A large number of Spanish firms have remained in operation and in profit as a result of having undertaken rapid adjustment, although unfortunately this has almost always been achieved through the only channel permitted by our obsolete and inefficient labour market: staff layoffs. Households, whose saving rate had fallen to 11%, reacted by swiftly raising it, which is enabling them to lower the rate in the present phase of the adjustment. At the same time we saw how non-energy inflation, which had been continuously far above that of our euro area partners since the creation of the single currency in 1999, fell substantially, to the extent that, in 2009 and 2010, its annual rate was under 1%, holding below that of the euro area. Finally,  BIS central bankers’ speeches  1  with regard to the banking sector, the rapid expansion of credit, which had reached a rate of 25% per annum and had been the most important source of excessive household and corporate indebtedness during the years of expansion, fell rapidly to stabilise at slightly negative levels over the past few years. Some might say that all this was inevitable, that ten years of imbalances required a correction, and that is partly true. But if we compare with the adjustment observed in other countries in a similar situation, the reaction of the Spanish private sector has been notably swift.
These banking reforms, like all the others now under way (on public spending, pensions and the labour market), should surely have been carried out during the years of expansion, when everything seemed to be going well and the problems that would eventually surface because of the imbalances that were building up were blithely ignored. Unquestionably, we would not now be facing the problems then being incubated and which have now emerged with the crisis. Regarding what has been done so far, it would be unfair not to mention the contribution of the EU authorities, since although there were initially some serious communication and coordination problems, the fact is that subsequently they took appropriate measures aimed at imposing greater economic discipline and improving confidence, such as the reform of economic governance and the Stability and Growth Pact and the recent “Pact for the Euro”. And, of course we cannot overlook the ECB’s contribution with its policy of providing unlimited liquidity and its programmes to purchase covered bonds and the government bonds of the countries hit hardest by the crisis. In short, at this stage it can now be said that both the authorities and private agents have made considerable efforts in the right direction and that, as a result, the process of adjustment of the banking sector and of the Spanish economy as a whole is progressing reasonably well.