First, Spain faces the challenge of reducing the unemployment rate and the temporary employment ratio, which have been persistently high in recent decades. In particular, the unemployment rate of the Spanish economy was, on average, 15.9% over the 2000-2019 period, as against 9.3% in the euro area. Also the share of temporary employment was 28.3% over the same period in Spain, but only 15.4% in the euro area. Young people (those under the age of 24) have been particularly affected by this instability, with their rate of unemployment (32.5%) and their share of temporary employment (69.5%) standing well above the euro area average in 2019 (15.6% and 52.4%, respectively). Reducing this high employment instability is key, especially for young workers, given its adverse economic effects in many spheres. For example, employment instability affects the 3  accumulation of workers’ human capital and can thus have very persistent effects on their working lives. Furthermore, it also increases uncertainty over the future income path of the affected workers. This not only has consequences for spending decisions, but also for emotional well-being, the formation of new households and the birth rate. In this context, one of the main objectives of the labour market reform enacted in 2022 in Spain is precisely to combat the high proportion of temporary employment. And indeed, since the approval of this legislation, permanent hiring has quickened significantly and temporary hires have slowed, with permanent contracts increased most among permanent seasonal workers and permanent part-time workers.
2  Normally, the reserve rate acts as a floor and the overnight lending rate as a ceiling for the overnight interbank rate, as banks will not normally lend reserves at an interest rate that is lower than the rate they receive from the central bank or borrow reserves at an interest rate that is higher than the rate they have to pay the central bank. There may be a stigma attached to using this lending facility. When this stigma cost is high, the market rate may exceed Norges Bank’s overnight lending rate. If one or more banks do not have access to the central bank’s deposit facility, the market rate may fall below the reserve rate. 3  Competition among banks keeps the overnight interbank rate close to the key policy rate. A bank holding reserves in excess of its quota towards the end of the day can avoid having to deposit these excess reserves at the reserve rate by lending in the interbank market to a bank with room on its quota. This bank will be able to deposit the borrowed reserves at the key policy rate and earn an interest rate margin as long as the borrowing rate is lower than the key policy rate. Competition among banks with room on their quotas pushes up borrowing rates and pushes down interest rate margins. 2  BIS central bankers’ speeches  the level of short-term money market rates. This also applies when the reserve rate is negative.