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Kingdom of Spain

Economic Policy and 2010 Funding


Strategy

Secretary of State for the Economy


February
y 2010
• Highlights

• The long growth cycle and the crisis

• Fiscal
Fi l consolidation
lid ti and
d structural
t t l reform
f

• Funding
g Strategy
gy of the Kingdom
g of Spain
p

~2009~
1
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
• Structural
S l reforms
f to boost
b potential
i l GDP:
GDP Sustainable
S i bl
Economy, Bank Reorganisation, Pensions, Labour Market
• Strengths: Sound financial system, low Debt/GDP,
institutional ability for reform
2
• Highlights

• The long growth cycle and the crisis

• Fiscal consolidation and structural reform

• Funding Strategy of the Kingdom of Spain

3
1994-2008: Convergence and Debt reduction

• GDP per capita has leapt forward, exceeding the average of EU-25
• Fiscal rigour during the good times allowed debt to GDP to be more
than halved

GDP Debt to GDP


(Year on year real growth rates) (% nominal GDP)

80%
6% Euro-area
Spain
4% 70%
2% 60%
Euro-area
0%
50%
-2% Spain
40%
-4%
-6% 30%
2000
0

2001

2002
2

2003
3

2004
4

2005
5

2006
6

2007
7

2008
8

2009
9
1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Source: Eurostat. Source: Eurostat.


4
Investment binge: housing and beyond

• What has fuelled domestic demand is a soaring investment rate,


with the national savings rate staying close to Eurozone average
• The housing boom is part of the story, but not the whole story

Savings rate Investment rate vs. Savings rate


((% nominal GDP)) (% nominal
o a GDP)
G )
34
30

25
30

20
26

15 22

10 18
99

00

01

02

03

04

05

06

07

08

09
199

200

200

200

200

200

200

200

200

200

200
Belgium Germany Spain France Italy

2000 2005 2009* Savings rate Investment rate


Source: Eurostat.
Source: Eurostat.
* 2009Q3 5
Investment binge: housing and beyond
• The residential real estate sector grabbed a non-sustainable share
of GDP and employment…

Construction Sector: Gross Value Added and Employment


(% Total Value Added and of Total Employment)
14
13
12
11
10
9
8
7
6
995
996
997
998
999
000
001
002
003
004
005
006
007
008
009
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
Full-time equivalent employees Gross Value Added

Source: National Statistics Institute, Spain.


6
Investment binge: housing and beyond
• …but Spain has also invested heavily in equipment, infrastructure
and Research and Development

Investment in equipment
(average growth, 1995-2008 in percent) Public Investment
5.0 (% of GDP)
10
8 40
4.0

6 3.0
4 2.0
2 1.0
0 0.0
UK
E U -15

Italy
G erm anyy

N etherlannds

D enm arkk

S pain
A ustria
Finland

France

1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
EU 27
EU-27 GERMANY FRANCE ITALY UK SPAIN

Source: Eurostat.

7
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 Labor productivity


(Growth rates from 2005Q1 to 2009Q3)
((Relative
e at e to EU-27,
U , PPP))
12% 107
10% 106
8% 105
104
6%
103
4%
102
2% 101
0% 100
Germanyy

Italyy
Spain
n

France
e
Belgium
m

m
Kingdom

1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
United

Source: Eurostat. Labor Force Survey.


Source: Eurostat. Labor Force Survey. 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) (Relative to eurozone 1999=100)
125 140
120 130
115 120
110 110
105 100
100 90
95 80 999
000
001
002
003
004
005
006
007
008
009
999
000
001
002
003
004
005
006
007
008
009

19
20
20
20
20
20
20
20
20
20
20
19
20
20
20
20
20
20
20
20
20
20

Spain Italy Germany France Spain Italy Germany France


Source: Eurostat.
Source: Eurostat 9
Exports show underlying improvement in supply
• In spite of brisk domestic demand and waning price
competitiveness…
• …Spain's market shares have outperformed most of peers

Share in world merchandise exports Share in world exports of services*


(Index 2000=100) 150 (Index 2000=100)
120

110
125
100

90 100

80
75
70

60 50
2000 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: International Monetary Fund. Source: World Trade Organisation.


* Services other than transportation and travel.
10
Services Exports’ market share has increased
significantly
• Among others, services related to architecture, construction and
engineering have more than doubled market share
Share of service exports in the OCDE, by service

10
2000
2007
8

0
otal 

Tourrism

ment
Informattion

Entertainm ent
Insurance

Financcial
Transportation

Royalties aand

Professional
ons

services to
and engineering
Architecturaal,

servicees
n,
To

Communicatio

construction

Otherr
patentss

Governm
services

Source: OECD. 11
FDI flows have increased significantly
• Outward FDI stock per capita has grown faster in Spain than in
the Eurozone
• Remains a major destination of international investment

Outward FDI stock per capita Top receivers of FDI in 2008


relative to Eurozone (Stock in millions of US $)
2500000
0.90
2000000
0.85
0.80 1500000

0.75 1000000

0.70 500000

0.65 0

Germany

UK

US
China

Canada

Belgium

Hong Kong

France
Italy

herlands
Spain
Swittzerland
0.60
2002 2003 2004 2005 2006 2007 2008

Neth

G
Source: World Investment Report 2009
Source: World Investment Report 2009
12
The crisis prompts an abrupt adjustment
• Rapid downsizing of residential sector: output, L (mainly in
temporary contracts)
• Ripple effects on employment in other sectors

Unemployment rate
20 (In percent)
Sectoral employment
16 (total number)
july 2008 sept 2009 dif %
Total 19.382.121 17.935.095 -1.447.026 (100)
12
Construction 2.361.177 1.752.157 -609.021 (42,1)
Industry 2.731.068 2.377.211 -353.857
353.857 (24,5)
8 Services 13.150.027 12.599.061 -550.966 (38,1)

Sources: Eurostat. Labor Force Survey.


4
2005 2006 2007 2008 2009
Spain Euro area (16 countries)
Sources: Eurostat. Labor Force Survey.
13
Changes in sectoral and external balances
• Large swing in private sector balance: plummeting Investment and
soaring Savings
• Government Deficit jumps, but 2.5 points of GDP are one-off
• Current Account deficit has halved in 2009
Sectoral balances
(% of GDP)

Public Sector Balance


8 6,5
6 Private Sector
4 1,9
2
% 0
-2
-4
-6 -4,1
-5,0
-8
-10
-12 -11,0 -11,4
-14
2007 2008 2009
Source: National Statistics Institute, Spain. 14
• Highlights
Hi hli ht

• The long growth cycle and the crisis

• Fiscal consolidation and structural reform

• Funding Strategy of the Kingdom of Spain

15
Policy Strategy for Sustainable Growth

• Prudent Macroeconomic Scenario 2010-2013


g
• Agreement on Fiscal Consolidation to bring
g the deficit
back to 3% in 2013
• Structural Reforms:
• Structural Reforms in the goods markets
• Public Pensions System
• Labour Market
• Banking sector Restructuring

16
The Government’s Macroeconomic scenario

• The output gap will be closed by 2013, after peaking in 2010


• External demand contribution to GDP will gradually wane as
domestic
do est c de
demand
a d gathers
gat e s stea
steam
• Potential growth will recover from a trough of 0.6% in 2010 to
1.6% in 2013

Macroeconomic scenario 2009-2013 2009 2010 2011 2012 2013


(Growth rate in percent)
GDP -3.6 -0.3 1.8 2.9 3.1
Final Consumption Expenditure -2.4 0.3 1.7 2.2 2.1
Gross Fixed Capital Formation -15.7
15 7 -6.5
65 03
0.3 42
4.2 59
5.9
National Demand (contribution to GDP growth) -6.4 -1.4 1.4 2.6 3.0
Exports of Goods and Services -12.4 2.8 5.2 6.9 7.4
Imports of Goods and Services -18.7 -1.3 3.7 5.8 6.8
External demand (contribution to GDP growth) 2.8 1.1 0.4 0.3 0.1
Source: Annual update of the Stability Programme.

17
Fiscal consolidation strategy

• Substantial reduction in Spending and moderate increase


in Revenues
• Already in 2010 a 2.2% cut in structural deficit

Fiscal Adjustment Path 2009-2013 2009 2010 2011 2012 2013


(Growth rate in percent)
GDP -3.6 -0.3 1.8 2.9 3.1
G
General
lGGovernmentt Budget
B d t Balance
B l (% off GDP) -11.4
11 4 -9.8
98 -7.5
75 -5.3
53 -3.0
30
General Government Gross Debt (% of GDP) 55.2 65.9 71.9 74.3 74.1
Source: Annual update of the Stability Programme.

18
Starting and final points of fiscal consolidation

• Temporary measures (changes in tax collection, one off


investment funds) account for 2.4% points of GDP in 2009’s total
deficit
• Total size of fiscal policy adjustment (structural terms): 5.7% of
GDP

Fiscal position 2009 2013


General Government Balance (1) -11,4 -3
Cyclical component (2) -1,4 0
Interest payments (3) -1
1,9
9 -3
3,1
1
Temporary measures (4) -2,5 0
Structural Primary Balance (1)-(2)-(3)-(4) -5,6 0,1
Source: Annual update of the Stability Programme.

19
Fiscal restraint measures
Measures adopted and announced (% of GDP)
Revenues Expenditures
VAT 0.7
Excise Taxes 0.3
400€ Tax Rebate Reform 0.4
2010 Budget
Savings Tax Reform 0.1
SME Corporate Tax Reform -0.1
Government Expenditure -0.8
Additional cut in 2010 Expenditure -0.5
New Measures* Central Government Austerity Plan 2011-2013 -2.6
R i
Regionall and
d local
l l governmentt Spending
S di cuts
t -0.5
05
Source: Annual update of the Stability Programme.

• Restraint in wage outlays for all public administrations through:


• 10% replacement rate
• No new temporary hiring
• Strong moderation in wages
• Sizable cuts in investment, transfers and subsidies

20
Can we implement this?
• We have done it in the past,
past which proves our compromise,
compromise the
quality of our public finances, and the success of our fiscal
discipline.
• Shared commitment to fiscal discipline and margin to secure
further reductions in the deficit
Net Lending (+)/Borrowing (-) of General Government
4.0 (% nominal GDP
GDP, EDP)
2.0
0.0
-2.0
40
-4.0
-6.0
-8.0
-10.0
-12.0
-14.0
1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010*

2011*

2012*

2013*
* Annual update of the Stability Programme. 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 (%) Gross Debt-to-GDP (%)


2000-2010 2010F
90 125.0
France
80 Germany
112.5
Eurozone
Spain 100.0
Average: 84.0%
70 87.5
75.0
60 65.9
65 9
62 5
62.5
50.0
50 55.2
37.5
40 25.0
39.7
12.5
30 0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Spain Ireland France Germany Italy UK USA

Sources: European Commission, Annual update of the Stability Programme and International Monetary Fund.
22
Lowest interest burden within affordable limits
Ratio of interests to GDP of General Government
(% nominal GDP, EDP)
13

11

*
95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10
19

19

19

19

19

20

20

20

20

20

20

20

20

20

20

20
Spain Germany France Belgium Italy UK

Source: European Commission.


* European Economic Forecast Autumn 2009, European Commission.
23
Structural Reforms in product markets

• Improving the institutional environment for business: by


modernizing and simplifying government activities as well as
increasing general government discipline
• Fostering competitiveness: by reducing the administrative
burden of creating companies and reducing red tape
• Fostering modernization: promoting sectors that are at the base
of economic activity (R&D, innovation and training), improving
support forf their
h integration into the
h overallll value
l chain,
h and
d
facilitating the internationalization of businesses
Estimated impact on GDP ֲ + 0.32% in Potential GDP

24
Residential Real Estate Sector

• Phasing out fiscal incentives for housing ownership from


2011 (deduction of mortgage payments)
• Removing barriers to the development of the rental market:
• Same fiscal treatment than ownership
• Creation
C ti off REITS
• Legal changes to strengthen certainty for landlords
• Tax Incentives for refurbishment p
provide some support
pp

25
26
Preventive financial support measures

reorganisation
enhancement
Capital

and
stimulus
Credit
Liquidity enhancement
9
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c
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The financial system remains resilient

• Main source of perceived vulnerability regards losses


stemming
i from
f lending
l di to reall estate developers
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
ti
times th
the peak
k off 1993) and
d LGD off 100 % (highly
(hi hl
implausible)

27
FROB: a tool for restructuring the banking sector
Rationale for the initiative Governance

- Overcoming fragmentation in the - Independent management.


savings and banks sector.
- Strong accountability to Parliament.
Parliament
- Achievement of economies of scale to
digest low interest margins and real - Authorized by DG Competition.
estate impact.

Asset Operations Funding

- Support to integration processes subject - Public-private mix of capital (9 bn€).


to conditions set by the banking
supervisor. - Agency-like funding programme
coordinated with the sovereign
- Instrumented through convertible programme.
preference shares with market-oriented
remuneration.

28
Pension System Reform

Proposed Measures:
• A progressive increase in the retirement age (to 67
years)
• Strengthening relationship between contributions and benefits
p between complementary
• A more flexible relationship p y social
security and the public system
• Possible adjustment of other parameters of the current system

Expected Results: Sustainability of the pension system

29
Labour Market Reform

• Five main guidelines:

• Stability
St bilit in
i employment,
l t by
b reducing
d i market
k t segmentation
t ti
• Reform of Collective Bargaining system
• Incentives for young workers’
workers employment and education
• Promotion of the integration of women in the labour market
• Worker intermediation and greater control of temporary
occupational disability claims

30
• Highlights

• The long growth cycle and the crisis

• Fiscal consolidation and structural reform

• Funding Strategy of the Kingdom of Spain

31
Highlights of Funding Strategy
• Significant reduction in net funding requirements and
persistence of sound risk metrics
• Liquidity,
Liquidity transparency and predictability will continue
as guiding principles for the execution of our auction program
• As for syndications, timing is dictated by the limit size of the
line to be replaced (16.5 bn for longer tenors) and market
conditions.
• Innovations for 2010: 18-month
18 month T-bills
T bills reappear
reappear, Euro
inflation linker still a project
• Maintain our stable and diversified investor base

32
The funding strategy

Tesoro Funding in 2010


(Billion euro)
1: Funding requirement = Net Issuance 76.8
2: Redemptions bonds 2010 35.4
3: Net issuance medium long term 61.6
4 = 2 + 3 Gross Issuance Medium-Long Term 97,0
5: Net Increase T-Bills 15.2
6: Assumption of RTVE debt 1.5
7 = 3 + 5 + 6: Net change outstanding debt 78.3
8: Forecast Outstanding Central Government Debt at end 2010 553.5
Source: General State Budgets Bill 2010

33
Funding programme in perspective

• Cut in Net Issuance: lower cash deficit and no exceptional


increase in net financial assets

Funding Programme. 2010 vs. 2009


140 (Net issuance in billion Euro)
120 116.7
2009 2010

100
82.3
76.8
80
61.6
60

40 34 4
34.4

20 15.2

0
T t l Net
Total N t Issuance
I L t
Letras del
d l Tesoro
T nett M
Medium
di & long
l term
t
issues net issues*
(*) Includes foreign currency issues.

Source: Dirección General del Tesoro y Política Financiera. 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
12-month
month Letras: 58.0 bn€

• Innovations in 2010:
• Calendar change: 3- and 6-month Letras auction 4th Tuesday
• 18-month T-bills relaunched: auction 3rd Tuesday

35
Medium- and long-term funding
• Gross issuance: 2009 overshooting (ca. 25 bn €) due to higher than
expected impact of the crisis
• Auction procedures unchanged: Quarterly calendar + potential off-
the-run lines announced Friday prior to the auction
• Limit size per line: increased to 16.5 bn € for longer lines
• Bonos del Estado:
• New 5-year benchmark in March
• Current 3-year benchmark B 2.30% 04/2013 issued until 15 bn €
• Obligaciones
Obli i d l Estado:
del E t d
• New 10 year O 4.00% 04/2020 (5 bn €) successfully syndicated in
January
• Next syndication a 15 year line, to replace the matured O 4.80% Jan-
2024), expected for February depending on market conditions
36
Diversification of funding sources
• Recent foreign currency issuance:
• Eurobond 2.75% March 2012 ($ 1.0 billion)
• Eurobond 2.00%
2 00% October 2012 ($ 2.5
2 5 billion)
• Tesoro Público is open to additional foreign currency issuance

• Floating Rate Note 3 3-Month


Month EURIBOR
EURIBOR-10 10 bps, October 2012
(€ 3.0 billion). Possible retapping in 2010

• Projects:
• European inflation-linked issues (HICP-ex tobacco)
• Schuldschein loans

37
Main features of Treasury funding strategy
600 Spanish debt portfolio 554
(€ billion)
500 475

400 358
319 312 307
300
229
200

100

0
995
996
997
998
999
000
001
002
003
004
005
006
007
008
009
0 (f)
19
19
19
19
19
20
20
20
20
20
20
20
20
20
20
2010
Foreign Currency Other Letras Bonos y Obligaciones
Source: Dirección General del Tesoro y Política Financiera. 38
-75
-50
-25
25
0
25
50
75
100
125
150
Sep-0
07
Oct-0
07
Nov-0
07
Dec-0
07
Jan-0
08

Source: Bloomberg.
Feb-0
08
Mar-0
08
Apr-08

Germany
08
May-0
Jun-008
Jul-0
08

Italy
Aug-08
Sep-008
Oct-008
Nov-0
08

France
Dec-0
08
(in bps)

Jan-0
09
Feb-0
09
Mar-0
09
Apr-09

Belgium
May-009
Jun-009
Jul-0
09
Aug-09
09
Sep-0
Netherlands

Oct-0
09
Nov-0
09
Dec-0
09
Jan-10
Spread of the Spanish 10-year bond vs. main European peers
Recent widening might be an opportunity

Feb-10
39
-75
-50
-25
25
0
25
50
75
100
125
150
S
Sep-0
07
Oct-0
07
Nov-0
07
Dec-0
07 Spread
Jan-008

Source: Bloomberg.
d off th

Feb-008
Mar-008
the S

Apr-008

Germany
May-008
Jun-008
Spanish

Jul-0
08
i h5

Italy
Aug-0
08
Sep-0
08
Oct-0
08
Nov-0
08
Dec-0
08

France
(in bps)
5-year bond

Jan-0
09
Feb-0
09
Mar-0
09
Apr-0
09

Belgium
May-0
09
b d vs. main

Jun-009
E

Jul-0
09
Aug-0
09
Sep-0
09
Netherlands

Oct-0
09
i European

Nov-0
09
Dec-0
09
Jan-1
10
peers
Cheapening concentrated in the front end

Feb-1
10
40
An atractive market to invest in

Attractive prices Liquid instruments

Solid and efficient Diversified investor


infrastructure base

41
Increase in market liquidity
Average outstanding
A t t di size:
i 13 5 b
13.5 bn €
Target for average outstanding <10 years: 15 bn €
20
Target for average outstanding >10 years: 15 bn €
18 On-the-run bonds 4.10%
6.00%
3.25% 5.40% 4.40%
16 4 10%
4.10% 3 90%
3.90% 4 20%
4.20% 3.30% 3 15%
3.15% 5 50%
5.50% 4 30%
4.30% 4.20%
5.35% 6.15% 4.75% 4.60% 4.80%
14 5.00% 3.80% 5.75%
4.25% 4.90%
2.75%
12 2.30%

10
8
6 4.00% 4.70%
4
2
0
Jul-10

Jul-11

Jul-12

Jul-13

Jul-14

Jul-17
Jul-18
Jul-19

Jul-32

Jul-40
Jul-41
Jan--13

Jan--14

Jan--15
Jan--16
Jan--17

Jan--24
Jan--29

Jan--37
Apr--11

Oct--11
Apr--12

Oct--12

Apr--13

Oct--14

Oct--19
Apr--20
Source: Dirección General del Tesoro y Política Financiera.
42
Low Debt Refinancing Risk…
Redemption profile of Bonos & Obligaciones
(Million Euros)
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
Source: Dirección General del Tesoro y Política Financiera. 43
Low Debt Refinancing Risk…

Central Government Debt refinancing risk


(in % of the total portfolio)
50
42
40

30
(%)

24
20 21 22 21
20 18 18

10 7

0
1 year or less 1 to 3 years 3 to 5 years
31.12.1995 31.12.1999 31.01.2010

Source: Dirección General del Tesoro y Política Financiera.

44
…Thanks to relatively high duration and average life
to maturity…
Duration & Average Life to Maturity of the Portfolio
(Letras, Bonos and Obligaciones)
8.0
(in years)

6 69
6.69 6 78
6.78
5.52
6.0

4.79
4.77
4.0
4.16
Average life
France 6,24
2.0 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
Source: Dirección General del Tesoro y Política Financiera. 45
…while achieving lower Funding Costs
Average Funding Costs
(in percent)
6.0
5.5
5.0
4.5 4.32

4.0
3.5 3.81 3.49
3.0
2.5
2.27
2.0
1.5
1.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Average cost of Debt outstanding Average cost at issuance

Source: Dirección General del Tesoro y Política Financiera.


46
Reliance on foreign funding relatively moderate

External public sector debt in 2009


100 (% of GDP)
90
80
70
60
50
40
30
20
10
0
Italy

Argentina
Germany
Greece

Austria

France

Ireland

Finland

Spain
United
Belgium

Kingdom
States
herlands

United
G

K
Neth

A
Source: OECD.
47
Banks financing of government debt in line with
Eurozone average

Holdings of government debt November 2009


(% of bank assets)
25

20

15

10

ermany

ortugal
Belgium
Sllovakia

Greece

France

Eurro area

Ireland

Finland
Italy

erlands
Spain

Austria

Po
F

F
G

A
Nethe

Ge
B

Source: Citi.
48
Spanish Banks’ funding from ECB around
Eurozone average

Recourse to ECB funding


(% of total bank assets)
10%
8%
6%
4%
2%
0%
IRL

IT

FI
NL

GR

AU

FR
PO
GE

ESP

BE
jul 08
jul-08 oct 09
oct-09

Source: Deutsche Bank.


49
Stable and diversified investor base
Government Bonds by Holder
(Term investment, % of total portfolio)
100%
Spanish official
90% institutions
33.37%
80% Non residents
70% 43.94%
60% Households &
Non financ.
50%
Pension & Mutual
40% Funds
30% Insurance
20% Companies

10% Credit Institutions

0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Dirección General del Tesoro y Política Financiera.


50
Stable and diversified investor base
Letras del Tesoro by Holder
(Term investment, % of total portfolio)
100%
Spanish Official
90% Institutions
80% Non-Residents
70%

60% Households & Non


financ.
50%
Pension and Mutual
40% Funds
48.97%
30% Insurance companies
35.57%
20%

10% Credit Institutions

0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Dirección General del Tesoro y Política Financiera.


51
Stable and diversified investor base
Government Bonds by Holder
(Term investment, % of total portfolio)
30%

25%

20%

15%

10%

5%

0%
France Japan Germany Italy BENELUX Rest of EU Asia, Afica America Rest of
and others Europe
2006 2007 2008 2009
Source: Dirección General del Tesoro y Política Financiera.
52
Top Primary Dealers in 2009

Bonos y Obligaciones
Barclays
BBVA
Calyon
Santander
S iété Générale
Société Gé é l

Letras
BBVA
Santander
Société Générale

53
Thank you for your attention
José Manuel Campa Fernández–
Fernández Secretary of State for the Economy

Soledad Núñez – Directora General del Tesoro y Política Financiera


DirectorTesoro@tesoro.meh.es

Gonzalo
G l G
García
í AAndrés
d é – Subdirector
S bdi t G Generall d
de Gestión
G tió y Financiación
Fi i ió ded la
l Deuda
D d Pública
Públi
ggarcía@tesoro.meh.es

José Ramón Martínez


jrmartinez@tesoro.meh.es

Rosa Moral
rmmoral@tesoro.meh.es

Leandro Navarro
lnavarro@tesoro.meh.es

Pablo de Ramón-Laca
pramonlaca@tesoro.meh.es
For more information please contact:
Ignacio Vicente Phone: 34 91 209 95 29/30/31/32 - Fax:34 91 209 97 10
ivicente@tesoro meh es
ivicente@tesoro.meh.es Reuters: TESORO
Bloomberg: TESO
Rocío Chico Internet: www.tesoro.es
mrchico@tesoro.meh.es
54
Annex: the Social Security Reserve Fund

Social Security Reserve Fund asset holdings


70 (Billon €)
60
50
40
30
20
10
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009
The Social Security Reserve Fund amounted in December 2009 to approximately 5.7%
(€ 60bn) of GDP. 55
Annex: Ley de Economía Sostenible & General
Agreement on Fiscal Sustainability

Competitiveness Tax measures


- Rental market: equal treatment with
- Society of Information. ownership.
- Science R&D.
Science, R&D - Elimination
li i i off tax rebates:
b i
i.e. relief
li f
- Internationalisation of SME’s. on mortgage payments, 400€ rebate
- Education. on income tax.
- Reduction of administrative burden. - Corporate Income Tax rebates
related to R&D and to the
environment.

Environment Fiscal Sustainability

- Spanish regions to formulate


- Energy Policy.
quarterly reports to the Fiscal Policy
- CO2 Emission-reduction.
Council.
- Efficiency of transport and
- Correction and surveillance of fiscal
infrastructure.
deficits.
- Debt/GDP
D bt/GDP ratio
ti t
to reach
h limit
li it off
60% by 2013.

56

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