The macroeconomic projections accompanying the Budget for 2013 include the stabilising of our unemployment rate at around 25% of the labour force, a rate double the average for the European Union countries. This rate of unemployment is, quite simply, dramatic. Hence the enormous importance of economic recovery and of greater labour market flexibility: these two variables complement one another, and without both operating simultaneously, net job creation will not be possible. Fiscal consolidation I shall now move on to public finances and to the nature of the fiscal drive needed. In 2007 Spain posted a budget surplus of close to 2% of GDP and a public debt/GDP ratio of 37%, then one of the lowest among the euro area members. However, this apparently healthy state of affairs concealed a precarious situation owing to the presence of high tax revenue that had a significant temporary component tied to the major expansion of the construction and real estate sector, and to unsustainable spending dynamics. Indeed, the end of this expansion uncovered the risks latent in that situation. Almost half of the deterioration of more than 13 pp of GDP over only two years from 2007 to 2009 – a turnaround in public finances unprecedented in Spanish economic history – was due to the fall in revenue, largely associated with the disappearance of the aforementioned extraordinary revenue.
Philipp M Hildebrand: Developing countries and international capital markets Summary of a speech by Mr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, to economiesuisse, Zurich, 14 June 2005. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  After having plummeted on the back of the Asian crisis, capital flows to developing countries have risen considerably again in the last three years. In 2005, they are likely to reach the approximate level at which they stood shortly before the Asian crisis. Capital flows are channelled mostly to a few emerging markets, notably China. China’s monetary order is currently undergoing profound changes, with the country gradually liberalising capital movements. The concept of the “impossible trinity”, which was developed by the Nobel Prize winner Robert Mundell, asserts that this will inevitably lead either to a loss in monetary autonomy or to a flexibilisation of the exchange rate regime. Both trends can be clearly observed: the pressure on the fixed exchange rate on the one hand, and the rapid expansion of the monetary and credit aggregates on the other. In the longer term, China’s monetary order will probably move towards floating exchange rates. This transition will hopefully be successful. As China’s monetary policy of gradual change has so far proved its worth, it is likely to serve as an example to other developing countries.