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Highlights The long growth cycle and the crisis Fi Fiscal consolidation and structural reform l lid ti d t t l f Funding Strategy of the Kingdom of Spain g gy g p
~2009~
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Highlights
Long growth cycle previous to the international crisis Important challenges ahead: Unemployment and deficit, consequence of the crisis but also symptoms of underlying structural shortcomings p The Spanish Government is determined to act: Fiscal consolidation: A cut of 5.7% of GDP in structural primary deficit in 2010-2013 S Structural reforms to boost potential GDP: Sustainable l f b i l GDP S i bl Economy, Bank Reorganisation, Pensions, Labour Market Strengths: Sound financial system, low Debt/GDP, institutional ability for reform
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Highlights The long growth cycle and the crisis Fiscal consolidation and structural reform Funding Strategy of the Kingdom of Spain
(% nominal GDP)
Euro-area 70% 60% 50% Spain
Spain Euro-area
2003 3
2004 4
2005 5
2006 6
2007 7
2008 8
Source: Eurostat.
Source: Eurostat.
2009 9
2001
( (% nominal GDP) )
30 25 20 15 10 Spain 2005 France 2009* Italy
Savings rate
Source: Eurostat.
Investment rate
5
200 09
14 13 12 11 10 9 8 7 6 19 995
19 998
20 008
19 996
19 997
19 999
20 000
20 001
20 002
20 003
20 004
20 005
20 006
20 007
20 009
Public Investment
5.0 4.0 40 3.0 2.0 1.0 0.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
7
10 8 6 4 2 0 UK UK UK E U -15 E U -15 E U -15 Italy G erm any G erm any G erm any y y y D enm ark D enm ark D enm ark k k k S pain S pain S pain N etherlan N etherlan N etherlan nds nds nds A ustria Finland France France France
(% of GDP)
EU-27 EU 27
GERMANY
FRANCE
ITALY
UK
SPAIN
Source: Eurostat.
Intensive in employment
Residential construction attracted low skilled labour, dragging productivity lower Labour supply matched this demand with the help of immigration flows
Active population
(Growth rates from 2005Q1 to 2009Q3)
12% 10% 8% 6% 4% 2% 0% Germany y Spain n Belgium m France e Italy y United m Kingdom
Labor productivity
( e at e (Relative to EU-27, PPP) U , )
107 106 105 104 103 102 101 100 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
8
Cost competitiveness
Loss of competitiveness has been moderate in the tradable sector Nominal divergence stems from non-tradables (where the bulk of the adjustment is taking place)
Unit labour cost index Manufacturing ULC index
(Relative to eurozone 1999=100)
125 120 115 110 105 100 95 19 999 20 000 20 001 20 002 20 003 20 004 20 005 20 006 20 007 20 008 20 009
140 130 120 110 100 90 80 19 999 20 000 20 001 20 002 20 003 20 004 20 005 20 006 20 007 20 008 20 009
9
Spain
Source: Eurostat.
Italy
Germany
France
Source: Eurostat
Spain
Italy
Germany
France
125
70 60 2000
50
2001
2002
2003
2004
2005
2006
2007
2008
2009
2000
2001
2002
2003
2004
2005
2006
2007
2008
Spain
Germany
France
United States
Spain
Germany
France
United States
Source: World Trade Organisation. * Services other than transportation and travel.
10
Source: OECD.
11
12
(In percent)
Sectoral employment
(total number)
sept 2009 17.935.095 1.752.157 2.377.211 12.599.061 july 2008 19.382.121 2.361.177 2.731.068 13.150.027 dif -1.447.026 -609.021 -353.857 353.857 -550.966 % (100) (42,1) (24,5) (38,1)
6,5
1,9
-4,1
-5,0
-11,0
-11,4
2007
Source: National Statistics Institute, Spain.
2008
2009
14
Hi hli ht Highlights The long growth cycle and the crisis Fiscal consolidation and structural reform Funding Strategy of the Kingdom of Spain
15
16
2009
-3.6
-2.4 -15.7 15 7
2010
-0.3
0.3 -6.5 65
2011
1.8
1.7 0.3 03
2012
2.9
2.2 4.2 42
2013
3.1
2.1 5.9 59
GDP
Final Consumption Expenditure Gross Fixed Capital Formation
-6.4
-12.4 -18.7
-1.4
2.8 -1.3
1.4
5.2 3.7
2.6
6.9 5.8
3.0
7.4 6.8
2.8
1.1
0.4
0.3
0.1
17
2009
-3.6 -11.4 11 4 55.2
2010
-0.3 -9.8 98 65.9
2011
1.8 -7.5 75 71.9
2012
2.9 -5.3 53 74.3
2013
3.1 -3.0 30 74.1
GDP General G G l Government Budget Balance (% of GDP) tB d tB l f General Government Gross Debt (% of GDP)
Source: Annual update of the Stability Programme.
18
19
Expenditures
21
Debt dynamics
Even after the impact of strong stabilisation policies, Spain's Debt to GDP is significantly lower that the Eurozone average
Gross Debt-to-GDP (%) 2000-2010
90 80 70 60 50 40
39.7 55.2 65 9 65.9
30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Sources: European Commission, Annual update of the Stability Programme and International Monetary Fund.
22
Spain
Germany
France
Belgium
Italy
UK
Source: European Commission. * European Economic Forecast Autumn 2009, European Commission.
23
24
25
9 b n c a E p x i t I t e n a n d l M d e & e p A d e 4 2 H n 8 7 b 3 D i d a S 0 e g e 2 b b n e h n 0 n n k c f J t iq o a u b R , n n c u fn i g d e t 1 a u s a g o 9 l n k r u a t , 2 . i d o a r i 0 3 it s u r m e p 1 y i n h n a r 0 h b n g a d n o .n a c c r t f f s o a e i 1 u e B l n n 5 e s n d u l d 2 g 0 u d t a 0 p i o t 0 m b f e n m u e a 7 o u r g a t r n n n v . r a a d d il k g s i s e e n o t m g r s e n a o t u p t e h n o r i z e
B a n L k i q g u C u R ia r e F e d r o A d iI a r A iC t n g F O y t t a F e n R f e s e l i O u t n s i z B n in h a d m a ( e t i n u 2 s i n c l0 o g e u 0 n s m 8 e n 2 t 0 0 9 )
Liquidity enhancement
Credit stimulus
26
Main source of perceived vulnerability regards losses stemming from lending to real estate developers i f l di l d l Bank of Spain stress test: Operating income over 3 years is able to absorb losses of 40% of the portfolio of lending to real estate developers. Extreme assumptions of stress test: PD of 40%(3 times th peak of 1993) and LGD of 100 % (hi hl ti the k f d f (highly implausible)
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Governance
- Independent management. - Strong accountability to Parliament Parliament. - Authorized by DG Competition.
- Achievement of economies of scale to digest low interest margins and real estate impact.
Asset Operations
- Support to integration processes subject to conditions set by the banking supervisor. - Instrumented through convertible preference shares with market-oriented remuneration.
Funding
- Public-private mix of capital (9 bn). - Agency-like coordinated programme. funding with the programme sovereign
28
29
30
Highlights The long growth cycle and the crisis Fiscal consolidation and structural reform Funding Strategy of the Kingdom of Spain
31
(Billion euro)
1: Funding requirement = Net Issuance 2: Redemptions bonds 2010 3: Net issuance medium long term 4 = 2 + 3 Gross Issuance Medium-Long Term
5: Net Increase T-Bills 6: Assumption of RTVE debt
7 = 3 + 5 + 6: Net change outstanding debt 8: Forecast Outstanding Central Government Debt at end 2010
Source: General State Budgets Bill 2010
33
116.7
2009
2010
76.8
Letras del Tesoro net M di L t d lT t Medium & long term l t issues net issues*
34
Short-term funding
Net issuance in 2009 in line with initial announcement: 34.4 bn. Gross issuance breakdown: 3-month Letras: 19.7 bn 6-month Letras: 31.6 bn 12-month Letras: 58.0 bn 12 month Innovations in 2010: Calendar change: 3- and 6-month Letras auction 4th Tuesday 18-month T-bills relaunched: auction 3rd Tuesday
35
37
554 475
300
229
200 100 0 19 995 19 996 19 997 19 998 19 999 20 000 20 001 20 002 20 003 20 004 20 005 20 006 20 007 20 008 20 009 2010 (f) 0
Foreign Currency
Other
Letras
Bonos y Obligaciones
38
25 -25 50 75 25
-50
Source: Bloomberg.
Germany Italy France Nov-0 08 Dec-0 08 Jan-0 09 Feb-0 09 Mar-0 09 Apr-09 09 May-0 Jun-0 09 Jul-0 09 Aug-09 09 Sep-0 Oct-0 09 Nov-0 09 Dec-0 09 Jan-10 Feb-10 Belgium Netherlands
39
Nov-0 07 Dec-0 07 Jan-0 08 Feb-0 08 Mar-0 08 Apr-08 08 May-0 Jun-0 08 Jul-0 08 Aug-08 08 Sep-0 Oct-0 08
(in bps)
125
150
100
-50
-25 25
Source: Bloomberg.
Germany Italy Aug-0 08 Sep-0 08 Oct-0 08 Nov-0 08 Dec-0 08 France Belgium Jun-0 09 Jul-0 09 Aug-0 09 Sep-0 09 Oct-0 09 Nov-0 09 Dec-0 09 Jan-1 10 Feb-1 10 Netherlands
40
(in bps)
Attractive prices
Liquid instruments
41
Average outstanding size: 13 5 b A t t di i 13.5 bn Target for average outstanding <10 years: 15 bn Target for average outstanding >10 years: 15 bn On-the-run bonds 4.10%
4.20% 4 20% 4.25% 4.40% 3.15% 3 15% 3.30% 5.50% 5 50% 4.30% 4 30% 4.60% 4.75% 3.80%
2.75%
Jul-10
Jul-11
Jul-12
Jul-13
50.000 45.000 40.000 35.000 30.000 30 000 25.000 20.000 15.000 10.000 5.000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020- 2024 2029 2032 2037 2040 2041 2023
43
(%)
30
20
20 10 0
21
24
22
21 7
18
18
1 year or less
1 to 3 years
31.12.1999
3 to 5 years
31.01.2010
31.12.1995
44
6.78 6 78
4.77
2.0
Average life France 6,24 Netherlands 6,88 Belgium 5,94 Italy 7,07
0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Duration Average life
45
4.32
3.81
3.49
2.27
Italy
A Argentina
100 90 80 70 60 50 40 30 20 10 0
Greece Belgium
G Germany
France
Austria
Ireland
Spain
Finland
United
Neth herlands
Source: OECD.
K Kingdom
States
United
47
25 20 15 10 5
Ge ermany Eur area ro Sl lovakia Po ortugal B Belgium G Greece F France Ireland Nethe erlands F Finland Italy
Spain
Source: Citi.
A Austria
48
jul-08 jul 08
Source: Deutsche Bank.
oct-09 oct 09
49
Spanish official institutions 33.37% Non residents 43.94% Households & Non financ. Pension & Mutual Funds Insurance Companies Credit Institutions
50
Households & Non financ. Pension and Mutual Funds 48.97% Insurance companies 35.57% Credit Institutions
2006
2007
2008
2009
52
Letras
BBVA Santander Socit Gnrale
53
For more information please contact: Phone: 34 91 209 95 29/30/31/32 - Fax:34 91 209 97 10 Reuters: TESORO Bloomberg: TESO Internet: www.tesoro.es
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70 60 50 40 30 20 10
(Billon )
2000
2001
2002
2003
2004
2005
2006
2007
2008
The Social Security Reserve Fund amounted in December 2009 to approximately 5.7% ( 60bn) of GDP.
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2009
Tax measures
- Rental market: equal treatment with ownership. - Elimination of tax rebates: i li i i f b i.e. relief li f on mortgage payments, 400 rebate on income tax. - Corporate Income Tax rebates related to R&D and to the environment.
Environment
- Energy Policy. - CO2 Emission-reduction. - Efficiency of transport infrastructure.
Fiscal Sustainability
- Spanish regions to formulate quarterly reports to the Fiscal Policy Council. - Correction and surveillance of fiscal deficits. - D bt/GDP ratio t Debt/GDP ti to reach li it of h limit f 60% by 2013.
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and