‘A program of adjustment and growth fr the next parliamentary term 1. Executive Summary The elections come against the extraordinary backdrop of the most serious economic crisis in Spain in the last 50 years. It is not just another parliamentary term. This one will go down in Spanish economic history. Spain's economic and financial credibility as a nation are at stake. The urgency in undertaking the Indispensable economic policy measures outlined in this document cannot be overstated. We are still in time to put things right, but if, through action or omission, Spain’s economic situation is allowed to continue deteriorating, we could even come toa situation of economic collapse which would be irreversible in the medium term. A comprehensive and credible emergency economic policy plan must be approved urgently. The three most immediate spheres of action are the following: fiscal consolidation, labor reform and normalization of credit. Firstly, to restore economic credibility and confidence, Spain must undertake a drastic budget consolidation and reform process that ensures that the country will meet its public deficit target of 3% of GDP by the end of 2013. Accordingly, efforts must focus on spending cuts. The 2012 budget cuts must be on a scale of at least 30 billion euros, and every line item must be revised for this purpose (zero-base budgeting). The Administration must be streamlined: reducing the number of municipal councils, merging and discontinuing government departments, minimizing freely designated appointments and rationalizing and/or closing public companies and entities. It is necessary to freeze and/or shrink the wage mass at Public Administrations, to unify public purchases, to slash transfers and subsidies to private agents, and to increase levies and public prices, not so much to raise funds as to boost the efficiency of the service. The legislative budget framework must be reformed, setting outright legal caps on central and regional government spending. So-called supplementary spending (falling outside of their sphere of competencies) must be outlawed at regional administrations. An independent and neutral fiscal body or office should be set up to monitor and supervise the Budget. Territorial funding must be reconsidered, and made to depend on compliance with deficit, spending and debt targets.Executive Summary Secondly, we must fast-track the return to growth and ensure that this growth generates employment from the outset. For this purpose, modernization of the labor market is the Spanish economy's major outstanding structural reform. Top of the list is to link wages to productivity in collective bargaining. To do this, unconditional priority must be afforded to company agreements and there must be an end to ultraactivity. Minimum legal internal flexibility parameters must be implemented (distribution of working hours, geographical and functional mobility) which agreements cannot override. Furthermore, an adequate law on industrial action must be passed. To create jobs, labor contract types must be reduced and simplified, and new employees must be given a single open-ended contract with compensation for improper dismissal stipulated at 20 days per year worked. In part-time contracts, the distribution of supplementary hours should be liberalized and the possibility of overtime should be introduced. It would be advisable to flexibilize minimum wages and wage agreements for young people. Private mutualities must be encouraged to act to curb absenteeism. The framework of unemployment benefit must be reviewed, encouraging people to actively seek work and redistributing spending towards active policies which must be assessed and refocused towards the needs of the labor market. Thirdly, credit must be normalized as a necessary condition for restoring the economic cycle. The starting point must be transparency. Potentially problematic exposure must be reported in detail and its integral on-balance sheet valuation must be monitored and its adequate rating verified. Restructuring of the financial system must inevitably continue in order to readjust structural excesses, further enhance efficiency and continue to implement integration processes that allow solvency complementarities to be tapped and scale savings to be obtained. The professionalization and depoliticization of the managing bodies of Spain's Cajas de Ahorros must be accelerated. The recapitalization of financial institutions must be conducted in the market, wherever possible What is fundamental is not so much to broaden the obligatory capital requirements compared to the current standards, but to ensure that the ones in place are reliable. For this purpose, balance sheets must be restructured, Where taxpayer funds are used for their recapitalization, this must entail an integral restructuring plan that guarantees the entity’s viability and the commitment, in the event, to their future privatization.‘A program of adjustment and growth fr the next parliamentary term In short, it is very urgent to tackle and resolve the following challenges as soon as possible: + Fiscal consolidation and budget reform. To generate confidence and restore economic policy credibility. + Laborreform, To stimulate growth and curb the rise in unemployment. ‘© Financial restructuring, As a necessary condition to start normalizing credit. But once these three major priorities have been addressed, the process must begin to instrument the other structural reforms pending, within the framework of improving institutional quality and rigour at every level of compliance with the law: © Legal security. Economic regulation must comprise clear, stable and predictable standards. The rules that impose unnecessary burdens on ‘companies must be rationalized and simplified. + Improvement of the Justice system. Legal bodies must be modernized to boost the independence of legal powers and reduce excess litigation, making non-judicial arbitration and mediation procedures swifter and easier. ‘© Integration of regulatory bodies. The duties currently distributed between the network industry regulators must be consolidated into a_ single independent body, which must be technically well equipped and well funded. ‘© Market unity. Framework legislation must be passed to harmonize the spheres where market unity is being breached, and the principle of reciprocal recognition in compliance of requirements and authorizations must be generalized. + Improvement of education quality. Language learning and the use of new information technologies must be enhanced. The culture of hard work must be fostered through high standards. © Boosting efficiency in healthcare, with copayment mechanisms to rationalize demand_and_promote_management_based_on_public-private