It is important to take advantage of the conditions in place so that the wage moderation begun in the first half of the year may take root in the coming quarters, and so that ailing companies may maintain employment and ensure their survival by drawing on the new avenues of flexibility offered to them, through negotiations with their workers. The austerity measures adopted in the public sector, which include wage cuts, will help bring about the adjustments the private sector needs to entrench its competitiveness. On top of wage restraint in those companies that need it to restore competitiveness, there should be genuine productivity gains based on greater efficiency, since so far their expansionary behaviour chiefly reflects the severity of the employment adjustment. A further key ingredient to ensure gains in structural competitiveness is the continuation of the current low-inflation scenario once the recovery firms. The return of the core inflation rate to its low level before the VAT rise, once the base effects are stripped out in the second half of next year, would be a good indicator that cost- and price-setting processes are moving in the right direction and are capable of surviving comfortably within an area of price stability. The absence of indexation clauses in wage bargaining for 2011, as stipulated in the agreement in force, will help prevent the rise in VAT from exerting second-round and inflation-inertia effects.
In Spain’s case, the stress tests covered virtually its entire financial system and were conducted in great detail and with a high degree of transparency, providing extensive information on exposure to the principal asset classes. The results showed the system as a whole to be sound, whereby their publication undoubtedly contributed to dispelling the doubts over our financial system. The final piece in the far-reaching reform of the financial system has been the savings bank legislation approved by this House. In opening up savings banks to private capital, the legislation will not only allow savings banks to move ahead without having to request  2  BIS Review 129/2010  assistance from taxpayers, but it will also enable them to meet the demanding capital requirements set under the new international financial regulation known as Basel III. In the budgetary domain, the government reinforced and accelerated the implementation of the fiscal consolidation programme which, in compliance with Community commitments, it had announced in January. To this end, it approved a new raft of measures on 20 May entailing spending cuts of somewhat over € billion to be made between 2010 and 2011 (around 1.5% of GDP), on top of the previously approved spending cuts and tax rises. The new deficit target path was thus set at 9.3% of GDP in 2010, 6% in 2011, 4.4% in 2012 and 3% of GDP in 2013, which would steady the public debt ratio at a level slightly below 75% of GDP as from 2012.