All I can add today is that a gradual process is no longer sufficient. The seriousness of the situation requires the adoption forthwith of a reform that draws our labour market closer to the levels of job flexibility and security prevailing in most European countries. Reform of our labour institutions is very necessary for many reasons. First, to put an end to the personal and family drama that unemployment entails. But also to help reduce the budget deficit. Indeed a more efficient labour market, that gave us unemployment rates similar to those of other countries, would permit the costs of unemployment – which in Spain amount to around 4% of GDP – to be reduced, and would increase government receipts from income and consumption taxes without tax rates having to be raised. A reduction in unemployment and an increase in employment are also very important for the banking system. First, because high rates of unemployment eventually lead to higher default rates. Second, because a reduction in unemployment is essential to reverse a trend that is having very serious effects on banks, namely the fall in solvent demand for credit. That said, at present, owing to the worsening of the sovereign crisis, supply-side factors are also contributing to the decrease in lending to households and firms which, as usual in this type of situation, affects small and medium-sized firms disproportionately.
With the benefit of hindsight, I do not think that anybody would now consider that we should have started in any other way than by requiring assets be written down, and then at a later stage, requiring recapitalisation. Balance sheet restatement is not just “one” possible formula for restructuring, but rather a vital ingredient of all restructuring processes. Finally, I understand but do not share the view of those who see a danger in forcing institutions to increase transparency in the midst of a crisis. I am convinced that, in the present situation of general distrust in the markets, suspicion is always much worse than reality, however problematic that may be. Admittedly, despite increased transparency, doubts persist as to the extent to which our banks have cleaned up their balance sheets. And although write-downs have been very intense, unsatisfactory economic performance might make further efforts along these lines necessary in future. Be that as it may, let me conclude by reiterating that such is the speed of change in the economic environment in Spain, Europe and the world in recent months, and even in the last few weeks, that it would be a grave error to establish rigid criteria that rule out the possibility of incorporating fresh financial restructuring tools, if changing circumstances mean that they are required in order to achieve the final goal. That can be none other than to have a set of solid credit institutions ready to effectively meet the solvent demand of Spanish households and firms for funds.