3.3  Other economic policies  The fact that I have referred first to the role played, in combating the crisis, by macroprudential and microprudential policies and monetary policy – instruments that, moreover, fall within the remit of the institution I lead – does not in any way imply that fiscal policy is not playing an important role. On the contrary, it seems to me that, from the standpoint of economic policy, budgetary policy is our main means of defence against the consequences of COVID-19. And this instrument has been deployed decisively since the outbreak of the crisis in Spain and in other countries. First, steps have been taken to increase the budgetary resources assigned to health in response to the pandemic. Second, since the start of the period of induced hibernation of the economy, various actions have been taken to make up for the loss of employment income and corporate revenues. Notable, in particular, are the temporary employment adjustment programmes and the public guarantee schemes for credit institutions’ lending to businesses, which I have already referred to. As you well know, the aim of these actions is to facilitate the preservation of employment relationships when the measures restricting activity and personal mobility are lifted, and to support the viability of non-financial corporations which, despite being solvent, have seen their liquidity position deteriorate as a consequence of the crisis.
In a context of persistent recession, this strategy would have important benefits, in the form of an increase in the economy’s potential growth, generated by the reforms, and an improvement in the credibility of the sustainability of public finances in the medium term, which would in turn expand the fiscal headroom available and boost the expansionary effects of the current fiscal actions. In short, to have the fiscal space necessary to be able to expand the support measures for the economy should the course of the pandemic make this necessary, the reform agenda needs to be implemented decisively, fiscal consolidation  5  See R. Blanco, S. Mayordomo, A. Menéndez and M. Mulino (2020), Spanish non-financial corporations liquidity needs and solvency after the COVID-19 shock, Occasional Paper No 2020, Banco de España. 17  needs to be planned and support instruments need to be reformed to make them more flexible and focused. In the case of structural reforms, the Annual Report, which I am presenting to you today is a veritable catalogue of the main challenges that, in the opinion of the Banco de España, the Spanish economy faces in order to raise aggregate well-being. These challenges are wide-ranging in type and require the following issues to be addressed: low productivity growth, labour market duality, high unemployment, population ageing, inequality, climate change action, changes in the globalisation model and the speed of digitalisation of the economy.