Yet it would be absurd to ignore the fact that the Spanish public largely believes the current system protects workers. And clearly, if there is no widespread awareness of the harm the system causes, there will be no reforms. It is therefore absolutely vital to study and publicise the reforms other European countries have undertaken, choosing those alternatives that allow us to raise our productivity, and thus our external competitiveness, to increase our per capita income and quality of life, and to improve the conditions of the most disadvantaged groups. In many respects the current situation of labour protection can be equated with the trade protectionism characterising the Spanish economy until the late 1950s. During that period, import tariffs and quotas were very high in comparison with those in other developed countries. The belief until then was that trade protectionism shielded Spanish firms and workers, but nothing was further from the truth. The goods sold in Spain were expensive and of poor quality, workers' wages were so low that attempting to hold down two jobs was the norm and the level of per capita income even fell relative to that of our trading partners. The situation changed radically with the opening up of the Spanish economy, when we began to resemble other developed countries. Indeed, this process, which started with the 1959 Stabilisation Plan and culminated in accession to the European Union in 1985, has seen Spain successfully converge on European standards of living.
Along with the effect of the positive factors I mentioned earlier, we should also highlight euro area membership for what it has meant in terms of stability and reducing uncertainty, and the contribution of immigration, which has added notable flexibility to the Spanish economy. Unquestionably, though, a decisive factor in growth from 1999 to 2008 was the extraordinary increase in household and corporate debt. In that decade, Spanish domestic demand growth was double that of the European Union because private agents' debt rose twofold in the 1999-2007 period. As a proportion of gross disposable income, household debt climbed from little more than 60% to 130%, and corporate debt from 270% to almost 600% of the gross operating surplus. 2  BIS Review 18/2009  The problem facing us on emerging from the crisis is that although this swift indebtedness drove the increase in domestic demand and, therefore, in economic growth in recent years, the high level attained will prevent debt from growing in the future at a similar rate to what it did in the past. Moreover, for several years we may well witness a debt reduction or deleveraging process, meaning its effect on domestic demand will be the opposite of what it was in the past, reducing our growth rate. The Spanish economy's main problem, then, is that its future looks very different from its past since the two possibilities I mentioned – devaluation and increased debt – have disappeared.