But in order to ensure that sufficient monetary policy stimulus continues to support the further buildup of headline inflation that we see in our projections, the Governing Council decided: to enhance our forward guidance on the likely future path of our policy interest rates, expressing our expectation that they will remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued convergence of inflation towards our aim; and to re-assert our intention to continue to re-invest the principal payments from maturing securities in our portfolio for an extended period of time after the end of our net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. These measures will continue to provide the necessary degree of monetary policy accommodation to bring inflation back towards a level that is below, but close to, 2%. Let me now turn to the Spanish economy. Following the severe recession in 2008-09 and 2012-13, Spain’s economic recovery has been strong, with five years of growth since 2013. During this time, the economy has expanded by an estimated 14% and the level of GDP is now above its pre-crisis peak. This strong recovery reflects substantial policy efforts at both national and European level, particularly the reforms initiated at the height of the sovereign debt crisis. Under the EU financial assistance programme, numerous measures and reforms were undertaken to strengthen the banking system.
These included the stress testing and recapitalisation of troubled banks; the identification of troubled real estate assets and their transfer to SAREB (Spain’s “bad bank”); and the reform of the savings banks. At the same time, actions and reforms at European level, including monetary policy (longer-term refinancing operations, LTROs, asset purchase programme, APP) and the move towards banking union, have ensured liquidity and strengthened confidence in Europe’s monetary and financial system. Financial reforms were accompanied by a series of reforms to labour and product markets and to the public sector. The 2012 labour market reform gave priority to collective bargaining agreements at firm level over those at sectoral or regional level. Reforms to product markets, including the law on market unity, have sought to reduce regulatory obstacles to firms’ growth, although implementation has been challenging. The Spanish economy has rebalanced as far as “flow” variables are concerned, while “stock” imbalances are gradually correcting. Banks’ asset quality and solvency has substantially improved, as reflected in higher capital ratios and a steadily declining ratio of non-performing loans (NPLs). The NPL ratio of Spanish banks has more than halved from 13.6% in 2013 to 6.4% now and continues to fall steadily. The banking sector has been able to finance growth with new loans while steadily deleveraging as legacy loans mature. Private sector debt has fallen considerably. Deleveraging of firms and households is well under way, with debt having declined by almost one-third since 2012.