The average annual growth rate of above 2.5 per cent is higher than the average in the boom period in the 1980s. In a way, perhaps this is hardly surprising. The weak exchange rate gave exports a strong impetus and there was plenty of unutilised capacity. But I do not think many people expected that such high growth could be combined with low inflation. In these years Sweden has rejected the policy from the decades of high inflation and reinstated the time-honoured tradition of annual price increases around 2 per cent. Inflation has also been low in an international comparison. Judging from the expectations of economic agents, a low-inflation regime has now been established. The composition of growth has also been favourable. After decades of growth that was generated to a high degree by rising consumption—with an accumulation of external debt—it is a healthy sign that expansion been associated with strong export demand and industrial investment. One result of this, the large current-account surpluses since 1994, has made it possible to repay external debt. A dramatic turnaround has also been achieved in government finances. Massive budget deficits have been succeeded by a surplus. This trend is primarily a consequence of the economic recovery, just as declining activity was the main cause of the earlier fiscal collapse. But without the extensive measures for budget consolidation, neither the economic upturn nor the improvement in government finances would have been feasible. Tax increases and spending cuts on the scale we have experienced in recent years obviously leave their mark.
Against this background, the Stability Programme Update considers a continuation of the fiscal adjustment which, in any event, would still entail in 2021, eight years after the start of the economic expansion, a structural deficit of over 1 pp of GDP and public debt of almost 90% of output. Maintaining levels of public debt around those currently prevailing in the Spanish economy involves significant costs that need to be taken into account. It entails the deviation of major resources for interest payments and, above all, vulnerability in the face of episodes of tightening financing conditions on international markets, restricting the possibilities of pursuing a countercyclical fiscal policy at times of economic recession. In sum, it is most important to harness the current favourable circumstances of the Spanish economy to redress, as soon as possible, our structural deficit and public debt levels, bringing them in line with the standards set by our legislation and European regulations. I would underscore, too, the challenge posed by the ageing of our population, in particular for our pension system. This is essentially a medium and long-term challenge; but for that very reason, tackling it appropriately is more difficult than other, shorter-term challenges. The latest Social Security reform, in 2013, introduced two automatic adjustment mechanisms (the Sustainability Factor and the Revaluation Index) which sought to ensure a balance between the system’s revenue and expenditure.