The proper implementation of these programmes, which have been favourably assessed in the European Commission's follow-up of the Lisbon agenda, is vital if the Spanish economy is to leave behind the path of low productivity growth on which it has been moving. Undoubtedly, the high availability of labour is a factor that partly explains the low increases in productivity. But this should not mask the difficulties faced in increasing and modernising productive capital, in properly training labour and in incorporating technological advances, difficulties that must be overcome to improve the competitiveness of the productive system. Market flexibility and efficiency is a vital requirement for sustaining long-term growth in an area of monetary stability. And it is all the more vital if, as in the case of the Spanish economy, the starting point involves a lag in technology and a relatively low level of productivity. This is why it is so important to move forward the Lisbon strategy in our country. The challenge lies, therefore, in translating the programmes designed into effective government action that is capable of mobilising the innovative energy of the private sector and of extending action to other key areas still requiring a liberalising boost, such as the retail trade sector and the land, housing and rentals markets. The financial system During 2005 Spanish deposit institutions operated in a benign domestic and international environment, both from the macroeconomic and financial-market perspective.
In this case, and from the perspective of the macroeconomic scenario of sustained growth projected for 2006, the general government surplus should feasibly and desirably stand a few tenths of a point above the 2005 figure, improving on the target of 0.9% set in the last Stability Programme update. Such a result would further the strategy pursued in recent years aimed at strengthening the stabilising nature of fiscal policy, which will be bolstered by the entry into force next year of the new budgetary stability legislation. The healthy position of Spanish public finances is evident from comparison with those of the other European countries, subject to the common fiscal discipline rules established by the Stability and Growth Pact. But this situation should not sideline significant challenges ahead. Most immediately, public-sector participation in various structural reform programmes, such as the National Reforms Plan, and compliance with the commitments made to improve the quality of certain services, such as healthcare, and the provision of new welfare benefits (some far-reaching, such as the coverage of situations of dependency) will require further efforts to achieve more efficient management of spending and of public revenue. From the standpoint of public revenue, the direct tax reform due to be enacted in 2007 contains features conducive to greater efficiency in the allocation of resources. As regards income tax, the reform is a significant step towards tax neutrality for saving.