I draw attention to these limitations of the Spanish economy at a particular juncture in which foreign direct investment is slowing considerably (FDI having been one of the main channels for the diffusion of technological advances), and in which the weight of high-technology imports remains very limited, despite the surge in import penetration. The prolongation of the current trends might mean that the industries most exposed to foreign competition have to adjust their staffing levels in order to maintain their business margins. Hence the importance of creating an environment conducive to technological innovation and to higher productivity, which I shall refer to later. The second area where risks have arisen from the extended expansionary phase of the economy is related, as earlier indicated, to the ongoing buoyancy of household spending on consumption and residential investment. This variable has been favoured by the notable generosity of financing conditions, and this has given rise to certain pressures on the financial position of Spanish households. As is known, household debt last year held on the upward course it has been following since the mid-nineties, clearly exceeding 100% of the sector’s gross disposable income. This new peak marks a departure from the average levels of the euro area and is beginning to draw closer to that of countries such as the United States.
It was able to consolidate its position as a significant international financial centre, and thus remains an important pillar of Switzerland’s economy. Stiff global competition, meanwhile, is still forcing the financial sector to increase its efficiency and lower costs. The days when banks and insurance companies were reliable job machines are gone and will probably not return in the foreseeable future. The challenges I mentioned - from securing the social security institutions to standing our ground in a global environment - will be major issues for the Swiss economy, politics and the public in the coming years, and they will put Switzerland’s adaptability to the test. Allow me now to comment briefly on a few of these challenges. 4. Current challenges  As in most industrialised countries, demographics create a need for action in Switzerland, too. The population is steadily aging and grows only slowly. It is thanks to immigration that it is rising at all. We will therefore face a massive increase in social security expenditure in the decades ahead. At the same time, economic growth in Switzerland is weak. This constellation threatens to destabilise public finances. There are solutions, yet none of them come for free. BIS Review 69/2004  3  The first two solutions, i.e. cutting back social benefits and/or increasing social contributions, are not very popular. In the first instance, the people are opposed to such measures. As to the second solution, it does not make economic sense to further increase the already heavy tax burden.