In previous public appearances I have warned that the sound fiscal results of the previous years had a component very closely linked to the expansion of the real estate sector, which would tend to disappear in lower growth phases. Unfortunately, the loss of momentum of tax revenue is proving acute. And combined with the significant revenuerelated impact of the expansionary measures taken this year, that means that the end-year figures for public finances in 2008 will be worse than projected only a few months ago, and that the general government balance at the end of the year will be in deficit. The weakness of activity in 2009 will give rise to a deficit-widening dynamic which, given the uncertainty facing us, will mean that that the deficit may be greater than forecast in the draft Budget. I must reiterate here the call for prudence in fiscal policy management, whereby budgetary policy should focus on allowing the automatic stabilisers to continue deploying their intended countercyclical effect, while preserving the bases for maintaining a sound position in the long term. Given the uncertainty surrounding the world growth scenario, it is important that fiscal policy should retain room for manoeuvre in the face of potential situations of greater weakness. Nothing could be worse than having to face fresh turmoil when the only option possible is that of having to reduce the deficit, as we have had to do in the past and as has happened recently in other developed countries.
Our efforts to promote high standards of corporate governance and sustainable business practices build on principles and guidelines developed by organisations such as the UN and the OECD. As a financial investor, the fund is affected by the regulation of financial markets. We engage with regulators and participate in consultations on new regulations. We support the development of harmonised rules across markets. We express our expectations towards the companies in our investment portfolio through published expectation documents and direct engagement. So far, we have established three focus areas: climate change, water management and children’s rights. The documents set out our expectations of how companies should manage risk in these areas. Chart: Responsible investment II The purpose of our interaction with investee companies is to support the companies in their creation of long-term value. One of the most important tools at our disposal for exercising ownership rights is voting. We vote at nearly every annual general meeting of the companies in our portfolio. As mentioned, equal treatment of shareholders, including minority shareholders, is of paramount importance to us. Shareholders should have the right to nominate and dismiss directors, file shareholder proposals at general meetings and approve significant changes to the capital structure of a company. Chart: Responsible investment III We seek to identify, assess and report on different kinds of risks to future returns by analysing environmental, social and governance issues. The aim is to gain greater insight into companies and portfolio risks.