liquidity of newly resolved entities – mainly the “good banks” –, which has not yet been addressed with sufficient clarity: liquidity support from public sources, beyond what can legitimately be expected from the Eurosystem, should be clarified. -  Second, consistency in the legal framework and requirements: faced with the accumulation of new and “separate” requirements, we need to adopt a holistic and consistent approach in order to avoid a prudential overload. In particular, the Total Loss Absorbing Capacity (TLAC) requirement resulting from the new international framework requires a consistent adaptation of the European minimum requirement for own funds and eligible liabilities (MREL). Therefore, the MREL targets should be set on the basis of updated prudential requirements – pillar II and buffers – and the most up-to-date financial position of the banks concerned. It is a question of consistency. In the same vein, the consequences of the Basel III reforms package – when it is finalised – should be carefully 2  taken into account, as it may lead to increased risk-weighted assets, which could in turn impact the MREL.