COMMISSION STAFF WORKING DOCUMENT Assessment of the 2012 national reform programme and stability programme for SPAIN Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on Spain's 2012 national reform programme and delivering a Council opinion on Spain's updated stability programme, 2012-2015
Date: 2012-05-30
Institutions: European Commission
Subjects: Spain, administrative formalities, banking system, budgetary equilibrium, corporate finance, educational reform, electricity supply, employment service, institutional reform, job creation, poverty, public debt, regions of Spain, retirement conditions, small and medium-sized enterprises, tax reform

EUROPEAN COMMISSION 

Brussels, 30.5.2012  
SWD(2012) 310 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2012 national reform programme and stability programme for  
SPAIN 

Accompanying the document 

Recommendation for a  

COUNCIL RECOMMENDATION 

on Spain's 2012 national reform programme and delivering a Council opinion on 
Spain's updated stability programme, 2012-2015 

{COM(2012) 310 final} 

EN 

   EN 

 
 
 
 
  
 
 
CONTENTS 

EXECUTIVE SUMMARY ................................................................................................. 3 

1. 

INTRODUCTION....................................................................................................... 4 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES .......................................... 5 

2.1.  Recent economic developments and outlook .................................................... 5 

2.2.  Challenges ......................................................................................................... 6 

3.  ASSESSMENT OF THE POLICY AGENDA ........................................................... 9 

3.1.  Fiscal policy and taxation.................................................................................. 9 

3.2.  Financial sector................................................................................................ 15 

3.3.  Labour market, education and social policies ................................................. 17 

3.4.  Structural measures promoting growth and competitiveness.......................... 21 

3.5.  Modernising public administration ................................................................. 26 

4.  OVERVIEW TABLE (CSRS, EPP, TARGETS, ETC.) ........................................... 29 

5.  ANNEX ..................................................................................................................... 34 

2

 
 
 
 
EXECUTIVE SUMMARY 

In  2012,  Spain's  economic  activity  is  expected  to  contract  by  1.8 %,  and  by  0.3 %  in 
2013.  Unemployment  is  foreseen  to  increase  further  to  25.1 %  in  2013,  also  for  the 
young. 

Spain  has  recently  adopted  ambitious  reforms,  including  in  key  areas  such  as  the 
financial  sector,  the  labour  market  and  collective  bargaining.  It  also  introduced 
legislation  to  strengthen  the  fiscal  framework  and  reformed  pensions.  Reflecting  the 
outstanding  challenges, Spain  has announced comprehensive and far-reaching plans for 
further measures to strengthen fiscal discipline and enhance competitiveness to boost the 
country's growth. 

Spain continues to face important policy challenges following the bursting of the housing 
and credit bubble. Further fiscal consolidation and fiscal discipline at regional level are 
necessary to restore market confidence and to halt the rapid increase in government debt. 
The  tax  structure  lacks  efficiency  and  there  is  room  for  making  the  tax  system  more 
growth  friendly.  The  banking  sector  remains  fragile  due  to  high  private  and  corporate 
debt levels. Low levels of competition in sheltered sectors such as professional services 
and retail, sluggish adjustment of prices and wages and low productivity growth hamper 
the  economic  recovery  and  the  re-orientation  of  the  Spanish  economy  towards  a  new 
growth model. Unemployment has reached a record high, and employability and labour 
market segmentation constitute significant bottlenecks. Problems in the education system 
include low levels of achievement at secondary level, too many students leaving school 
early and a vocational training system insufficiently tailored to market needs. 

3

 
 
INTRODUCTION 

1. 
In  June  2011,  the  Commission  proposed  seven  country  specific  recommendations1 
(CSRs) for economic and structural reform policies for Spain. In July 2011, the Council 
of  the  European  Union  adopted  these  recommendations2,  which  focused  on  public 
finances, pension reform, restructuring of the financial sector, tax policies, labour market 
and the functioning of the product and services markets. 
In  November  2011,  the  Commission  published  its  Annual  Growth  Survey  for  20123 
(AGS 2012) presenting the basis for building the necessary common understanding about 
the priorities for action at national and EU level in 2012. It focused on five priorities – 
growth-friendly fiscal consolidation, restoring normal lending to the economy, promoting 
growth  and  competitiveness,  tackling  unemployment  and  social  consequences  of  the 
crisis,  and  modernising  public  administration  –  and  encouraged  Member  States  to 
implement them in the 2012 European Semester. 

Against  this  background,  Spain  presented  its  national  reform  programme  and  stability 
programme  in  April  2012.  These  programmes  provide  details  on  progress  made  since 
July 2011 and plans going forward. 

Overall assessment 

This  staff working  document  assesses  the  state of implementation of the 2011 country-
specific recommendations as well as the Annual Growth Survey 2012 in Spain, identifies 
current policy challenges and, in this light, examines the policy plans. 

Overall,  the  policy  plans  submitted  by  Spain  are  relevant,  but  in  some  areas  they  lack 
sufficient ambition to address the challenges identified. The national reform programme 
confirms that Spain will continue with its current strategies and announces new plans in 
the  areas  of  active 
labour  market  policies,  measures  promoting  growth  and 
competitiveness,  bank  regulation  and  cooperation  between  different  layers  of  public 
administration. For some of these areas, the national reform programme does not contain 
any specific plans for addressing the challenges. 

Concerning  public  finances,  a  stronger  institutional  framework  has  been  legislated,  in 
line  with  the  Council  recommendation.  However,  the  deficit  outturn  in  2011  was 
considerably  worse  than  planned  in  the  previous  programme.  The  general  government 
deficit4  fell  to  8.5 %  of  GDP  in  2011  compared  with  a  6 %  of  GDP  target.  The  related 
country-specific recommendation has therefore been only partially implemented. 

In  the  area  of  pensions,  Spain  has  implemented  the  recommendation;  however,  the 
worsening of the economic prospects in Spain is limiting the impact of the reforms on the 
projected age-related public expenditure. 

As far as the financial sector is concerned, in February 2011 Spain adopted much more 
stringent  minimum  capital  requirements  for  all  banks  that  were  reached  by  end-
September 2011, in line with the commitment under the Euro Plus Pact and the country-
specific  recommendation.  However,  the  weakening  of  macroeconomic  prospects  may 
require  further  strengthening  of  the  capital  buffers  of  banks,  especially  of  weaker 

1   SEC(2011) 817 final of 7 June 2011 
2   OJ C 212, 19.7.2011, p. 1-4. 
3   COM(2011) 815 final of 23 November 2011 
4   According to latest information, official general government deficit in 2011 might be still subject to 

revision.  

4

 
 
                                                 
institutions.  Firms'  access  to  finance  continues  to  be  one  of  the  main  concerns  of  the 
Spanish enterprises. 

The recent reform of the tax system introduced by government is heading in the opposite 
direction  to  the  country-specific  recommendation  to  Spain  in  this  area.  Overall,  the 
Spanish  tax  system  still  relies  disproportionately  on  direct  taxes,  while  taxes  on 
consumption and environmental taxes are relatively low compared to the EU average. 

Spain  has  designed  a  sound  labour  market  reform,  in  the  direction  advocated  by  the 
country-specific  recommendations  in  this  area  and  in  line  with  Euro  Plus  Pact 
commitments; nevertheless, the reform was not ambitious enough to tackle the use of ex-
post  automatic  wage  inflation  indexation  clauses  in  collective  agreement,  to  reduce 
labour market segmentation and to improve employment opportunities for young people. 

In  the  area  of  competition  in  the  product  and  services  markets,  there  has  been  some 
progress on implementing the Sustainable Economy Law, but only in certain areas. The 
absence of competition in professional services undermines the competitiveness of users 
downstream.  Strong  commitment  is  needed  from  the  new  government  to  carry  on 
planned privatization efforts, which have currently been put on hold. No major progress 
has  been  observed  with  respect  to  the  administrative  burden  associated  to  the  lack  of 
coordination between administrations. 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1.  Recent economic developments and outlook 

Recent economic developments 

The large internal and external imbalances built up during the long period of the housing 
and  credit  boom  started  being  corrected  in  2007.  The  international  financial  crisis 
accelerated this correction, as reflected by the downsizing in the construction sector, the 
reversal  in  credit  flows  to  households  and  firms,  the  significant  reduction  of  the 
traditionally  high  current  account  deficit  and  the  slowdown  in  external  debt  growth. 
Nevertheless,  significant  imbalances  remain.  High  private  sector  indebtedness  and 
record-high  unemployment  continue  to  depress  the  outlook  for  Spain.  The  Spanish 
economy has lost momentum due to a weaker external environment, the intensification of 
the sovereign debt crisis, negative spillovers in the financial sector, reductions in public 
expenditure  and  a  larger-than-expected  deterioration  in  the  labour  market.  Real  GDP 
growth stagnated in the third quarter of 2011 and declined by 0.3 % quarter-on-quarter in 
the  last  quarter  of  the  year.  For  2011,  real  GDP  growth  still  reached  0.7 %. 
Unemployment has been fuelled by the radical downsizing of the construction sector and 
by  the  economic  downturn.  The  situation  was aggravated  by  a  rigid  labour  market  and 
very  sluggish  adjustment  of  wages.  The  unemployment  rate  reached  24.4 %  in  the  first 
quarter (over 5 million people). 

Outlook 

The Commission’s 2012 spring forecast expects real GDP to shrink by 1.8 % in 2012 and 
by around 0.3 % in 2013. Spain went into recession in the fourth quarter of 2011, driven 
by  a  larger-than-expected  deterioration  in  the  labour  market,  lower  public  expenditure 
and deteriorating credit conditions, while the euro-area sovereign debt crisis intensified 
and external demand weakened. Internal demand will act as a drag on growth in 2012, 
only  partially  compensated  by  external  demand.  The  contraction  is  expected  to  be 
strongest  in  the  second  half  of  2012,  reflecting  the  short-term  impact  of  consolidation 

5

 
 
 
needs. The correction of the economic imbalances will adversely affect domestic demand 
over the forecast horizon, although a gradual improvement is expected in 2013. Resilient 
exports and weaker imports, implied by the subdued domestic demand, should continue 
to support net exports and, thus, economic growth. However, unemployment is likely to 
increase further in the short-term. 

2.2.  Challenges 

Spain faces major adjustment challenges following the bursting of the housing and credit 
bubble.  Major  reforms  have  begun  in  the  areas  of  fiscal  consolidation  and  fiscal 
framework,  the  financial  sector,  pensions  and  labour  and,  to  a  certain  degree,  product 
markets.  However,  Spain  still  faces  significant  challenges  in  rebuilding  market 
confidence, securing the sustainability of public finances, reducing domestic and external 
vulnerabilities and underpinning medium-term growth and employment. In consequence, 
there is need to fully implement the ongoing reforms and substantially speed up reforms 
in the product and service markets. 

Public finances have deteriorated significantly following the crisis. Further consolidation 
is  essential  to  halt  the  rapid  increase  in  government  debt  and  to  restore  market 
confidence.  To  achieve  this,  compliance  with  budgetary  targets  at  all  levels  of 
government  is  indispensable.  The  bursting  of  the  asset  price  bubble  and  the  end  of  the 
domestic-demand-led boom has structurally dented Spain’s revenue base. Consequently, 
structural  adjustments  of  both  expenditure  and  revenue  are  required.  Growth-friendly 
fiscal consolidation would include improving the efficiency of the tax system by shifting 
the  tax  burden  from  labour  towards  consumption  and  environmental  taxes,  broadening 
tax bases and rationalising subsidies. The worsening of the economic outlook limits the 
positive  impact  of  recent  reforms  on  the  projected  age-related  public  expenditure. 
Dealing with the costs of ageing therefore remains a further challenge. 

Recent  reforms  have  helped  to  speed  up  restructuring  of  the  banking  sector,  which 
should  continue.  However,  ensuring  the  stability  of  the  financial  sector  is  still  a 
challenge. Real estate loans make up a large proportion of total loans, and this remains a 
risk  factor.  Households  and  corporations  are  still  exposed  to  very  high  debt  levels  and 
need  to  repair  their  balance  sheets.  Further  adjustments  in  house  prices  are  needed  to 
absorb  the  high  stock  of  unsold  homes.  Difficult  market  conditions,  weak  economic 
prospects  and  stricter  provisioning  rules  for  banks  pave  the  way  for  credit  restrictions 
and leave firms facing increasing difficulties with access to finance. 

Net external debt remains close to 90 % of GDP. The current account will have to shift to 
a structural surplus to contain external financing needs amid persistent market pressures. 
This  will  require  additional  improvements  in  price  and  non-price  competitiveness. 
Moreover, flexible product and factor markets are essential to facilitate the re-orientation 
of  the  Spanish  economy  to  the  tradable  sector.  Recent  reforms  are  heading  in  the  right 
direction,  but  the  adjustment  is  being  hampered  by  lack  of  competition  in  sheltered 
sectors  such  as  professional  services  and  retail,  by  sluggish  adjustment  of  prices  and 
wages  and  by  low  productivity  growth.  What  Spain  needs  is  stronger  competition, 
especially  in  services,  a  more  growth-friendly business environment and more efficient 
education,  training  and  R&D  and  innovation  systems.  These  would  make  it  easier  to 
reallocate  resources,  diversify  Spain’s  economic  activity  and  its  productive  potential, 
increase employment, improve productivity and boost growth. 

Unemployment  in  Spain  has  surged  to  record-high levels  in the  aftermath of  the  crisis. 
Both  cyclical  and  structural  factors  play  a  role.  Unemployment  particularly  affects 
younger and low-skilled workers and those who had temporary contracts. Adjustment in 
the labour market has been occurring via lay-offs rather than through wage flexibility or 
6

 
 
by changing working conditions within firms. Young people face significant challenges 
in  making  the  transition  from  education  and  training  to  the  labour  market.  These 
challenges include lack of work experience, low levels of qualification and a mismatch 
between skills and labour market requirements. Spain has made a considerable effort to 
improve the functioning of the labour markets through a series of labour market reforms 
in 2010, 2011 and, the most ambitious one in February 2012. They embrace changes to 
employment protection legislation, the collective bargaining system, internal flexibility, 
job  incentives  and  labour  market  intermediation  services.  However,  there  is  still  a 
question mark over the effectiveness of active labour market policies and the efficiency 
of  the  intermediation  services,  in  particular  with  regard  to  coordinating  national  and 
regional public employment services, including information exchanges on job vacancies 
throughout the country. The social consequences of the crisis in Spain are reflected in the 
recent  increases  in  number  of  people  at  risk  of  poverty  and/or  social  exclusion,  which 
makes harder to achieve the target  of reducing the number of people at risk of poverty 
and/or social exclusion by between 1.4 and 1.5 million. 

Problems in the education system include low levels of achievement at secondary level, 
too  many  students  leaving  school  early  and  a  vocational  training  system  insufficiently 
tailored  to  market  needs.  These  contribute  to  low  productivity  growth  and  reduce  the 
employability of the workforce. 

7

 
 
Box 1: Summary of the results of the in-depth review (IDR)                                    

under the macroeconomic imbalances procedure 

The in-depth review takes a broad view of the Spanish economy in order to identify actual or potential 
imbalances  and  the  possible  macroeconomic  risks  which  they  may  entail.  The  main  finding  of  this 
review  is  that  the  various  imbalances  characterising  the  Spanish  economy  are  highly  interconnected. 
The origin of the current imbalances lies in the abundant availability of cheap external financing, which 
allowed  a  significant  increase  in  investment  —  notably  in  real  estate  —  and  consumption.  This 
triggered a sharp rise in external deficits and private debt. A significant part of these financial resources 
was  channelled  into  the  non-tradable  sector,  especially  construction.  Generous  financing,  combined 
with demographic pressures and incentives favouring housing investment, created significant housing 
demand, pushing up house prices, and ultimately leading to a housing bubble. The adjustment of these 
imbalances started in 2007 and is on-going. While the adjustment of flows (e.g. current account deficit, 
investment  in  construction,  credit  growth),  has  been  relatively  swift  and  is  quite  advanced  in  some 
areas, the adjustment of stocks, in particular the high level of private and external debt, has been much 
more gradual and will take a considerable time. At the same time as these imbalances started to correct, 
significant  new  imbalances  arose,  notably  in  the  labour  market  and  in  public  finances.  The  banking 
sector  remains  burdened  with  sizeable  exposures  to  the  real  estate  and  construction  sector,  although 
additional measures were adopted recently to speed up the recognition of losses and to clean up balance 
sheets.  Banks'  ability  to  lend  is  constrained  by  their  need  to  deleverage  and  re-capitalise,  and  by 
difficult access to finance. This, in turn, makes it hard for the real economy to access credit and carry 
out  structural  adjustment.  As  this  adjustment  proceeds,  negative  feedback  loops  may  arise  between 
private  and  public  sector  deleveraging,  compressed  domestic  demand,  high  levels  of  unemployment, 
further  adjustment  in  the  housing  sector,  and  financial  sector  stability.  In  addition,  prolonged 
adjustment  of  these  imbalances,  due  to  their  large  size  and  scope,  may  create  risks  of  negative  spill-
overs to other euro-area economies. The main findings of the review are as follows: 

•  Large accumulated private sector debt is a source of concern, especially with regard to the 
real  estate  and  construction  sectors.  The  size  and  scope  of  the  necessary  deleveraging  implies 
subdued domestic demand in the medium-term with significant downside risks related to the high 
vulnerability of the private sector to interest rate increases. 

•  The large external debt poses significant risks and needs to be brought back to a sustainable 
path. Large external financing needs increase the vulnerability of the Spanish economy in terms of 
access  to  finance  and  the  interest  burden.  While  the  current  account  deficit  has  been  reduced 
significantly,  a  shift  to  persistent  current  account  surpluses  will  be  required  to  restore  the 
sustainability of the external position. 

•  Spain is gradually regaining competitiveness. It has made important progress in compensating 
for past losses of its price and cost competitiveness. However, a significant part of this adjustment 
has been due to cyclical factors, in particular the sharp reduction in employment which implied a 
strong improvement in measured productivity. If Spain is to achieve a more structural, long-lasting 
re-balancing of the economy it must tackle the structural problems that are hampering growth and 
limiting competitiveness. 

•  House prices continue to fall in Spain. The bursting of the housing bubble exposed a significant 
oversupply  of  new  housing,  leading  to  an  accumulation  of  a  large  stock  of  unsold  houses.  This 
continues  to  exert  downward  pressure  on  house  prices  with  potential  adverse  effects  on  private 
consumption and financial stability.  

•  Public debt has become an emerging, rapidly-increasing, imbalance in Spain. While the share 
of public debt in GDP is still below the euro-area average, it is increasing rapidly on the back of 
weak growth, rising interest payments and high budget deficits. 

The unwinding of these imbalances and the required structural adjustment of the economy depend on 
the flexibility of Spanish factor and product markets. The Spanish Government's policy response has 
been  comprehensive  and  far-reaching.  However,  important  challenges  remain.  To  support  the  further 
correction  of  imbalances,  the  Government  needs  policies  to  make  the  Spanish  economy  more 
competitive and to enlarge its export base, to strengthen competition in product and service markets, to 
further restructure the banking sector, to complete the adjustment of the housing sector and to widen 
the scope of labour market reforms. 

8

 
 
3.  ASSESSMENT OF THE POLICY AGENDA  

3.1.  Fiscal policy and taxation 

Budgetary developments and debt dynamics 

The stability programme plans to bring the budget deficit below the 3 % reference value 
by  2013,  in  line  with  the  Council  recommendations  of  April  2009,  and  to  reduce  it 
further  to  1.1 %  of  GDP  in  2015.  Under  the  stability  programme,  the  medium-term 
objective (MTO), which remains a balanced budget in structural terms, would be almost 
reached by 2015 with a structural budget deficit of 0.2 % of GDP. The MTO adequately 
reflects the requirements of the Stability and Growth Pact. 

The  deficit  outturn  in  2011  was  considerably  worse  than  planned  in  the  previous 
programme.  The  deficit5  fell  to  8.5 %  of  GDP  compared  with  the  target  of  6 %.  About 
two  thirds  of  the  deviation  is  explained  by  overruns  in  the  budgets  of  autonomous 
communities, while central government and social security slippages were more limited. 
The budget deviation was driven mainly by weaker-than-expected revenues in line with 
the materialisation of a less favourable economic environment than foreseen in the 2011 
stability  programme  and  additional  revenue  shortfalls  due  to  a  less  tax-rich  growth 
composition.  In  particular,  taxes  on  production  and  imports  (VAT,  taxes  on  real  estate 
transactions)  recorded  major  shortfalls,  affecting  the  central  and  regional  government 
levels.  Social  contributions  were  also  weaker,  in  line  with  a  stronger-than-expected 
deterioration in the labour market. Consequently, Spain has not met part of the first 2011 
recommendation,  which  called  inter  alia  for  achieving  deficit  targets  at  all  levels  of 
government,  including  by  strictly  applying  the  existing  deficit  and  debt  control 
mechanisms  for  regional  governments,  and  adopting  further  measures  if  budgetary  and 
economic developments do not turn out as expected. 

For 2012, the stability programme aims to achieve a general government deficit of 5.3 % 
of GDP, compared with a target of 4.4 % in the previous update. This revision reflects the 
worse  starting  position  in  2012  and  a  weaker  economic  outlook.  In  its  2012  spring 
forecast,  the  Commission  predicts  a  deficit  of  6.4 %  of  GDP  for  2012.  The  main 
difference  concerns  the  expenditure  side  (0.8 pps  of  GDP)  given  that  some  of  the 
consolidation measures to be taken at regional government level have not been yet fully 
specified.  The  difference  in  revenues  (0.3 pps  of  GDP)  is  explained  by  lower  expected 
social contributions in line with a deteriorating labour market outlook. While the central 
government's target of a deficit of 3.5 % of GDP should be broadly within reach, regional 
governments  are  expected  to  miss  their  targets,  mainly  because  they  need  to  further 
specify  their  consolidation  measures.  Moreover,  given  the  lower  expected  social 
contributions,  the  social  security  system  is  likely  to  record  a  deficit  again  this  year, 
instead of the balanced budget planned in the stability programme. 

The stability programme maintains a budget deficit target of 3 % of GDP for 2013. The 
target for 2014 has been set at 2.2 % of GDP (it was 2.1 % in the previous update) and for  
2015 it is set at 1.1 % of GDP. 

5  According  to  latest  information,  official  general  government  deficit  in  2011  might  be  still  subject  to 

revision. 

9

 
 
 
                                                 
The fiscal consolidation plan is frontloaded, with most of the total fiscal adjustment to be 
delivered  in  2012  and  2013,  in  terms  of  headline,  primary  and  structural  balances. 
According  to  the  stability  programme,  the  cumulative  reduction  of  the  headline  deficit 
between  2011  and  2015  amounts  to  7.4 pps  of  GDP  and  is  mainly  expenditure-based 
(6 pps  of  GDP).  Expenditure  cuts  up  to  2015  are  expected  to  be  particularly  severe  for 
compensation  of  employees  (2.3 pps  of  GDP),  intermediate  consumption  (1.7 pps  of 
GDP), and gross fixed capital formation (1.3 pps of GDP). The central Government plans 
to reduce its deficit by 4 pps of GDP between 2011 and 2015, but regional Governments 
will also have to deliver a reduction of close to 3 pps of GDP in their budget deficit. 

According  to  the  stability  programme,  total  revenue-raising  measures  of  2.3 %  of  GDP 
are planned in 2012. Of these, 1.8 % have already been adopted, while 0.5 % remains to 
be  decided  at  regional  level.  These  include  mainly  increases  in  direct  taxation,  such  as 
changes  to  income  and  corporate  taxation  and  a  fiscal  amnesty.  A  number  of  these 
measures  are  temporary  in  nature,  e.g.  an  increase  in  income  tax  (limited  to  2012  and 
2013), a change in the ‘tax instalment’ system for corporate taxes in 2012, a public wage 
freeze in 2012 and the fiscal amnesty in 2012. Total expenditure is expected to decline 
by  1.2 %  of  GDP  in  2012,  underpinned  by  cuts  in  ministerial  spending  levels.  The 
stability programme envisages major cuts in capital spending and in current spending, for 
example by ceasing to recruit civil servants. At regional level, the largest cuts are set to 
come from the recently-announced savings in the areas of health and education in 2012 
and 2013. 

10

 
 
  Box 2. Main budgetary measures 

  Revenue 

2011 

Expenditure 

•  2010  increase  in  VAT  rates  (residual 

impact of 0.3 % of GDP) 

• 

Increase  in  excise  taxes  in  the  2011 
budget (0.1 % of GDP) 

•  Withdrawal  of  a  personal  income  tax 
credit  of  400  euro,  residual  impact 
(0.1 % of GDP). 

•  May  2010 
expenditure, 
cuts 
including 
in  public 
reduction 
a 
investment and a freeze in public sector 
wages (-1 % of GDP). 

in 

•  Withdrawal  of  the  National  Fund  for 
Employment  and  Local  Sustainability 
(0.5 % of GDP). 

•  Phasing 

out 

subsidies, 

including 

housing subsidies. (-0.1 % of GDP). 

2012 

• 

Increase in Personal Income Tax (0.4 % 
of GDP) 

•  Cuts in education (0.1 % of GDP) 

•  Cuts in health care (0.3 % of GDP) 

•  Cuts in capital transfers (0.5 % of GDP) 

•  Corporate Tax (0.5 % of GDP) 

•  Fiscal regularisation (0.2 % of GDP) 

•  Fight against tax fraud (0.2 % of GDP) 

•  Tax on Property (0.1 % of GDP) 

•  Additional  revenues  of  Autonomous 

Communities (0.3 % of GDP) 

2013 

•  Revenues from indirect taxation (0.8 % 

•  Cuts in education (0.2 % of GDP) 

of GDP) 

•  Personal Income Tax (0.1 % of GDP) 

•  Cuts in health Care (0.3 % of GDP) 

•  Removal of overlaps and rearrangement 
levels  of 

of  competences  between 
Government (0.3 % of GDP) 

Note:  The  budgetary  impact  in  the  table  is  the  impact  reported  in  the  programme,  i.e.  by  the  national 
authorities. A positive sign implies that revenue / expenditure increases/decreases as a consequence of this 
measure. 

Among the macro-structural measures affecting potential growth, the main measures to 
highlight are the successive labour market reforms. A series of labour market reforms in 
2010 and 2011 and again in February 2012 aimed to reduce labour market segmentation 
and to make the collective bargaining system more flexible (see Section 3.3). 

In  2013  the  stability  programme  includes  a  large  projected  increase  in  revenues  from 
taxes on production and imports, within a framework of a tax restructuring that might be 
partially compensated by lower taxes on labour. The Government has not yet specified 
the  measures  it  will  take  to  underpin  the  increase  in  indirect  taxes.  On  the  expenditure 
side,  cuts  in  education  and  health  are  planned  at  regional  level,  as  well  as  a 
rearrangement of competences between levels of Government. For 2014 and 2015, few 

11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
concrete measures are included in the programme, so the envisaged consolidation is not 
yet sufficiently supported by measures to underpin the proposed deficit target. 

According to the stability programme, the annual average improvement of the structural 
balance6 is 2.6 % of GDP for 2011-13, well above the fiscal effort of over 1.5 % of GDP 
recommended in the excessive deficit procedure. Additional improvements of 1.3 pps and 
0.7 pps  of  GDP  are  envisaged  in  2014  and  2015.  The  stability  programme  expects  a 
sizeable improvement in the primary balance — from a deficit of 6.1 % of GDP in 2011 
to  a  surplus  of  2.0 %  of  GDP  in  2015.  This  comes  alongside  an  increase  of  0.7 pps  of 
GDP in interest expenditure over the programme horizon. In its 2012 spring forecast, the 
Commission  expects  a  primary  deficit  of  3.3 %  of  GDP  in  2012  and  3.1 %  in  2013 
(compared to a 2.2 % deficit in 2012 and 0.2 % surplus in 2013 in the programme). 

Targets of -2.9 % in 2014 and -2.1 % in 2015 have been set for real public expenditure 
growth. (This is the modified expenditure aggregate used for the expenditure benchmark, 
which is the growth rate net of non-discretionary changes in unemployment benefit and 
of  discretionary  revenue  measures).  These  targets  are  more  ambitious  than  the  lower 
reference rate of -0.2 for both years that the expenditure benchmark would require. The 
lower reference rate applies as long as Spain is still adjusting towards its medium-term 
objective of a balanced structural budget. Spain thus meets the expenditure benchmark. 

There are significant downside risks to the scenario presented in the stability programme. 
First, there are risks linked to the macroeconomic scenario. These risks appear minor in 
2012 and would be linked mainly to a less tax-rich composition of growth, with weaker 
domestic  demand  and  in  particular  private  consumption.  For  2013  and  beyond,  the 
macroeconomic  assumptions  of  the  programme  appear  favourable,  with  real  GDP 
expected to turn positive again already in 2013. Very high unemployment, the need for 
further deleveraging in the private sector and tight financing conditions would also point 
to a more subdued recovery of private consumption and investment than expected in the 
programme.  The  Commission’s  2012 spring forecast projected that GDP growth would 
reach  -1.8 %  in  2012  and  -0.3 %  in  2013,  as  against  -1.7 %  and  0.2 %,  respectively, 
according  to  the  programme.  Second,  revenues  could  be  even  more  sensitive  to  the 
ongoing structural adjustment, due to composition effects and the protracted slump in the 
real  estate  sector,  and  this  could  also  result  in  greater  revenue  shortfalls.  Third,  an 
additional  risk  stems  from  the  budgetary  performance  of  the  regional  Governments, 
given their recent poor track record. Sizeable slippages occurred in 2011 and the regional 
deficit  target  for  2011  was  breached  by  many  regions.  Fourth,  it  is  hard  to  assess  the 
budgetary impact of measures, as the revenue impact of the fiscal amnesty is subject to 
considerable  uncertainty.  Fifth,  there  is  a  lack  of  information  about  the  anticipated 
consolidation  measures  from  2013  onwards,  which  are  not  yet  fully  specified.  Sixth,  a 
downside  risk  also  stems  from  the  one-off  and  temporary  nature  of  consolidation 
measures adopted so far, which will expire post-2013. Finally, potential financial rescue 
operations may be a source of risk for deficit, or debt, depending on the form they take. 
In terms of upside risks, strict enforcement of the Budget Stability Law and the adoption 
of  strong  fiscal  measures  at  regional  level  would  mitigate  the  risks  of  a  slippage  at 
regional level. 

6 Cyclically adjusted balance net of one-off and temporary measures, recalculated by the Commission on 
the basis of the information provided in the programme, using the commonly agreed methodology.  

12

 
 
                                                 
Public  debt  is  expected  to  increase  from  68.5 %  of  GDP  in  2011  to  79.8 %  of  GDP  in 
2012,  and  further  by  2.5 pps  of  GDP  in  2013,  according  to  the  stability  programme, 
exceeding the Treaty reference value in all years. This increase in debt is mainly driven 
by  higher  interest  payments  (which  increase  by  3.1  and  3.2 pps  of  GDP  in  2012  and 
2013) and to a lesser extent by the primary deficit (with an increase of 2.2 pps of GDP in 
2012). Stock-flow adjustments are sizeable in 2012, contributing 5.4 pps of GDP to the 
debt increase. They consist in the plan to settle invoices of providers of public bodies and 
other outstanding operations accounted as debt according to excessive deficit procedure 
rules. According to the programme, debt would then decrease by 0.8 and 0.7 pps of GDP 
in 2014 and 2015, respectively. The trend in the debt ratio may be less favourable than 
projected in the programme, given the risks attached to the macroeconomic scenario and 
the budgetary targets, and given that the financial sector will need additional re-financing 
as  part  of  the  banking  sector  reform  announced  in  May  2012.  The  Commission’s  2012 
spring  forecast  predicts  that  public  debt  will  surge  to  80.9 %  of  GDP  in  2012  and  to 
87.0 % in 2012, based on a no-policy-change scenario. In 2014 and 2015 Spain will be in 
a transitional period and plans would ensure sufficient progress towards compliance with 
the debt criterion. 

Long-term sustainability 

The  long-term change  in Spain's age-related expenditure is below the EU average. The 
initial  budgetary  position  compounds  the  long-term  costs.  Under  a  no-policy-change 
assumption,  debt  would  increase  to  100 %  of  GDP  by  2020.  Considerable  additional 
fiscal  consolidation  beyond  the  forecast  horizon  would  be  needed  to  make  progress 
towards  the  reference  value  for  government  debt  beyond  the  short  term.  Full 
implementation of the programme would be enough to put debt on a downward path by 
2020, though it would still be above the 60 % of GDP reference value. 

Spain  has  already  taken  steps  to  improve  the  long-term  sustainability  of  its  public 
finances,  in  line  with  the  2011  country-specific  recommendation.  The  pension  reform 
adopted  in  July  2011  increased  the  statutory  retirement  age  by  two  years  and  the 
contribution  period  taken  into  account  for  the  calculation  of  benefits  by  ten  years.  The 
changes will be phased in between 2013 and 2022 (2027 in some cases). A sustainability 
factor  is  planned  for  the  period  after  2027,  linking  retirement  age  to  increases  in  life 
expectancy, although the details of its implementation have yet to be decided. The reform 
was a significant step towards containing the costs of ageing. 

Nevertheless, the projected increase in age-related public expenditure will still be higher 
than  the  EU  average  by  2060,  as  a  result  of  the  continuously  increasing  challenge.  A 
Global Employment Strategy for Older Workers for 2012-2014 (known as the ‘55 y más’ 
Strategy) was adopted in October 2011. It aims to increase the number of older people in 
work  and  to  improve  their  working  conditions.  This  strategy  still  needs  to  be 
underpinned with concrete measures. 

Long-term public spending trends, mainly related to pensions and healthcare, should be 
contained  further.  To  improve  the  sustainability  of  public  finances,  the  Government 
needs  to  ensure  sufficient  primary  surpluses  over  the  medium-term,  to  accelerate  the 
planned gradual increase in the statutory retirement age and to carry out an earlier update 
of the sustainability factor under the reformed pension system. 

Fiscal framework 

Given  the  decentralised  nature  of  Spain’s  public  finances,  a  strong  institutional 
framework is essential. The medium-term budgetary framework has a good track record 
overall,  but  the  crisis  put  Spain’s  fiscal  institutions  under  strain  and  exposed  a  need  to 

13

 
 
tighten the control over regional and local authorities’ budgets and to take better account 
of cyclical developments when setting budgetary targets. 

On  27  January  2012,  the  Government  took  a  significant  step  forward  to  improve  the 
fiscal framework with the adoption of a draft ‘Organic Law on Budgetary Stability and 
the Sustainability of Public Finances’. This develops the constitutional balanced budget 
rule  adopted  in  2011  and  sets  out  new  mechanisms  for  budgetary  coordination  and 
control  vis-à-vis  regional  governments.  The  law,  which  came  into  force  in  May  2012, 
introduces a set of fiscal rules which are binding for all levels of Government, including 
public-sector companies (structural balanced budget rule, debt rule and expenditure rule). 
It  also  gives  a  mandate  for  a  medium-term  budgetary  strategy,  introduces  an  early 
warning  mechanism  for  budget  deviations,  provides  for  corrective  mechanisms  and 
sanctions, and strengthens reporting requirements for all levels of Government. The law 
is  a  positive  step,  as  it  compels  not  only  the  national  parliament,  but  also  regional 
parliaments, to comply with budgetary stability. The definition of the rule in terms of a 
structural  deficit  should  allow  better  reflecting  cyclical  developments  in  future  budget 
Laws. 

However,  the  law  provides  for  a  very  long transition period, until 2020. Moreover,  the 
preventive,  corrective  and  coercive  arms  of  the  new  fiscal  framework  imply  relatively 
long  deadlines  and  may  not  be  sufficient  to  ensure  a  timely  correction  of  emerging 
budget  deviations.  The  draft  law  does  not  provide  for  setting  up  an  independent  fiscal 
institution.7 

Tax system 
The tax-to-GDP ratio in Spain is among the lowest in the EU,8 and the structure of the 
Spanish tax system does not appear to be particularly growth-friendly, with revenue from 
indirect taxes being the second lowest in the EU. Spain thus has some room to improve 
the  efficiency  of  the  tax  system  by  shifting  revenue  towards  the  least  distorting  taxes 
such as those on consumption (in particular VAT) and environmental taxes, which would 
be  consistent  with  fiscal  consolidation  efforts.  Reducing  tax  advantages,  such  as  the 
favourable fiscal treatment of residential housing (i.e. deductibility of mortgage interest 
payments), would broaden tax bases and thus also help improve the efficiency of the tax 
system. 

Spain has a high rate of home ownership, which has been encouraged by tax deductions 
for  buying  houses.  These  deductions  were  reduced  in  1998,  but  the  tax  policy  bias  in 
favour  of  buying  rather  than  renting  homes  has  been  maintained.  Tax  policy  was 
therefore driving up household debt and feeding the housing bubble in Spain. 

VAT revenue amounted to only about 5.5 % of GDP in 2010, which is the lowest in the 
EU. The standard VAT rate of 18 % is at the lower end of the spectrum compared with 
other  Member  States.  Because  of  the  wide  application  of  a  super-reduced  rate  (4 %),  a 
reduced rate (8 %) and the scope of VAT exemptions, actual VAT revenue amounted to 
only  around  42 %  of  the  theoretically  possible  level.9 The low ratio also underlines the 

7  Council  Directive  2011/85/EU  of  8  November  2011  on  requirements  for  budgetary  frameworks  of  the 

Member States. 

8 Just below 32 % of GDP in 2010, compared to the EU average of above 38 %. 
9 Theoretical revenues assume that all final consumption is taxed at the standard rate. 

14

 
 
                                                 
lack  of  effectiveness  of  enforcement  measures  to  reduce  the  level  of  VAT  evasion. 
Revenue from excise duties on tobacco and alcohol is also relatively low. 

Revenue from environmental taxes was the lowest in the EU in 2010 (as a percentage of 
GDP).  A  wide  range  of  tax  exemptions  and  reductions  are  in  place,  as  well  as 
environmentally  harmful  subsidies.  There  is  also  room  for  higher  excise  duties  on 
transport fuels (unleaded petrol and diesel). Spain is drawing up a strategic multiannual 
plan for the coal industry in 2013-2018, but it has not yet been published. This strategic 
plan  is  expected  to  include  details  of  how  Spain  intends  to  gradually  reduce  and 
ultimately  phase  out  coal  production  aid  and  to  close  down  the  coal  mines  by  2018. 
Economic  instruments  for  waste  management,  which  make  prevention  and  recycling 
more  attractive  and  help  cover  the  costs  of  collection,  sorting  and  recycling,  offer 
alternative growth-enhancing tax measures and can help ensure the sustainability of local 
public finances. The same applies to water tariffs, which are amongst the lowest in the 
EU. In particular, certain regional water pricing policies give farmers little incentive to 
reduce water use for irrigation. 

Spain  has  taken  no  measures  to  implement  the  country-specific  recommendation  on 
revising the efficiency of its tax system. On the contrary, the recent temporary increases 
in direct taxation, introduced on 30 December 2011,10 go in the opposite direction to the 
Council  recommendation,  as  they  further  increase  the  direct  tax  burden  and  thus  the 
growth-unfriendliness of the Spanish tax system. 

3.2.  Financial sector 

Banking 

In February 2011, Spain adopted more stringent minimum core capital requirements for 
all  banks  (8  or  10 %  of  risk  weighted  assets).  These  were  achieved  by  the  end  of 
September  2011,  in  line  with  the  commitment  under  the  Euro  Plus  Pact.  Most  of  the 
savings  banks  raised  capital  from  private  investors.  Plans  for  restructuring  those  banks 
that  have  received  public  funds  had  to  be  submitted  by  late  March  2012.  Four  banks 
requested assistance from the state banking restructuring fund (FROB). 

Following  the  October  2011  European  Council  conclusions  in  the  context  of  the 
temporary  bank  recapitalisation  exercise  coordinated  by  the  European  Banking 
Authority,  five  systemically  important  Spanish  banks  (Santander,  BBVA,  Bankia, 
CaixaBank  and  Banco  Popular)  were  requested  to  raise  roughly  EUR  26  billion  to 
comply with a higher minimum core Tier 1 capital ratio of 9 % of risk-weighted assets 
after accounting for sovereign debt holdings. 

Spanish  banks  still  have  large  exposures  to  the  real  estate  and  construction  sectors 
(amounting to about 10 % of total consolidated assets in December 2011). Over a half of 
this exposure is already problematic and may eventually rise further as developers prove 
unable  to  sell  their  assets  and  make  repayments.  Mortgages  to  households  imply, 
however, a much lower risk for banks. At present, the doubtful asset ratio of mortgage 
loans  (around  3 %)  is  much  lower  than  the  loans  to  construction  and  real  estate  firms, 
whose repayments are conditional on their ability to sell real estate assets. To tackle this 
problem, new measures were adopted in February and May 2012, which increase specific 
and generic provisions and require banks to set aside capital buffers. The main objective 

10 Spain in particular introduced a temporary increase in individual income tax rates and savings income 

tax rates for the years 2012 and 2013. 

15

 
 
                                                 
of this reform is to dispel any uncertainties arising from Spanish banks’ exposure to the 
real estate sector and to promote further consolidation of the banking system. Banks have 
until the end of 2012 to comply with the new requirements, and until the end of 2013 in 
the event of mergers. 

The  current  difficult  macroeconomic  environment  coupled  with  the  high  funding  costs 
and  the  on-going  increase  in  impaired  assets  continues  to  put  pressure  on  the  banks' 
short- to medium-term profitability. Given the risk of bank funding stress, it is necessary 
to  continue  to  strengthen  the  banks’  capital  base.  The  reform  measures  adopted  in 
February  and  May  2012  targeted  the  legacy  stock  of  real  estate  assets,  but  the 
vulnerabilities  related  to  other  exposures  such  as  loans  to  SMEs  and  residential 
mortgages  have  not  been  addressed.  Spain  needs  to  ensure  that  the  policy  response  is 
consistent with a broader strategic context (i.e. on-going discussions about new proposals 
for recapitalising of the financial sector across the euro area). 

Firms’ access to finance 

A main factor currently constraining firms operations and growth in Spain, particularly 
small  and  medium-sized  enterprises  (SMEs),  is  the  lack  of  access  to  bank  financing, 
which  has  been  stricter  since  last  year  and  continue  to  be  one  of  the  main  concerns  of 
Spanish business. According to the Spanish Statistics Institute (INE), 60 % of SMEs will 
need  financing  for  their  working  capital  until 2013. In  this respect, the  national reform 
programme falls short of proposing specific actions to help banks finance firms. 

In  addition,  the  long  delays  in  payments,  in  particular  from  the  public  sector,  further 
aggravate  the  problem.  The  effects  of  the  recent  law  on  late  payments11  have  not  yet 
fully  materialised.  According  to  the  latest  data  from  the  Cross-sector  Platform  against 
Late  Payments,  which  represents  around  one  million  businesses  in  Spain,  the  public 
sector takes 162 days to pay bills, making it the second worst performer in the EU after 
Greece. The average payment time for the private sector is 98 days. The main measure 
proposed in national reform programme in this area is a mechanism for regional and local 
entities  to  address  late  payments  (measure  52  of  the  NRP);  however,  this  measure 
implies penalising suppliers, who have to accept the non-inclusion of interests and other 
costs  in  the  final  payment,  and  it  goes  against  the  principles  of  the  Late  Payments 
Directive.  In  addition,  the  national  reform  programme  does  not  provide  details  on 
whether  accepting  a  voluntary  reduction  of  the  due  payment  would  be  considered  as  a 
criterion  for  priority  payment.  Financial  instruments  other  than  credit  (e.g.  risk  capital, 
business  angels  or  mezzanine  finance)  could  help  fill  the  credit  gap  in  Spain,  but  they 
have yet to be developed. 

Structural  funds  are  a  good  opportunity  to  help  in  this  area.  So  far  three  financial 
instruments supported by Structural Funds have been put in place to provide guarantees 
and  loans  to  small  and  medium  businesses  (JEREMIE12  holding  funds)  to  help  them 
carry out research and innovation at regional and national level. JESSICA13 is another 
financial  instrument  at  national  level  for  promoting  sustainable  urban  projects  and  is 

11 Law 15/2010 published on 6 July 2010 in the Spanish Official Journal (BOE No 163). 
12  Joint  European  Resources  for  Micro  to  Medium  Enterprises:  initiative  of  the  European  Commission 
together  with  the  European  Investment  Fund  to  promote  the  use  of  financial  engineering  instruments  to 
improve access to finance for SMEs via Structural Funds operations. 
13 Joint European Support for Sustainable Investment in City Areas: initiative of the European Commission 
in cooperation with the European Investment Bank (EIB) and the Council of Europe Development Bank 
(CEB)  to  support  sustainable  urban  development  and  regeneration  through  financial  engineering 
mechanisms. 

16

 
 
                                                 
supported  by  the  Structural  Funds.  More  extended  use  of  these  funds  and  their 
introduction  in  other  regions  would  certainly  help  SMEs  in  search  of  finance.  The 
European  Regional  Development  Fund  (ERDF)  offers  various  possible  options  in  this 
area.  For  example,  the  reallocation  of  EUR  400  million  to  a  reindustrialisation  aid 
scheme  on  investment  loans  primarily  for  SMEs;  support  for  measures  related  to  seed 
capital and micro credit in the framework of the upcoming Law on Entrepreneurship; and 
the  reallocation  of  EUR  155  million  for  the  creation  of  a  working  capital  fund  for 
innovative  SMEs,  to  be  run  by  existing  national  institutions/instruments,  to  which 
regions can be asked to further contribute on a voluntary basis. Another line of action by 
the Spanish authorities has been to reform and extend the Official Credit Institute (ICO) 
credit  lines.  Their  design  still  needs  to  be  improved  in  order  to  make  this  mechanism 
more efficient. Other measures which can help in this area are the rapid implementation 
of the VAT Directive and the compensation of debts/credits between administrations and 
enterprises. 

3.3.  Labour market, education and social policies 

Employment continued to fall last year, while wages kept reacting only partially to the 
situation  on  the  labour  market.  The  cumulated  loss  in  employment  in  the  period  2008-
2011, which has reached 11.3 %, was accompanied by a cumulated increase of 11.2 % in 
nominal wages (6.9 % in real terms), thus leading to an increase in nominal unit labour 
costs. The existing rigid system of wage bargaining prevented a better alignment between 
wages  and  productivity,  notably  by  including  a  generalised  use  of  ex-post  wage 
indexation. The unemployment rate, already the highest in the euro area, reached a new 
record high of  24.4 % in the first quarter of 2012. Young people and the less qualified 
and less experienced workers, many of them on temporary contracts, continue to bear the 
brunt  of  the  economic  crisis.  Youth  unemployment  increased  from  49 %  in  the  fourth 
quarter to 52% in the first quarter of 2012. Young people are much more likely to find 
themselves  unemployed,  on  involuntary  temporary  and  part-time  work  contracts  or  in 
precarious employment conditions and on low pay. In recent years, the number of long-
term unemployed people has increased substantially — from 1.7 % in 2007 to 7.3 % in 
2010. 

The average exit age from the labour market was 62.3 in 2009, so 2.7 years lower than 
the statutory retirement age at 65, even if above the EU average (61.4). Employment rate 
of older workers (55-64) has risen from 39.2 % in 2001 to 43.6 % in 2010, but it was still 
below the EU average of 46 %. 

The  measures  detailed  in  the  national  reform  programme  are  intended  to  address  the 
main  challenges  facing  the  labour  market  situation  in  Spain,  in  line  with  the 
comprehensive  reforms  entailed  by  the  Government.  The  segmentation  of  the  labour 
market  and  the  high  unemployment  rate,  especially  for  youth,  are  subject  to  a 
comprehensive  diagnosis.  On  10  February  2012,  the  Spanish  Government  adopted  a 
further  reform14  of  the  labour  market,  which  included  reducing  the  severance  payment 
for unjustified dismissals to 33 days per year of service, gave priority to company-level 
collective  agreements,  allowed  firms  to  opt  out  of  agreements  on  higher  level,  granted 
firms  greater  internal  flexibility  and  provided  financial  incentives  for  hiring  workers, 
especially young. 

14 Royal Decree 3/2012 ‘on urgent measures for reforming the labour market’. 

17

 
 
                                                 
These elements of the reform have the potential to change the dynamics of the Spanish 
labour market, enabling  firms to adapt quickly to changes in market conditions. In this 
regard,  it  is  more  ambitious  than  previous  reforms.  By  reducing  severance  pay, 
simplifying  the  procedures  for  collective  and  individual  dismissals  and  clarifying 
objective  dismissals,  the  reform  may  help  restore  the  conditions  for  hiring  workers  on 
permanent  contracts.  In  the  short  term,  however,  it  may  lead  to  an  increase  in 
unemployment. 

The  effect  of  the  reform  on  labour  market  segmentation  and  job  creation  depends  on  a 
series of elements. Past evidence shows that strong emphasis on financial incentives does 
not have the intended effect of ensuring sustainable job creation. Moreover, although the 
reform  re-establishes  limits  on  renewing  temporary  contracts,  in  order  to  reduce 
segmentation, the new contracts for SMEs contain relatively long trial periods and may 
become  a  substitute  for  temporary  contracts.  The  trial  period  for  the  new  permanent 
contract is one year — much longer than the two or three months limit (six months for 
qualified workers) set by the Workers’ Statute. There is a risk that firms will use the one-
year period to transform this contract into a de facto low-quality temporary contract with 
zero termination costs. Apprenticeship contracts share a similar risk, since a person can 
be hired under consecutive apprenticeship contracts that can be terminated at zero cost. 
This may indeed contribute to increasing segmentation. The cost of dismissing someone 
on  a  permanent  contract  also  remains  high  compared  to  the  figure  for  a  temporary 
contract. 

In  the  area  of  collective  bargaining,  the  reform  could  lead  to  a  faster  adjustment  of 
wages,  in  line  with  the  2011  Council  recommendation.  This  is  because  it  gives  the 
priority to company-level decisions on working hours, tasks and wages. It also makes it 
easier  for  firms  to  opt  out  of  sectoral  agreements  and  it  puts  an  end  to  the  practice  of 
indefinitely  extending  collective  agreements.  However,  such  agreements  can  still  be 
extended  beyond  their  term  for  two  years.  Enhanced  internal  and  external  flexibility 
helps the labour market adjust to shocks in a more balanced way. Until now, adjustment 
has  concentrated  mainly  on  headcounts,  with  the  brunt  being  borne  by  people  on 
temporary contracts. 

Regarding  wage-setting  mechanisms,  the  system  of  ex-post  inflation  wage  indexation 
usually applied in collective agreements has been put on hold by a recent social partners’ 
agreement for the period 2012-2014. In addition, the limit of two years for the validity of 
expired agreements is too long, and small firms might not find it easy to implement the 
opt-out  clauses,  as  they  rarely  have  collective  agreements  at  firm  level.  Indeed,  in  the 
event of disagreement on the derogation from sector agreements, the reform has added a 
third  layer  of  dispute  resolution  (the  National  Advisory  Committee  on  Collective 
Bargaining)  which  may  lead  to  the  appointment  of  an  arbitrator.  It  remains  to  be  seen 
whether  this  additional  layer  would  actually  make  it  easier  to  implement  such 
derogations. 

According to the national reform programme, the efficiency of the active labour market 
policies,  as  a  key  element  for  preventing  unemployment,  needs  to  be  improved.  An 
annual employment policy plan is intended to monitor the effectiveness of measures and 
refocus them, if necessary. Priority is given to measures counterbalancing the high youth 
unemployment  rates.  Importance  is  accorded  to  the  promotion  of  self-employment  and 
entrepreneurship,  the  improvement  of  vocational  training  and  a  whole  set  of  new 
instruments  for  vocational  guidance  and  labour  market  intermediation,  such  as  the 
creation  of  individual  training  accounts  which  will  help  providing  information  for  the 
placement of job seekers. 

18

 
 
The  national  reform  programme  states  that  the  revision  of  the  active  labour  market 
policies  will  be  implemented  on  a  gradual  basis. EU funding (and the  European Social 
Fund  in  particular)  can  be  a  useful  tool  to  support  the  necessary  change  in  order  to 
improve  employment  opportunities  and  human  capital.  The  reform  of  February  2012 
allows private employment services to act as intermediaries, to complement the capacity 
of  the  Public  Employment  Service  and  expand  hiring  capacity.  However,  there  is  little 
coordination between the national and regional public employment services, particularly 
when  it  comes  to  sharing  labour  market  information  and  publishing  job  vacancies 
throughout the entire country. In addition, active labour market policy instruments do not 
seem to be effective enough at getting unemployed people into work and upgrading their 
skills, and they rely excessively on employment subsidies. Strengthening training and re-
training  measures,  which  might  be  partly  financed  by  the  European  Social  Fund  (ESF) 
can  improve  human  capital,  and  thus  employment  opportunities,  and  can  also  help  to 
renew  the  country’s  productive  potential  and  redirect  economic  activity  toward  sectors 
with greater job-creating capacity. 

For  all  that,  the  labour  market  reform  goes  in  the  direction  advocated  by  Council 
recommendations for the labour market addressed to Spain last year, and tackles one of 
the  Euro  Plus  Pact  commitments  made  by  Spain.  Moreover,  the  reform  is  particularly 
useful  for  tackling  unemployment  in  the  medium  and  long  term  and  for  addressing  the 
social  consequences  of  the  crisis,  which  are  priorities  of  the  2012  Annual  Growth 
Survey. 

Following  the  European  Council  of  30  January  2012,  the  Spanish  authorities  and  the 
Commission  examined  measures  for  reducing  youth  unemployment,  including  through 
reallocation  of  the  European  Structural  Funds.  As  a  result,  within  the  European  Social 
Fund,  EUR 135 m  is  to  be  redirected  to  the  public  employment  service  to  help  young 
people  find  work  and  the  possibility  of  redirecting  an  additional  amount  is  being 
considered.  Additional  over  EUR 80 m  will  be  redirected  for  the  young  under  specific 
operational programmes. 

To  tackle  the  challenge  of  high  overall  unemployment  and  youth  unemployment  in 
particular,  it  is  crucial  for  Spain  to  improve  the  quality  of  its  education  and  training 
system  and  to  match  training  (particularly  in  medium-level  skills)  to  the  needs  of  the 
labour  market.  The  plan  for  improving  the  foreign  language  learning  announced  in  the 
national  reform  programme  represents  a  step  in  the  right  direction,  as  it  should  help 
young people become more competitive and mobile. The Sustainable Economy Law of 
2011 laid down measures to be taken in this area, but there is no information on what has 
been done to implement these measures. 

In spite of expenditure cuts in 2012, the budget to combat early school-leaving has been 
maintained. Spain managed to reduce the early school-leaving rate from 31.2 % in 2009 
to 28.4 % in 2010. The economic crisis was very likely one of the factors contributing to 
the lower ESL rate and there is a long way to go to achieve the target of 15 % by 2020, as 
recognised by the Government in the national reform programme. Moreover, the overall 
early  school-leaving  rate  conceals  significant  disparities  between  the  autonomous 
communities.  By  contrast,  the  national  target  of  44 %  higher  education  attainment  for 
2020 is ambitious enough compared to the policy challenge and is achievable. 

Considerable progress has been made in vocational training, and the measures provided 
for  in  this  area  by  the  Sustainable  Economy  Law  in  March  2011  are  apparently  being 
successfully  implemented.  However,  the  Reinforcement,  Counselling  and  Support  Plan 
(PROA) is not ambitious enough to address the challenge, and there are not enough basic 
vocational  training  programmes.  In  the  national  reform  programme  the  Government 

19

 
 
announces  a  reform  in  this  area,  although  objectives  and  measures  are  not  clearly 
differentiated. The labour market reform of 10 February 2012 provides positive elements, 
such  as  steps  towards  a  dual  system  of  professional  training  and  a  reform  of 
apprenticeship  contracts  and  training  contracts  to  reduce  youth  unemployment.  In  this 
regard,  the  Government  announces  a  pilot  project  for  a  dual  system  of  professional 
training.  This  a  promising  initiative  that  favours  an  active  participation  of  firms  in 
providing professional training in order to better adapt competencies and skills to labour 
market  demands.  The  national  reform  programme  acknowledges  the  key  role  that  the 
ESF  plays  in  the  area  of  vocational  training  and  employability  of  youth.  A 
comprehensive plan for lifelong learning is missing in the national reform programme. 

The NRP announces a relevant set of reforms in the area of university education, which 
aim  at  improving  the  efficiency  of  the  offered  qualifications  and  services.  Proposals 
include a rationalisation in the offer of new education programmes and an alignment of 
the university fees to real costs, although details about practical implementation remain 
unclear. 

Addressing  youth  unemployment,  which  is  high  in  Spain,  was  identified  as  one  of  the 
main  priorities.  Following  a  Commission  initiative,  the  Spanish  authorities  and 
Commission  staff  examined  measures  for  reducing  youth  unemployment,  including 
through  reallocation  of  the  European  structural  funds.  Structural  funds  provide 
instruments  to  strengthen  national  efforts  to  combat  youth  unemployment,  training  for 
young  people  and  early  school  leaving.  For  example,  the  European  Regional 
Development  Fund  provides  support  for  low-skilled  unemployed  young  people  in  the 
most  under-developed  regions.  It  does  so  through  programmes  for  innovative  SMEs  in 
the agri-food sector at end of the production chain. The European Social Fund also offers 
possibilities in this area. For example, a number of regional operational programmes can 
be refocused towards early school leavers, vocational training and apprenticeships. 

All in all, Spain still lacks a comprehensive education and training strategy, including a 
comprehensive  plan  on  lifelong  learning,  reflecting  the  change  in  the  country’s 
productive  model.  Continuous  training  and  the  maintenance  of  competences  and  skills 
are  not  sufficiently  updated  and  adapted  to  market needs,  especially  the needs of those 
sectors with better prospects of economic development. 

The poverty and  exclusion target set for Spain is based on the EU headline target. It 
combines three indicators: (i) the at-risk-of-poverty indicator (reflecting relative income 
poverty), which worsened from 19.5 % in 2009 to 20.7 % in 2010; (ii) the severe material 
deprivation indicator, which increased by 0.5 pps to 4 % in 2010; and (iii) the percentage 
of people living in households with very low work intensity, which also worsened from 
7 % in 2009 to 9.8 % in 2010. This means there has been no progress towards achieving 
the target of reducing the number of people at risk of poverty and/or social exclusion by 
1.4 to 1.5 million. On the contrary, the number of people at risk of poverty or exclusion 
increased  by  1.1  million  (to  26.2 %  of  the  overall  population)  in  2010  alone. 
Furthermore,  the  at-risk-of-poverty  rate  for  children  and  the  in-work  poverty  rate 
continued  to  rise significantly in 2010. The rate for children rose by 2.5 pps to 26.2 %. 
There  is  a  high  risk  of poverty among  children in medium work-intensity households 
and a high proportion of children at risk in two-parent households. This is partly because, 
in  many  cases,  only  one  of  the  parents  has  a  paid  job.  Spain  is  also  among  the  EU 
countries  where  social  protection  does  the  least  to  reduce  child  poverty.  This  is  partly 
due  to  reduced  redistributive  effects  across  income  groups,  and  to  the  fact  that  Spain’s 
spending on child and family benefits (as a percentage of its total expenditure on social 
protection), is below the EU average. 

20

 
 
In-work poverty has increased steadily since 2006, rising from 10 % to 12.7 % in 2010 
—the third highest level in the EU. Moreover, the in-work poverty rate for young people 
reached 14 % in 2010, even further below the EU average, and the in-work poverty rate 
for temporary workers was four times higher than for permanent workers. The good news 
is  that  the  at-risk-of-poverty  rate  for  the  elderly  has  decreased  considerably,  falling  in 
2010 by 3.5 pps to 21.7 %. 

3.4.  Structural measures promoting growth and competitiveness 

Spain  is  currently  going  through  deep  structural  adjustments  following  the  build-up  of 
large  external  and  internal  imbalances  during  the  housing  and  credit  boom.  Current 
account  deficits  remain  high,  although  they  have  started  to  decrease  recently  in  the 
context  of  the  severe  economic  slowdown  and  on  the  back  of  an  improving  export 
performance.  Since  2008,  losses  in  price  and  cost  competitiveness  have  only  partially 
been reversed. While the adjustment of imbalances is ongoing, it will take time to absorb 
the large stocks of internal and external debt and to reallocate the resources freed from 
the  construction  sector.  Adjusting  imbalances  in  Spain  means  tackling  structural 
problems  that  are  hampering  growth  and  preventing  the  country  from  becoming  more 
competitive. 

Spain  urgently  needs  to  continue  implementing  major  structural  reforms  in  the  product 
and  services  markets  in  order  to  create  new  jobs.  That  objective  will  become  more 
achievable  if  Spain  sets  easier  conditions  for  firms  to  enter  and  leave  the  market,  if  it 
ensures  that  the  institutional  set-up  guarantees  effective  competition  enforcement  in  all 
sectors  of  the  economy  as  well  as  effective  and  independent  regulatory  activity  in 
regulated  sectors  and  if  it  enhances  competition  and  reduces  regulation  in  a  number  of 
services sectors with high spillover effects, such as professional services. Private-sector 
participation  in  R&D  and  innovation  activities  remains  too  low  and  the  system  of 
knowledge transfer is weak. Spanish firms still face very difficult access to credit, a lack 
of  alternative  financing  instruments  and  a  heavy  bureaucratic  burden,  in  particular  at 
regional  and  local  levels.  There  is  still  considerable  room  for  using  or  reprogramming 
available Structural Funds, in particular to support youth employment and human capital 
development,  and  to  make  small  and  medium-sized  enterprises  more  competitive.  This 
could  boost  the  country’s  growth  and  competitiveness  and  help  it  achieve  the  Europe 
2020 targets. 

With  respect  to  measures  promoting  growth  and  competitiveness,  the  Spanish  national 
reform program proposes solutions going in the right direction, even if some of them are 
not yet enough developed. 

Internal market, market opening and competition 

In April 2011, Spain set up an Advisory Commission on Competitiveness, as part of its 
Euro  Plus  Pact  commitments.  The  main  functions  of  this  body  include  preparing  an 
annual  indicator-based  report  on  productivity  and  competitiveness,  carrying  out  studies 
on  competitiveness  and  answering  ad  hoc  questions  from  the  Government  on 
competitiveness  issues.  It  aims  to  guide  the  Government  in  designing  economic  policy 
and  in  negotiations  with  the  social  partners.  It  is  an  independent  body,  although  it  is 
financed  from  the  budget  of  the  Ministry  of  Economy  and  Finance.  Until  now  the 
Commission has not been fully operational. 

The  fragmentation  of  the  domestic  market  in  Spain  is  a  major  obstacle  preventing 
businesses from taking advantage of economies of scale and scope. The national reform 
programme  acknowledges  the  problem  but  the  measures  proposed  are  very  general.  In 
particular,  the  ‘Law  on  the  unity  of  the  domestic  market’  (point  79)  goes  in  the  right 

21

 
 
direction but now the challenge is to properly develop its content, to proceed swiftly with 
its approval and to ensure its full and speedy implementation. 

Business services present the largest development potential of the Spanish economy both 
in  terms  of  growth  and  jobs.15    Business  services  are  the  key  factor  in  the  proper 
performance  and  development of other  sectors and, given that they are inputs for other 
sectors  of  the  economy,  the  absence  of  competition  in  services  also  undermines  the 
competitiveness  of  users  downstream.  However,  business  services,  and  in  particular 
professional  services  (which  account  for  75 %  of  business  services)  show  lower 
productivity than in the rest of the EU. Transposing the Services Directive into national 
law has led to a significant removal of barriers in certain services, namely retail, tourism, 
some  business  services  and  some  regulated  professions.  However,  some  professional 
services  are  still  protected  from  competition  by  ‘activity  reservations’  (or  exclusive 
rights)  to  provide  services.  Opening  up  these  services  to  competition  would  certainly 
drive down prices, improve the quality of the services, add transparency and ultimately 
provide more job opportunities.16 

The  Spanish  National  Competition  Authority  had  already  advocated  abolishing 
profession-specific  restrictive  regulations  and  has  recently  published  a  report  on  the 
functioning  of  the  guilds  following  the  transposition  of  the  Services  Directive.17  The 
liberalisation of professional services proposed by the national reform programme would 
be  a  significant  step  forward,  but  the  programme  does  not  provide  much  detail. 
Meanwhile,  the  reform  should  cover  highly  regulated  professions  such  as  notaries, 
property  registry  agents  or  court  officers,  removing  the  barriers  to  entry  and  operation 
imposed  by  professional  associations.  The  national  validity  of  authorisations  and 
declarations  required  for  professionals  (point  81  of  the  national  reform  programme) 
would facilitate the provision of services, but would need to be enforced at all levels of 
administration. 

Despite  major  efforts  at  simplification,  both  nationally  and  at  regional  level,  regional 
governments  have  maintained  authorisation  schemes  for  opening  large-scale  retail 
outlets,  and  these  schemes  limit  competition.  According  to  the  Spanish  Competition 
Authority,18  maintaining  these  restrictions  is  continuing  to  make  it  difficult  for  new 
operators  to  enter  the  market.  They  are  thus  prevented  from  exerting  competitive 
pressure  on  incumbent  retailers  and  from  developing  alternative  distribution  models. 
These  restrictions  also  tend  to  strengthen  the  bargaining  power  of  incumbent  retailers. 
The intention to remove municipal licences expressed in the national reform programme 
(point 82) is welcome. 

The Spanish Government has announced its intention, in the second quarter of this year, 
to  merge  the  national  competition  authority  with  seven  national  sector  supervisory 
and  regulatory  authorities  (energy,  telecommunications,  postal  services,  audio-visual 
industries,  railway  and  air  transport  and  gambling)  thus  creating  a  single  body  —  the 
National Commission for Markets and Competition (CNMC). This new body should be 

16   According to official estimates, professional services account for 8.5 % GDP and their reform could 

increase potential GDP by 0.7 %. 

17   Comisión Nacional de Competencia — Informe sobre los colegios profesionales tras la transposición 

de la Directiva de Servicios, April 2012. 

18   Comisión Nacional de Competencia — Report on the relations between manufacturers and retailers in 

the food sector, October 2011. 

22

 
 
                                                 
 
more efficient and could boost competitiveness in all sectors of the economy, as it would 
allow  any  sectoral  legislation  to  be  screened  on  competition  grounds  before  being 
adopted. However, the current draft Law that creates the CNMC does not guarantee that 
it will carry out its regulatory activity in an effective and independent way. 

Energy, transport, infrastructure and environment 

Spain ranks 6th in the EU-27 in terms of total greenhouse gas (GHG) emissions. Spain 
has  committed  itself  to  reduce  GHG  emissions  by  10 %  in  2020,  compared  to  2005,  in 
sectors not covered by the emissions trading system (ETS). In 2010 the emissions were 
4 % lower than in 2005, and this is in line with the target. According to the latest Spanish 
projections,  emissions  are  expected  to  decrease  by  9.7 %  by  2020  (compared  to  2005), 
leading to a shortfall of the target by less than one percentage point. 

Spain has put forward an appropriate mix of policy measures on energy efficiency and 
support for renewable energy sources in order to achieve its energy and climate targets 
by  2020.  However,  the  electricity  tariff  system  in  Spain  remains  inefficient  and 
competition insufficient. 

Spain has traditionally capped end-user prices of electricity to several consumer groups 
under a regulated tariff system. The tariffs do not always cover the costs, so a so-called 
tariff deficit is generated within the system at the expense of utilities. With the costs of 
generation and the regulated costs (e.g. transportation and distribution) rising faster than 
the  tariff,  the  deficit  has  significantly  increased  in  recent  years  and  reached  an 
accumulated  amount  of  EUR  24  billion  (more  than  2 %  of  GDP).19  Two  thirds  of  this 
amount  (around  EUR  17  billion)  is  guaranteed  by  the  Government,  which  has  allowed 
utilities to securitise it. In 2009, the Government revised the whole tariff system with the 
aim  of  ensuring  that  electricity  prices  cover  total  costs.20  However,  low-consumption 
households (representing 83 % of consumers) were still allowed to pay electricity prices 
that did not fully reflect the overall costs of the system21 under the so-called ‘last resort 
tariff’.22 As a result, the tariff deficit continued to build up. 

In January 2012, the Government temporarily suspended23 renewable energy premiums 
paid to newly-built plants (wind, solar, biomass and hydro technologies) in an attempt to 
reduce  electricity  costs  and  thus  the  electricity  tariff  deficit.  Suspending  support  for 
renewables discourages investment in the sector and will make it hard to achieve Spain's 
target under the Europe 2020 energy and climate goals. Moreover, with less renewable 
energy in the mix, Spain’s dependence on imported energy would further increase from 
the  current  79 %  (which  is  already  much  higher  than  the  EU  average  of  54 %). 
Streamlining complex authorisation and planning procedures and removing other barriers 
to the growth of renewable energy can help reduce the cost of renewables, which remains 
an issue for Spain. 

19 There is also a tariff deficit in the gas sector, but it is much smaller (EUR 0.4 bn.). 
20  Total  electricity  costs  include  hidden  costs  designed  to  sustain  certain  regulated  activities 
(e.g.inefficient  and  environmentally  harmful  energy  subsidies  to  coal  mines  and  the  return  on  the 
distribution/transport activities according to the net value of the assets used). 

21  Elements  contributing  to  the  overall  cost  include  the  production,  transportation  and  distribution  of 

electricity and various energy-related policies. 

22 Households whose consumption capacity is limited to 10 kW. 
23 Recently, the energy regulator suggested maintaining this moratorium at least until 2017. 

23

 
 
                                                 
In  March  2012,  the  Government  adopted  further  measures  to  reduce  costs  in  the 
electricity  sector  by  EUR  1 700  million,  e.g.  distribution,  transmission,  capacity 
payments,  financing  the  regulator  CNE,  an  interruptible  tariff  and  a  slight  reduction  of 
subsidies for coal. It also increased tariffs (around 7 % for the tariff of last resort), thus 
generating  an  additional  income  of  around  EUR  1 400  million.  The  Government  also 
adopted  legislation  to  completely  take  on  board  the  EU’s  internal  energy  market 
legislation,  in  particular  strengthening  the  powers  of  the  Spanish  national  regulatory 
authority. This is expected to enhance competition. While cutting electricity costs should 
help reduce the tariff deficit, the increase in tariffs for consumers may hinder domestic 
consumption and reduce firms' external competitiveness. 

Weak  competition  in  the  energy  sector  has  contributed,  at  least  partly,  to  building  the 
tariff deficit by favouring overcompensation to certain utilities, such as nuclear and large 
hydro  power  generators  which  have  already  been  paid  for,  or  by  sustaining  inefficient 
and  environmentally  harmful  energy  subsidies  to  coal  mines.  These  measures  have  not 
been translated into lower prices, and they thus hinder economic growth. Indeed, Spain 
has one of the lowest levels of interconnectedness in the EU. Completing electricity and 
gas interconnectors with France and Portugal, currently under construction, would help 
to intensify competition in the energy sector. Increasing the electricity network's capacity 
for  cross-border  exchanges,  notably  with  France,  will  allow  Spain  to  increase  its  trade 
with neighbouring countries and balance the supply of renewable electricity such as wind 
power. Indeed, the low cross-border transmission capacity has contributed to a waste of 
resources  in  renewable  utilities,  which  have  to  plan  heavy  investments  in  expensive 
backup  power  (i.e.  for  wind  power),  such  as  gas-fired  capacity,  and  in  transmission 
networks.  Giving  priority  to  developing  the  Africa-Spain-France  gas  corridor  and 
establishing  a  functioning  Iberian  gas  hub  (Mibgas)  would  foster  competition  between 
gas  companies,  increase  market  liquidity  and  help  diversify  and  secure  gas  supplies. 
Connecting  Catalonia  to  the  Rhone  Valley  in  France  would  also  boost  cross-border 
capacity. 

Spain  faces  considerable  challenges  in  the  area  of water and waste management and 
air  pollution.  Although  parts  of  Spain  are  experiencing  water  shortages,  there  are 
insufficient incentives for using water efficiently and this results in unsustainable use. In 
particular,  there  is  still  no  clear  commitment  on  part  of  the  Spanish  Government  to 
reform  the  market  for  water  concessions  in  order  to  concretely  address  the  mentioned 
inefficiencies.  More  than  50 %  of  municipal  waste  in  Spain  is  landfilled,  and 
opportunities  for  prevention  and  recycling  have  not  been  fully  harnessed.  Full 
implementation  of  the  existing  legislation  could  create  more  than  54 000  jobs  and 
increase  the  annual  turnover  of  the  waste  sector  by  around  EUR 5.7  billion,  while 
reducing  total  direct  and  indirect  greenhouse  gas  emissions  by  3.5 %  to  6.1 %  in  2020. 
Environmental  policy  is  disregarded  in  the  national  reform  programme  and  Spain 
continues to lag behind other EU countries in implementing environmental legislation.24 

The  transport  infrastructure  deficit  of  the  past  has,  to  a  large  extent,  already  been 
addressed  in  Spain.  The  resulting  extensive  network  of  motorways,  high-speed  railway 
lines, airports and ports requires high on-going maintenance and renewal costs, high debt 
service  or  public-private  partnership  (PPP)  service  payments.  At  the  same  time,  the 
network suffers from a lack of interoperable interconnections with other Member States 

24 Spain continues to have one of the highest numbers of infringement cases in EU. 

24

 
 
                                                 
and  poor  integration  between  transport  modes  —  ports  and  railways,  airport  hubs  and 
high  speed  railway  lines,  multimodal  platforms  and  railway  corridors.  There  is 
insufficient  competition  in  transport  services,  notably  in  railways  and  ports,  leading  to 
inefficient exploitation of transport assets. 

It  is  therefore  critically  important  that,  for  any  new  infrastructure  project,  a  fully 
transparent  cost-benefit  analysis  is  carried  out.  An  issue  for  Spain  is  to  limit 
infrastructure investment to those projects for which there is genuine demand and which 
are affordable, taking into account the high opportunity cost of public funds. Transport 
users  should  bear  a  more  proportionate  share  of  the  overall  costs  through  wider 
application  of  the  ‘user  pays’  principle.  It  is  crucial  to  adopt  measures  to  increase 
competition in railway and port services, to develop and manage transport infrastructure 
in  a  more  business-oriented  way,  to  open  up  the  isolated  network  and  better  integrate 
transport modes. 

Air transport has expanded considerably in recent years, with the rise of low-cost carriers 
and the implementation of new airport strategies. However, it is important to ensure that 
unprofitable regional airports do not place an unnecessary burden on public finances and 
do not distort competition within the internal market. The sustainable growth of airports 
and airlines requires full compliance with state aid rules and the avoidance of detrimental 
airport  duplication.  A  recent  study  showed  that  out  of  the  48  regional  commercial 
airports built in Spain over the last 20 years, only 11 make a profit.25 There are some 20 
airports  handling  fewer  than  100 000  passengers  a  year,  well  below  the  profitability 
threshold  of  around  500 000,  and  only  a  few  among  them  help  preventing  isolation  of 
remote regions (i.e. in the Canary Islands). 

Research and innovation 

Spain’s  public  investments  in  research  and  development  (R&D)  grew  consistently 
between 2000 and 2009. Business spending on R&D also grew until 2008. In the wake of 
the crisis and fiscal consolidation, both public and private investment in R&D declined. 
Business R&D investment remains very low in Spain and the economic structure has not 
shifted substantially towards a more sustainable model based on more knowledge-based 
products  and  services.  The  trend  of  falling  public  and  private  investment  in  R&D  will 
need to be reversed to avoid long-term damage to Spain’s capacity for innovation. 

The considerable increase in public and private R&D expenditure over the decade 2000-
2009  did  not  significantly  boost  innovation  in  Spain.  The  country  has  made  little 
progress in accumulating intellectual assets (patent applications, community trademarks 
and  designs),  in  improving  public-private  and  private-private  partnerships  or  in 
introducing and marketing new and innovative products, processes and services. 

Spain  has  initiated  comprehensive  policies  and  reforms  to  improve  its  research  and 
innovation  system.  These  include  the  new  Science  Law  adopted  in  2011,  the  Spanish 
Innovation Strategy (e2i) and the 2015 University Strategy for Excellence. These reforms 
need  to  be  implemented  fully  in  2012,  including  making  fully  operational  the  National 
Research Agency for competitively funding R&D in Spain, as mentioned in the national 
reform programme. Special attention should be paid to ensuring a consistent institutional 

25‘La reforma del modelo de gestión de aeropuertos en España: ¿Gestión conjunta o individual?’, October 
2010: http://www.ief.es/documentos/recursos/publicaciones/revistas/hac_pub/196_5.pdf. 

25

 
 
                                                 
framework  to  reduce  uncertainty  and  increase  efficiency  in  the  allocation  of  stable 
resources to R&D activities. To this end, the scope of the new agency's financing powers 
and responsibilities needs to be clarified to avoid overlapping and to foster cooperation 
with partially competing bodies like the CDTI (Centro para el Desarrollo Tecnológico 
Industrial)  and  the  CNEAI  (Comisión  Nacional  de  Evaluación  de  la  Actividad 
Investigadora).  Building  on  the  success  of  other  Member  States  in  boosting  the 
efficiency of their public R&I system, Spain could also improve its institutional funding. 
It  could  introduce  a  performance-based  financing  system  for  universities  and  public 
research  institutions,  linking  some  of  the  funding  to  each  institution’s  progress  in 
scientific excellence, its level of internationalisation and the extent of its public-private 
cooperation.  In  terms  of  innovation,  Spain  needs  to  continue  moving  towards  a  more 
knowledge-intensive  economy,  building  on  existing  sectors  and  potential  new  growth 
areas. The national reform programme has a strategic focus on core sectors (point 90) but 
at the same time remains vague on implementation. 

Innovation  is  particularly  important  at  regional  level.  Complementary  monitoring  and 
support  at  national  level  would  ensure  consistency  and  economies  of  scale.  In  this 
respect,  the  national  reform  programme  could  be  more  explicit  how  the  state  plan  for 
science and technology would mesh with regional strategies, to avoid duplication and to 
ensure synergies. 

3.5.  Modernising public administration 

A  number  of  indicators  suggest  that  more  efficient  public  administration  would  help 
improve  Spain’s  business  environment  and  boost  its  growth  potential.  In  recent  years, 
businesses  have  seen  a  decline  in  the  effectiveness  and  quality  of  public  services  in 
Spain, when compared to other European countries.26 Some serious cases of corruption 
in local and regional public administrations and the excessive administrative burden on 
businesses  may  have  contributed  to  this  deterioration.  The  new  Law  on  budgetary 
stability  and  financial  sustainability  will  contribute  to  progress  in  this  area,  as  will  the 
future new Law on transparency, access to public information and good governance. 

Administrative burden and licensing 

So  far  the  progress  in  reforming  the  business  environment  has  been  slower  and  less 
ambitious  than  reforms  in  other  areas.  Despite  continuing  efforts  to  reduce  the 
administrative  burden  for  enterprises,  bureaucracy  remains  heavy,  especially  when  it 
comes  to  the  time  needed  to  start  up  a  company  (second  highest  in  the  EU)  and  to 
granting  operating  licences.  According  to  a  recent  Commission  study,  Spain  is  the 
Member State where it takes the longest for a firm to obtain its business licence — on 
average 116 days, compared to the EU average of 66 days. This causes potential start-ups 
to  lose  their  innovative  edge.  The  national  reform  programme  (point  82)  is  not  clear 
whether shorter delays in granting licenses will be applied to sectors other than retail and 
wholesale. In this regard, the Law on Entrepreneurs (Ley de emprendedores) announced 
in the national reform programme may help improve the situation. 

On  a  more  general  note,  increasing  lack  of  coordination,  and  overlapping  or  divergent 
rules  laid  down  by  the  lower  levels  of  the  public  administration  in  recent  years,  are 
partly  undermining  government  efforts  to  cut  red  tape,  are  hampering  business 
innovation  and  productivity  and  impede  more  efficient  reallocation  of  resources.  They 

26 World Bank Governance Indicators 2011. 

26

 
 
                                                 
are  also  fragmenting  the  Spanish  single  market  by  obliging  firms  to  meet  different 
criteria in order to operate in different autonomous communities. The different layers of 
public administration need to work together more closely to overcome this problem and 
similar problems in other areas (such as the coordination of public employment services). 
In the national reform programme, the Government has committed itself to tackling this 
issue and has announced a law to guarantee the unity of the market (‘Ley de garantía de 
la  unidad  de  Mercado’).  This  is  a  positive  step  with  important  efficiency  gains.  The 
complexity of the task should not be underestimated though. Some measures fall directly 
under  the  responsibility  of  the  autonomous  communities,  and  the  national  reform 
programme  fails  to  indicate  how  the  central  Government  is  going  to  encourage  the 
regional authorities to adopt these measures. For example, some public bodies need to be 
abolished, and national law needs to be fully implemented at regional and local levels. 

eCommerce and eGovernment 

Spain scores below the EU average for the percentage of citizens using eCommerce. The 
proportion  of  Spanish  people  shopping  on-line,  especially  across  borders,  is  still 
relatively small compared to the EU average. Spain scores better when it comes to small 
and  medium-sized  enterprises,  both  for  on-line  purchasing  and  on-line  selling.  While 
Spain has almost 100 % online availability of public services, for citizens and businesses, 
the direct use of eGovernment services by people in Spain is close to the EU average, but 
use  by  businesses  is  among  the  lowest  in  the  EU.  According  to  a  recent  Commission 
study,27  Spain  has  a  decentralised  eProcurement  policy  with  a  national  platform 
(contrataciondelestado.es)  that  is  mandatory  for  the  federal  administrations.  Regional 
authorities have their own platforms, and regional and local authorities can use a mix of 
national, regional and their own platforms. Spain is generally performing well in this area 
and has set itself a target of 100 % e-procurement availability and aims to procure 50 % 
of contracts above EU thresholds electronically. E-procurement is, however, in the initial 
phase  of  development,  especially  regarding  the  electronic  submission  of  offers.  For 
example,  a  recent  report  indicates  that  less  than  1 %  of  municipalities  use  e-
procurement.28 Moreover, the national reform programme measures on eGovernment in 
general  and  eProcurement  in  particular  remain  vague  and  are  not  underpinned  with 
details on implementation and expected benefits. 

Spain  has  made  significant  progress  in  the  past  few  years  in  developing  eGovernment, 
both  in  terms  of  investment  and  legislative  measures.  The  country  also  supported  the 
development  of  the  Digital  Single  Market.  The  national  reform  programme  has 
announced  a  Spanish  Digital  Agenda  that  reproduces  the  Digital  Agenda  for  Europe. 
However,  the  presentation  of  the  agenda  is  vague  and  it  objectives  are  neither  clearly 
defined nor given a target date. 

Judicial system 

The  Spanish  judicial  system  has  been  adversely  affected  by  the  economic  crisis.  It  has 
seen a considerable increase in the number of incoming civil and commercial cases and 
labour  cases  (e.g.  related  to  enforcement  of  mortgages,  bankruptcy  proceedings, 
dismissal  proceedings,  etc.),  especially  at  first-instance  level.  Labour  courts,  in 
particular,  have  seen  their  workload  increase  considerably  as  a  result  of  the  crisis.  The 

27   Digitising Public Services in Europe: Putting ambition into action 2010. 
28   ‘La licitación electrónica en el sector público español. Presente y futuro’, IESE and Vortal, 2012, p. 9. 

http://www.iese.edu/research/pdfs/ESTUDIO-160.pdf. 

27

 
 
                                                 
recent  labour  market  reform  introduced  specific  measures  to  extend  the  competence  of 
labour  courts  and  to  facilitate  changes  in  working  conditions  and  dismissal.  Labour 
procedures  have  also  been  improved  by  recasting  the  law  on  labour  jurisdiction  (Law 
36/2011  of  10 October 2011).  On  5 March  2012  mediation  in  civil  and  commercial 
matters was also improved though the adoption of Royal Decree Law 5/2012, which aims 
at  transposing  in  national  law  the  EU  rules  in  this  area  (Directive  2008/52/EC).  The 
national  reform  programme  announces  additional  measures  aiming  at  improving  the 
efficiency  in  the  judicial  system,  which  are  expected  to  reduce  legal  uncertainty  in  the 
economic activity. These measures include a revision of existing working methods, the 
promotion  of  extra-judicial  solutions  for  conflicts  and  a  modification  of  the  legal 
regulations involved in business transactions. 

State aid 

The  relatively  high  spending  on  State  aid  in  Spain  in  a  context  of  a  decentralised 
administrative  structure requires a large  effort of coordination, which is ensured by the 
Ministry  for  Foreign  Affairs.  However,  opinions  on  draft  State  aid  measures  issued  by 
the  Ministry  are  not  binding  and  are  not  independent.  Entrusting  a  competent 
independent  body  with  the  responsibility  to  coordinate  State  aid  and  to  issue  binding 
opinions,  and  establishing  a  central  State  aid  registry  can  improve  the  institutional 
framework. 

28

 
 
 
4.  OVERVIEW TABLE (CSRS, EPP, TARGETS, ETC.) 

2011 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

from 

ensuring 

the  EDP, 

CSR  1:  Implement 
the  budgetary 
strategy  in  2011  and  2012  and  correct 
the excessive deficit in the year 2013 in 
line with the Council Recommendation 
under 
the 
achievement  of  deficit  targets  at  all 
levels  of  government,  including  by 
strictly  applying  the  existing  deficit 
and  debt  control  mechanisms 
for 
regional  governments;  adopt  further 
measures 
in  case  budgetary  and 
economic developments do not turn out 
take  any  opportunity 
as  expected; 
including 
economic 
conditions  to  accelerate  the  deficit 
reduction; set out concrete measures to 
fully underpin the targets for 2013 and 
2014  which  should  bring  the  high 
public  debt  ratio  on  a  downward  path 
and  ensure  adequate  progress  towards 
the  medium-term  objective.  Keep 
public  expenditure  growth  below  the 
rate  of  medium-term  GDP  growth,  by 
introducing  a  binding  expenditure  rule 
levels  of  government,  as 
at  all 
envisaged. 
the 
provision  of  information  in  relation  to 
regional and local government budgets 
and their execution. 

improve 

Further 

better 

to 

the 

extend 

CSR  2:  Adopt  the  proposed  pension 
reform 
statutory 
retirement age and increase the number 
of working years for the calculation of 
pensions  as  planned;  regularly  review 
pension  parameters 
line  with 
changes to life expectancy, as planned, 
to 
and  develop 
improve  lifelong  learning  for  older 
workers. 

further  measures 

in 

in 

line  with 

Spain has implemented the recommendation. Overall, 
the reforms adopted so far are ambitious compared to 
earlier  measures  and  represent  a  significant  step  in 
the  Council 
the  right  direction, 
recommendation, and help reducing the risks for the 
long-term sustainability of public finances. However, 
the  worsening  of  Spain’s  economic  outlook  is 
limiting  the  impact  of  the  reforms  on  the  projected 
increase  in  age-related  public  expenditure,  which  is 
still  expected  to  remain  higher  than  the  EU  average 
by  2060.  Moreover, 
the  2012-2014  Global 
Employment Strategy for Older Workers has not yet 
been  underpinned  by  concrete  measures.  Indeed, 
Spain appears now to be at medium risk with regard 
to  the  sustainability  of  public  finances  in  the  long  -
term. 

29

 
 
 
 
 
CSR  3:  Monitor  closely  the  ongoing 
restructuring  of  the  financial  sector,  in 
particular  as  regards  savings  banks, 
with  a  view  to  finalising  it  by  30 
September 2011 as envisaged. 

Spain  has  implemented  the  CSR.  Spain  has  made  a 
considerable  progress  in  restructuring  its  financial 
sector;  the  policy  response  in  this  area  has  been 
ambitious compared to earlier measures and is in line 
with the Council recommendation. 

However,  the  worsening  of  the  macroeconomic 
outlook  might  require  an  increase  in  provisions, 
which  would  have  an  impact  on  the  profitability  of 
the  banking  system.  In  addition,  given  the  risk  of 
bank  funding  stress,  further  strengthening  of  the 
capital base of banks may be required. It is therefore 
of  paramount  importance  that  the  banking  sector  be 
sufficiently  capitalised  and 
the  on-going 
restructuring continues. 

that 

the 

scope 

CSR  4:  Explore 
for 
improving  the  efficiency  of  the  tax 
system,  for  example  through  a  move 
away 
towards 
consumption  and  environmental  taxes 
while  ensuring  fiscal  consolidation 
plans. 

labour 

from 

practice, 
complete 
and  proceed  with 

CSR  5:  Following  consultation  with 
social  partners  and  in  accordance  with 
the 
national 
adoption 
the 
implementation  of  a  comprehensive 
reform  of  the  collective  bargaining 
indexation 
process  and 
system  to  ensure  that  wage  growth 
better 
productivity 
developments  as  well  as  local-  and 
firm-level conditions and to grant firms 
enough  flexibility  to  internally  adapt 
working  conditions  to  changes  in  the 
economic environment. 

the  wage 

reflects 

Measures adopted by Spain in this area are not in line 
with  the  recommendation.  The  recent  reform  of  the 
tax  system  introduced  by  the  Government  mainly 
affects  direct  taxes  and  is  set  to  be  temporary. 
However,  direct  tax  increases  are  heading  in  the 
opposite direction to the Council recommendation to 
Spain in this area. Indeed, direct tax increases lead to 
a  higher  tax  burden  on  labour  and  capital,  which  is 
considered to be particularly detrimental for growth. 
Other  tax  increases  which  are  considered  to  be  less 
detrimental  for  growth, 
in 
indirect  taxation,  have  been  explicitly  excluded  by 
the Government. 

i.e. further 

increases 

the 

reform, 

implementation  of 

Spain  has  implemented  the  recommendation  only 
partially. The reform of collective bargaining adopted 
by the Government in February 2012 is a step in the 
direction advocated by the Council recommendations 
in  this  area  and  is  in  line  with  Euro  Plus  Pact 
commitments  made  by  Spain.  However,  it  is  not yet 
clear  whether  this  reform  is  ambitious  enough  to 
address the challenge. The Government needs strictly 
to  monitor 
in 
particular whether the social partners are able to seize 
the  opportunities  given  by  the  law  to  negotiate 
locally 
trade-offs  between  wages  and  working 
conditions.  These  include  revising  the  ex  post 
automatic  wage 
in 
collective  agreements  —  which  a  recent  social 
partners’  agreement  has  simply  put  on  hold  for  the 
period 2012-2014. In addition, the ultra-activity limit 
of  two  years  is  too  long,  and  opt-out  clauses  might 
not  be  easy  for  SMEs  to  implement.  Indeed,  in  the 
event  of  disagreement  on  the  derogation  from 
sectoral  agreements,  the  reform  has  added  a  third 
layer  of  dispute  resolution  (the  National  Advisory 
Committee  on  Collective  Bargaining)  which  may 
lead  to  the  appointment  of  an  arbitrator.  Concerns 
remain as to whether some elements of the reform are 
compatible with the Spanish Constitution.  

indexation  clause 

inflation 

CSR 6: Assess, by the end of 2011, the 
impacts  of  the  labour  market  reforms 
of  September  2010  and  of  the  reform 
of  active  labour  market  policies  of 

Spain  has  implemented  the  recommendation  only 
partially.  The  reform  is  a  step  in  the  direction 
advocated by the recommendation. However, it is not 
yet  clear  whether  the  reform  is  ambitious  enough  to 
address the challenge. The Government needs strictly 

30

 
 
 
to 

to 

2011, 

accompanied, 

February 
if 
necessary,  by  proposals  for  further 
reduce 
labour  market 
reforms 
segmentation, 
improve 
and 
employment  opportunities  for  young 
people;  ensure  a  close  monitoring  of 
the  effectiveness  of  the  measures  set 
out in the National Reform Programme 
to 
leaving, 
including  through  prevention  policies, 
to 
transition 
the 
and 
vocational education and training. 

facilitate 

reduce 

school 

early 

and 

restrictions 

CSR  7:  Further  open  up  professional 
services 
the  planned 
enact 
legislation  in  order  to  redesign  the 
regulatory  framework  and  eliminate 
current 
to  competition, 
efficiency  and  innovation;  implement 
the  Law  on  Sustainable  Economy, 
notably  measures  aimed  at  improving 
the 
and 
enhancing  competition  in  the  product 
and  service  markets,  at  all  levels  of 
government; and improve coordination 
national 
between 
administrations 
the 
administrative burden for enterprises. 

regional 
to 

environment 

business 

reduce 

and 

to  monitor  implementation  of  the  reform,  and  in 
particular  its  effects  on  labour  market  segmentation. 
The  reform  re-established  the  limitation  (introduced 
by the 2010 reform) on chains of temporary contracts 
and will probably reduce use of these contracts. The 
negative  effect  on  employment  might  be  offset  by 
creating  jobs  using  the  new  permanent  contract  for 
SMEs,  particularly  given  the  considerable  hiring 
incentives. However, these positive effects need to be 
assessed against the risk that firms will use the one-
year trial period for the new permanent contract as a 
way of turning this contract into a de facto temporary 
contract  with  zero  termination  costs.  Moreover, 
allowing  an  employer  to  hire  a  worker  under 
contracts  with  no 
consecutive 
associated  severance  payments  runs  counter  to  the 
intentions  of  the  reform  unless  these  contracts 
actually  become  permanent.  Finally,  the  cost  of 
dismissing  an  employee  who  is  on  a  permanent 
contract  remains  high  compared  to  the  figure  for  a 
temporary  contract. The reform also relies too much 
on  financial  incentives  for  job  creation  that  proved 
inefficient in the past. With respect to education and 
training,  although  Spain  has  taken  measures  to 
combat  early  school-leaving 
the 
recommendation,  the  rate  remains  high  (28.4 %  in 
2010)  and  conceals  significant  disparities  between 
the autonomous communities.  

apprenticeship 

line  with 

in 

Spain has not implemented the recommendation yet. 
Spain  committed  itself  under  the  Euro  Plus  Pact  to 
present  a  new  law  on  Professional  Services  before 
the summer of 2011. However, no progress has been 
made. The proposal to further facilitate the provision 
of  professional  services  put  forward  by  the  current 
Government in the Spanish NRP is thus welcome. 

to  cut  red 

There  has  been  some  progress  on  implementing  the 
Sustainable Economy Law, but only in certain areas: 
telecommunications  (a  major  auction  of  spectrum); 
reforms 
tape;  simplifying  operating 
licences  and  permits;  bankruptcy  law  and  SMEs 
(taxation,  access  to  finance,  and  business  angels). 
Strong  commitment 
the  new 
Government to carry on planned privatisation efforts, 
which had been put on hold (lottery and airports). No 
major progress has been observed with respect to the 
administrative  burden  associated  to  the  lack  of 
coordination  between  Administrations,  although  the 
NRP flags some initiatives to tackle the issue such as 
the so-called new Law to Guarantee the Unity of the 
Market and the Law on Entrepreneurs.  

is  needed 

from 

31

 
 
Euro Plus Pact (national commitments and progress) 

Public finance: 

Reform  the  Fiscal  Stability  Law  to 
the  establishment  of  an 
promote 
expenditure  rule,  taking  into  account 
nominal  GDP  growth  in  the  medium 
term. 

Labour market: 

Reform 
the 
system by April 2011. 

collective  bargaining 

The  public  finance  commitments  are  being  fully 
implemented.  On  27  January  2012,  the  Spanish 
Government  adopted  a  draft  Organic  Law  on 
Budgetary  Stability  and  the  Sustainability  of  Public 
Finances.  This  develops  the  constitutional  balanced 
budget  rule  adopted  in  2011  and  sets  out  an 
expenditure  rule,  taking  into  account  nominal  GDP 
growth in the medium term.  

The commitment to reform collective bargaining has 
been  implemented  via  the  labour  market  reform 
adopted in February 2012. 

acts 

implementing 

Adopt 
in 
compliance with the Royal Decree Law 
labour 
of  February  18  on  active 
policies,  with  a  view  to  designing  a 
Strategy for Employment. 

Adopt  Decree  laws  to  develop  the 
provisions of the Sustainable Economy 
Law in the field of vocational training. 

Implement  a  programme  to  promote 
the reduction of informal employment. 

Structural policy: 

Reform professional services. 

Set  up  an  Advisory  Commission  on 
Competitiveness. 

Speed  up  bankruptcy  procedures  by 
reforming the bankruptcy law. 

to  design  a  Strategy 

the  Government  adopted 

The  commitment 
for 
Employment  was  implemented  on  28  October  2011 
when 
the  National 
Employment  Strategy  for  2012-2014.  This  aims  to 
foster employment of the active population, to reduce 
temporary  contracts,  improve  productivity and adapt 
professional  skills  to  market  needs.  However,  there 
has been no progress on implementing this strategy. 

The  commitment  to  develop  the  provisions  of  the 
Sustainable Economy Law on vocational training has 
been implemented. 

The commitment to reduce informal employment has 
been implemented with the adoption of Royal Decree 
5/2011  of  29  April,  which  sets  out  measures  for 
regulating and controlling undeclared work as well as 
measures to encourage the eradication of undeclared 
work,  including  higher  penalties  and  greater  control 
by the Labour Inspection System. 

The commitment to reform professional services has 
not been implemented. 

The commitment to set up the Advisory Commission 
on Competitiveness has been implemented: Spain set 
up the Commission in April 2011. 

Europe 2020 (national targets and progress) 

Employment rate target: 74 %  

R&D  target:  3 %  (2 %  from  private 
investment)  

(GHG)  emissions 
Greenhouse  gas 
to  2005 
target: 
emissions),  ETS  emissions  are  not 
covered by this national target. 

(compared 

-10 % 

The employment rate was 63.7 % in 2009 and 62.5 % 
in  2010.  No  significant  progress  has  been  made 
towards achieving the target. 

Gross  domestic  expenditure  on  R&D  (as  percentage 
of  GDP)  was  1.39 %  both  in  2009  and  in  2010.  No 
progress has been made towards achieving the target. 
Private  R&D  expenditure  (as  percentage  of  GDP) 
was 0.71 % in 2010. 

Change  in  non-ETS  GHG  emissions  between  2005 
and  2010:  -4 %  (this  number  corresponds  to  the 
current scope of the ETS) 

Renewable energy target (as a share of 
renewable energy in gross final energy 

The  figure  was  13.3 %  in  2009.  Progress  has  been 
made towards achieving the target. 

32

 
 
 
 
consumption): 20 % 

efficiency– 

in 
Energy 
primary  energy  consumption  by  2020: 
25.2 Mtoe 

reduction 

Early  school  leaving  target  (in  %): 
15 % 

n.a.  The  energy  efficiency  objectives  are  set 
according  to  national  circumstances  and  national 
formulations.  The  Commission  is  not  yet  able  to 
present 
the  methodology  for 
expressing  the  2020  energy  consumption  impact  of 
these objectives in the same format was agreed only 
recently. 

the  overview,  as 

The  proportion  of  early  leavers  from  education  and 
training  (as  a  percentage  of  the  population  aged  18-
24 with at most lower secondary education and not in 
further education or training) was 31.2 % in 2009 and 
28.4 %  in  2010.  Progress  has  been  made  towards 
achieving  the  target;  however,  the  rate  remains  high 
and  relatively  far  from  the  target  of  15 %.  It  also 
conceals 
the 
autonomous communities. 

significant 

disparities 

between 

Tertiary education target (in %): 44 % 

Tertiary  educational  attainment  was  39.4 %  in  2009 
and 40.6 % in 2010. Progress has been made towards 
achieving the target. 

Target  on  the  reduction  of  population 
at risk of poverty or social exclusion in 
number  of  persons:  between  1.4  and 
1.5 million. 

The  number  of  people  at  risk  of  poverty  or  social 
exclusion  was  10 652 000  in  2009  and  11 675 000  in 
2010. No progress has been made towards achieving 
the target. 

33

 
 
 
5.  ANNEX 

Table I. Macroeconomic indicators 

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)
General government (%  of GDP)
Net lending (+) or net borrowing (-)
Gross debt
Net financial assets 
Total revenue 
Total expenditure
  of which: Interest
Corporations (%  of GDP)
Net lending (+) or net borrowing (-)

1995-
1999

2000-
2004

2005-
2008

2009

2010

2011

2012

2013

3,7
-1,0
2,8
4,2
17,2
22,5
22,0

-4,2
64,7
-52,6
37,9
42,1
4,5

3,6
1,6
3,2
4,2
11,2
26,7
22,6

-0,4
52,5
-39,3
38,4
38,8
2,7

3,0
1,1
3,5
3,4
9,3
29,8
21,1

0,3
39,8
-23,0
39,6
39,4
1,7

-3,7
-4,4
-0,2
-6,2
18,0
24,0
19,3

-11,2
53,9
-34,4
35,1
46,3
1,8

-0,1
-4,6
2,0
-1,0
20,1
22,9
18,8

-9,3
61,2
-40,3
36,3
45,6
1,9

0,7
-3,8
3,1
-1,7
21,7
21,7
18,2

-8,5
68,5
n.a
35,1
43,6
2,4

-1,8
-4,4
1,9
-4,4
24,4
20,4
18,8

-6,4
80,9
n.a
36,0
42,4
3,2

-0,3
-3,6
1,1
-2,1
25,1
20,1
19,4

-6,3
87,0
n.a
35,7
42,0
3,3

0,2

-3,2

-7,2

-0,4

1,5

2,8

3,2

3,8

n.a
n.a
13,6
22,4

n.a
n.a
13,4
23,0

-89,1
0,4
13,6
20,6

2,3
n.a
36,3
3,2
22,7
7,6

-136,2
13,3
13,3
21,0

-144,0
11,0
13,4
20,8

-141,7
4,2
16,9
19,0

-104,1
3,1
15,4
19,4

6,9
77,9
38,5
3,7
22,3
12,8

-1,5
90,6
37,1
3,6
19,1
7,3

3,8
77,5
37,5
3,4
22,8
9,3

4,0
114,3
38,5
3,8
20,8
8,9

0,2
100,4
38,0
4,0
19,8
7,4

Net financial assets, non-financial corporations
Net financial assets, financial corporations
Gross capital formation
Gross operating surplus
Households and NPISH (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Gross wages and salaries
Net property income
Current transfers received
Gross saving
Rest of the world (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Net exports of goods and services
Net primary income from the rest of the world
Net capital transactions 
Tradable sector
Non-tradable sector
  of which: Building and construction sector
Real effective exchange rate (index, 2000=100)
Terms of trade in goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between actual and potential gross domestic product at 2000 market prices.
2 The indicator for domestic demand includes stocks.
3  Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within two 
weeks. The labour force is the total number of people employed and unemployed. The unemployment rate covers the age group 15-74.

0,2
27,7
-0,1
-0,9
1,1
50,2
41,3
8,4
104,7
102,1
99,1

-3,4
40,7
-2,8
-1,3
1,0
46,8
43,6
10,4
105,0
103,8
102,5

-4,0
86,8
-2,1
-1,5
0,5
42,8
48,6
10,9
116,4
105,4
101,1

-3,4
n.a
-0,6
-2,4
0,5
44,1
47,8
10,5
113,3
102,2
106,9

-8,4
70,5
-6,0
-2,0
0,6
42,9
47,1
12,4
118,3
106,3
97,7

-4,7
90,5
-1,9
-2,2
0,4
42,5
50,4
12,1
122,2
109,9
97,9

-1,4
n.a
1,6
-2,8
0,6
n.a
n.a
n.a
108,0
100,5
109,8

1,8
n.a
35,4
3,2
23,2
7,0

n.a
n.a
13,2
23,6

2,1
n.a
34,7
3,4
23,4
7,2

-0,4
n.a
2,9
-3,0
0,6
n.a
n.a
n.a
105,5
98,8
110,6

Source :
Commission spring 2012 forecast

34

 
 
 
Table II. Comparison of macroeconomic developments and forecasts 

Real GDP (% change)

Private consumption (% change)

Gross fixed capital formation (% change)
Exports of goods and services (% change)
Imports of goods and services (% change)
Contributions to real GDP growth:

- Final domestic demand

- Change in inventories

- Net exports
Output gap1
Employment (% change)

Unemployment rate (%)

Labour productivity (% change)

HICP inflation (%)

GDP deflator (% change)

Comp. of employees (per head, % change)
Net lending/borrowing vis-à-vis the rest of the 
world (% of GDP)

2011

2012

2013

2014

2015

COM SP

COM SP

COM SP

0,7

-0,1

-5,1
9,0
-0,1

-1,8

0,0

2,5

-3,8
-2,0

21,7

2,8

3,1

1,4

0,8
-3,4

0,7

-0,1

-5,1
9,0
-0,1

-1,7

0,0

2,5

-3,8
-2,0

21,6

2,8

3,1

1,4

0,8
-3,4

-1,8

-2,2

-7,9
3,2
-5,6

-4,4

0,0

2,7

-4,4
-3,7

24,4

2,0

1,9

0,9

0,1
-1,4

-1,7

-1,4

-9,0
3,5
-5,1

-4,4

0,0

2,7

-4,3
-3,6

24,3

1,9

1,0

1,0

0,2
-0,9

-0,3

-1,3

-3,2
4,7
-0,9

-2,1

0,0

1,8

-3,6
-1,5

25,1

1,2

1,1

0,7

0,1
-0,4

0,2

-1,1

-0,5
6,9
1,3

-1,6

0,0

1,8

-3,8
-0,3

24,2

0,5

1,2

1,6

-0,4
0,8

SP

1,4

0,6

2,4
7,5
5,4

0,4

0,0

1,0

-3,0
0,8

23,4

0,6

1,5

1,6

0,2
1,4

SP

1,8

1,1

3,0
8,0
6,2

0,8

0,0

1,0

-2,1
1,1

22,3

0,7

1,7

1,7

0,3
1,8

Note:
1In percent of potential GDP, with potential GDP growth according to the programme as recalculated by the Commission.

Source :

Commission spring 2012 forecasts (COM); Stability programme (SP).

35

 
 
 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

2011

2012

2013

2014

2015

Change: 
2011-2015

Revenue

of which:

- Taxes on production and imports

- Current taxes on income, wealth, etc.

- Social contributions

- Other (residual)

Expenditure

of which:

- Primary expenditure

of which:

Compensation of employees

Intermediate consumption

Social payments

Subsidies

Gross fixed capital formation

Other (residual)

- Interest expenditure

General government balance (GGB)

Primary balance

One-off and other temporary measures
GGB excl. one-offs
Output gap2
Cyclically adjusted balance2
Structural balance
Change in structural balance

3

Structural primary balance
Change in structural primary balance

3

Expenditure benchmark
Public expenditure growth4 (real)
Reference rate5,6
Lower reference rate5,7
Deviation in % of GDP 
   from applicable reference rate
Two-year average deviation in % of GDP 
   from applicable reference rate

Notes:

COM

COM

35,1

36,0

9,8

9,5

13,0

2,9

43,6

9,8

10,2

12,7

3,2

42,4

SP

36,3

9,8

10,3

13,2

3,0

41,6

COM

35,7

9,7

10,1

12,6

3,3

42,0

SP

36,9

10,6

10,3

12,7

3,3

39,9

SP

36,6

10,5

10,1

12,4

3,6

38,8

SP

36,6

10,4

10,5

12,2

3,5

37,7

41,2

39,2

38,4

38,8

36,6

35,6

34,6

11,5

5,4

18,0

1,1

2,8

2,5

2,4

-8,5

-6,1
0,4

-8,9

-3,8

-6,9

-7,3

-4,9

11,1

4,8

18,6

0,9

1,9

2,0

3,2

-6,4

-3,3
0,2

-6,7

-4,4

-4,5

-4,8

2,5

-1,6

3,3

10,9

4,5

18,6

0,9

1,7

1,9

3,2

-5,3

-2,2
1,0

-6,3

-4,3

-3,4

-4,4

2,9

-1,2

3,7

10,9

4,6

18,6

0,9

1,8

2,0

3,3

-6,3

-3,1
0,0

-6,3

-3,6

-4,8

-4,8

0,0

-1,5

0,1

10,3

3,9

18,6

0,7

1,5

1,6

3,3

-3,0

0,2
0,8

-3,8

-3,8

-1,4

-2,2

2,3

1,1

2,4

9,7

3,8

18,3

0,7

1,4

1,6

3,2

-2,2

1,0
0,0

-2,2

-3,0

-0,9

-0,9

1,3

2,3

1,2

9,2

3,7

17,9

0,7

1,5

1,6

3,1

-1,1

2,0
0,0

-1,1

-2,1

-0,2

-0,2

0,7

2,9

0,6

-9,17

1,08

-0,18
-3,87

-12,05

1,08

-0,18
-4,95

-2,60

1,08

-0,18
-0,98

-7,40

1,08

-0,18
-2,78

-2,86

1,08

-0,18
-0,96

-2,13

1,08

-0,18
-0,67

n.a.

n.a.

-2,43

-3,86

-1,87

-0,81

SP

1,5

0,6

1,0

-0,8

0,6

-5,9

-6,6

-2,3

-1,7

-0,1

-0,4

-1,3

-0,9

0,7

7,4

8,1
-0,4

7,8

1,7

6,7

7,1

7,8

-

-

-
-

-

1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically adjusted balance according to the programme as recalculated by Commission on the basis 
of the information in the programme.
3Structural (primary) balance = cyclically adjusted (primary) balance excluding one-off and other temporary measures.
4M odified expenditure aggregate used for the expenditure benchmark, growth rates net of non-discretionary changes in unemployment benefit 
and of discretionary measures.
5The reference rates applicable to 2014 onwards will be available from mid-2012. For illustrative purposes, the current reference rates have also 
been applied to the years 2014 onwards.
6The (standard) reference rate applies starting in the year following the one in which the country reaches its M TO.
7The lower reference rate applies as long as the country is adjusting towards its M TO, including the year in which it reaches the M TO.

Source :

Stability programme (SP); Commission services’ spring 2012 forecasts (COM); Commission services’ calculations.

36

 
 
 
Table IV. Debt dynamics 

Average 
2006-10

46,2

3,6

2,4

0,6

1,7

-0,3

-0,8

0,6

2011

68,5

7,3

6,1

1,2

2,4

-0,4

-0,8

0,0

2012

2013

COM

80,9

12,5

3,3

3,8

3,2

1,2

-0,6

5,4

SP

79,8

11,3

2,2

3,6

3,1

1,2

-0,7

5,5

COM

87,0

6,1

3,1

3,0

3,3

0,3

-0,5

0,0

SP

82,3

2,5

-0,2

1,7

3,2

-0,2

-1,3

1,0

2014
SP

81,5

-0,8

-1,0

0,8

3,2

-1,1

-1,3

-0,6

2015
SP

80,8

-0,7

-2,0

0,4

3,1

-1,4

-1,3

1,0

(% of GDP)

Gross debt ratio1
Change in the ratio

Contributions 2 :

1. Primary balance

2. ‘S nowball’ effect

Of which:

Interest expenditure

Growth effect

Inflation effect

3. S tock-flow adjustment

Of which:

Cash/accruals diff.

Accum. financial assets

Privatisation

Val. & residual effects

(% of GDP)

2011

2012

2013

2014

2015

COM/SP3

SP4

COM/SP3

SP4

SP4

SP4

Gap to the debt benchmark3,4

S tructural adjustment5

To be compared to:

Required adjustment6

Notes:

-

-

-

-

-

-

-

-

-

-

-

-

-

-

1,3

0,0

0,7

0,0

1End of period.
2The snowball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP growth and 
inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash and accrual accounting, 
the accumulation of financial assets and valuation and other residual effects. 

3Assessment of the consolidation path set in the stability programme assuming growth follows the COM  forecasts.
4Assessment of the consolidation path set in the stability programme assuming growth follows the SP projections.
5 Not relevant during the excessive deficit procedures that were ongoing in November 2011 and in the three years following the 
correction of the excessive deficit.
6Shows the difference between the debt-to-GDP ratio and the debt benchmark. If positive, the projected gross debt-to-GDP ratio does 
not comply with the debt reduction benchmark.

7Applicable only during the transition period of three years from the correction of the excessive deficit for excessive deficit procedures 
that were ongoing in November 2011.

8Defines the remaining annual structural adjustment over the transition period which ensures that - if followed – M ember State will 
comply with the debt reduction benchmark at the end of the transition period, assuming that the COM  (SP) budgetary projections are 
achieved.

Source :

Stability programme (SP); Commission spring 2012 forecasts (COM); Commission services’ calculations.

37

 
 
 
Table V. Sustainability indicators 

ES

EU27

No policy 
change 
scenario 

Stability 
programme 
scenario

No policy 
change 
scenario 

SCPs

S2
of which:

Initial budgetary position (IBP)
Long-term change in the primary balance (LTC
 of which:
pensions
health care and long-term care
other

S1 (required adjustment)*

Debt,  % of GDP (2011)
Age-related expenditure, % of GDP (2011)

4.3

2.3
2.0

2.3
1.6
-1.8
3.7

0.6

-1.2
1.8

2.2
1.5
-2.0
-1.6

2.9

0.7
2.3

1.1
1.5
-0.3
2.2

0.7

-1.6
2.4

1.2
1.5
-0.3
-0.1

68.5
24.2

82.8
25.8

Source: Commission, 2012 stability and convergence programmes. 

Note: The ‘no policy change’ scenario depicts the sustainability gap on the assumption that the budgetary 
position  evolves  according  to  the  spring  2012  forecast  until  2013.  The  ‘stability  programme’  scenario 
depicts  the  sustainability  gap  on  the  assumption  that  the  budgetary  plans  in  the  programme  are  fully 
implemented. 

*  The  required  adjustment  of  the  primary  balance  until  2020  to  reach  a public debt of 60 % of GDP by 
2030. 

Graph — Medium-term debt projections 

Gross debt as % of GDP - ES - Medium term debt projections

(% of GDP)

120

100

80

60

40

20

0

0
0
0
2

2
0
0
2

4
0
0
2

6
0
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

6
1
0
2

8
1
0
2

0
2
0
2

COM no-policy change scenario
COM + Shock ( -1p.p. in the short-term/long-term interest rate on maturing and new debt from 2014)
COM + Shock (+1p.p. in the short-term/long-term interest rate on maturing and new debt from 2014)
COM consolidation scenario (0.5% per year on SB) in order to achieve MTO
COM consolidation scenario (1% per year on SB) in order to achieve MTO
SP scenario

Source: Commission, 2012 stability and convergence programmes. 

38

 
 
 
 
 
Table VI. Taxation indicators 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)
Decomposition by economic function (% of GDP)1
     Consumption

              of which:

              - VAT

             - excise duties on tobacco and alcohol

             - energy

             - other (residual)

     Labour employed

     Labour non-employed

     Capital and business income

     Stocks of capital/wealth
     p.m.  Environmental taxes 2
3
VAT efficiency
     Acctual VAT revenues as % of theoretical revenues at standard rate

2001

33.7

9.6

6.0

0.8

1.7

1.2

2005

35.9

10.0

6.5

0.8

1.5

1.2

2007

37.1

2008

33.0

2009

30.7

2010

31.9

9.3

6.0

0.8

1.4

1.1

8.2

5.1

0.8

1.3

1.0

7.3

4.1

0.9

1.3

1.0

8.7

5.5

0.9

1.3

1.0

15.5

15.4

16.1

16.0

15.7

15.9

0.5

5.9

2.8

2.1

0.6

6.8

3.6

1.9

0.6

8.0

3.6

1.8

0.6

5.9

2.8

1.6

0.7

5.3

2.5

1.6

0.8

4.9

2.5

1.6

53.1

58.8

53.6

44.5

35.3

41.7

Note: 
1 T ax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission (2012), 

T axation trends in the European Union, for a more detailed explanation.

2 T his category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.

3 T he VAT  efficency is measured via the VAT  revenue ratio. T he VAT  revenue ratio is defined as the ratio between the actual VAT  revenue collected and the revenue that 

would theoretically be raised if VAT  was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due to large exemptions 

or the application of reduced rates to a wide range of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection gap'). See European 

Commission (2011), T ax reforms in EU Member States, European Economy 5/2011, for a more detailed explanation.

Source: Commission services

39

 
 
 
Table VII. Financial market indicators 

2007

2008

2009

2010

2011

285.4
41.0
11.4

330.1
44.3
…

328.9
43.3
10.2

313.4
42.4
10.6

4.1
12.2
9.2
-1.0
0.1
110.8
3.1
6.6
179.7

2.8
11.3
12.6
6.7
5.1
114.5
3.3
7.0
175.7

0.9
11.4
19.6
16.8
13.8
121.6
2.7
6.7
170.3

Total assets of the banking sector (% of GDP)
Share of assets of the five largest banks (% of total assets)
Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans) 1)
              - capital adequacy ratio (%) 1),2)
              - return on equity (%) 1), 3)
Bank loans to the private sector (y-o-y % change)
Lending for house purchase (y-o-y % change)
Loan to deposit ratio
CB liquidity as % of liabilities
Banks' exposure to countries beneficiary of official financial assistance  (% of GDP)4)
Private debt (% of GDP)
Gross external debt (% of GDP) 5)
            - Public
            - Private
Long term interest rates spread versus Bund (basis points)*
Credit default swap spreads for sovereign securities (5-year)*
Notes: 
1) Latest available June 2011.
2) The capital adequacy ratio is defined as total capital devided by risk weigthed assets.   
3) Net income to equity ratio. After extraordinary items and taxes.
4) Covered countries are IE, EL, PT, RO, LV and HU.
5) Latest data 2011Q3.
* M easured in basis points.
Source :
Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission services (long-term interest rates), World Bank (gross external debt) and ECB (all other indicators).

4.7
11.9
7.7
1.3
0.9
108.8
2.4
7.1
180.4

27.2
58.3
150.8
203.4

22.7
61.8
38.2
59.2

27.9
58.9
75.7
92.9

19.1
61.6
9.1
…

337.5
…
…

5.3
11.8
7.5
-2.5
-2.0
108.7
5.9
6.1
171.5

26.1
54.6
283.3
318.1

40

 
 
 
 Table VIII. Labour market and social indicators 

Labour market indicators
Employment rate 
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women 
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment 
(% of total employment)
Part-time employment of women  
(% of women employment)
Part-time employment of men  
(% of men employment)
Fixed term employment 
(% of employees with a fixed term contract)
Unemployment rate1 (% of labour force)

Long-term unemployment

2

  (% of labour force)

Youth unemployment rate 
(% of youth labour force aged 15-24)

2006

2007

2008

2009

2010

2011

68,7

69,5

68,3

63,7

62,5

61,6

4,1

3,1

-0,5

-6,8

-2,3

-1,9

56,4

58,0

58,3

56,3

55,8

55,5

80,7

80,7

78,1

71,0

69,1

67,6

44,1

44,6

45,6

44,1

43,6

44,5

12,0

11,9

12,1

12,9

13,4

13,9

23,3

22,9

22,8

23,2

23,4

23,6

4,4

4,1

4,2

4,9

5,4

6,1

34,0

31,7

8,5

1,8

8,3

1,7

17,9

18,2

29,3

11,3

2,0

24,6

25,4

18,0

4,3

37,8

24,9

20,1

7,3

41,6

Youth NEET3 rate (% of population aged 15-24)

12,0

12,2

14,4

18,3

18,0

Early leavers from education and training (% of 
pop. 18-24 with at most lower sec. educ. and not 
in further education or training)
Tertiary educational attainment (% of population 
30-34 having successfully completed tertiary 
education)
Labour productivity per person employed 
(annual % change )
Hours worked per person employed  (annual % 
change)
Labour productivity per hour worked (annual % 
change; constant prices)
Compensation per employee (annual % change; 
constant prices)
Nominal unit labour cost growth (annual % 
change)

30,5

31,0

31,9

31,2

28,4

39,2

38,9

38,8

38,2

39,2

0,6

0,5

-0,8

-0,9

0,9

-0,3

3,1

1,3

1,4

4,1

0,8

1,1

0,3

0,8

3,6

4,8

2,4

2,9

0,4

2,7

4,2

1,3

1,2

2,6

0,3

2,3

-0,4

-2,6

-3,0

Real unit labour cost growth (annual % change)

-1,0

Notes:

1 According to ILO definition, age group 15-74)
2 Share of persons in the labour force who have been unemployed for at least 12 months.
3 NEET are persons that are neither in employment nor in any education or training.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

41

25,3

21,7

9,0

46,4

:

:

:

2,8

1,0

1,7

-0,5

-1,9

-3,2

 
 
 
Expenditure on social protection 
benefits (% of GDP)
Sickness/Health care
Invalidity
Old age and survivors
Family/Children
Unemployment
Housing and Social exclusion n.e.c.
Total
of which:  Means tested benefits
Social inclusion indicators
Risk-of-poverty or exclusion1 (% of total 
population)
Risk-of-poverty or exclusion of children (% of 
people aged 0-17)
Risk-of-poverty or exclusion of elderly (% of 
people aged 65+)
At-risk-of-poverty rate2 (% of total population)
Value of relative poverty threshold (single 
household per year) - in PPS
Severe material deprivation3  (% of total 
population)
Share of people living in low work intensity 
households 4 (% of people aged 0-59 not 
student)
In-work at-risk-of poverty rate (% of persons 
employed)

Notes:

2005

2006

2007

2008

2009

6,30
1,53
6,50
1,18
2,17
0,17
20,6
2,69

6,34
1,52
6,47
1,20
2,10
0,17
20,5
2,73

6,39
1,53
6,55
1,26
2,06
0,18
20,7
2,74

6,83
1,58
6,92
1,36
2,51
0,19
22,1
2,94

7,30
1,72
7,66
1,51
3,67
0,20
25,0
3,47

2006

2007

2008

2009

2010

23,9

23,1

22,9

23,4

25,5

26,3

26,1

26,3

26,2

29,8

32,1

19,9

29,7

19,7

28,2

19,6

26,1

19,5

22,6

20,7

7560

7871

8369

8384

7995

3,4

3,0

2,5

3,5

4,0

6,3

6,3

6,2

7,0

9,8

9,9

10,7

10,7

11,4

12,7

1 People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) 
and/or suffering from severe material deprivation (SM D) and/or living in households with zero or very low 
work intensity (LWI).

2 At-risk-of poverty rate: share of people with an equivalised disposable income below 60% of the national 
equivalised median income. 

3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or 
utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have 
a washing machine, viii) have a colour TV, or ix) have a telephone.

4 People living in households with very low work intensity: share of people aged 0-59 living in households 
where the adults work less than 20% of their total work-time potential during the previous 12 months.

Sources: 
For expenditure on social protection benefits ESSPROS; for social inclusion EU-SILC.

42

 
 
 
Table IX. Product market performance and policy indicators 

Performance indicators

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, water 
(annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Patent intensity in manufacturing2 (patents of the 
EPO divided by gross value added of the sector)

Policy indicators

Enforcing contracts3 (days)
Time to start a business 3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

Product market regulation4, Overall
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Retail
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Network Industries 5
(Index; 0=not regulated; 6=most regulated)

2002-
2006

-0.1

0.3

0.5

1.5

-0.4

-1.2

-0.3

-2.9

0.9

1.0

2002-
2006

n.a.

n.a.
1.1

2007

2008

2009

2010

2011

1.3

-1.3

8.4

9.6

0.8

3.1

1.2

2.2

1.3

n.a.

n.a.

-9.0

n.a.

n.a.

21.0

6.6

n.a.

n.a.

n.a.

n.a.

2007

2008

2009

2010

2011

515

47
1.3

515

47
1.4

515

47
1.4

515

47
1.4

36.0

39.5

39.8

39.4

40.6

515

28
n.a.

n.a.

4.3

4.4

4.6

n.a.

n.a.

n.a.

2005

2006

2008

2009

2010

2011

n.a.

n.a.

n.a.

n.a.

1.0

2.7

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

1.6

1.6

1.6*

n.a.

n.a.

n.a.

Notes:
1Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2Patent data refer to applications designated to the European Patent Office (EPO). They are counted according to the year in 
which they were filed at the EPO. They are broken down according to the inventor's place of residence, using fractional 
counting if multiple inventors or IPC classes are provided to avoid double counting. 
3 The methodologies, including the assumptions, of this indicator is presented in detail at the website 
http://www.doingbusiness.org/methodology. 
4 The methodologies of the Product market regulation indicators are presented in detail at the website 
http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html. The latest available product market 
regulation indicators refer to 2003 and 2008, except for Network Industries.

5 Aggregate ET CR.

*figure for 2007.

Source :

Commission services, World Bank Doing Business (for enforcing contracts and time to start a business) and OECD (for the 
product market regulation indicators). 

43

 
 
 
 
Table X. Green growth indicators 

Spain

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users 
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS
Transport energy intensity
Transport carbon intensity
Change in the ratio of passenger transport and GDP

Security of energy supply
Energy import dependency
Diversification of oil import sources 
Diversification of energy mix
Share of renewable energy in energy mix

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €
%

%
HHI
HHI
%

2001-
2005

0.20
0.59
1.16
n.a.
-2.2%
9
-1.28
12.5%
5.9%

0.21
9.8
0.06
n.a.
n.a.
34.5%
n.a.
0.71
1.82
-1.1%

77.8%
n.a.
0.32
6.1%

2006

2007

2008

2009

2010

0.19
0.55
1.19
0.21
-3.3%
9
6.2
11.4%
5.1%

0.16
9.5
0.07
0.02%
0.03%
38.9%
42.2%
0.68
1.72
-3.8%

81.2%
0.10
0.31
6.3%

0.18
0.55
1.18
0.20
-3.1%
10
-0.9
10.7%
4.9%

0.17
9.3
0.08
0.02%
0.04%
39.0%
42.7%
0.66
1.67
-0.8%

79.7%
0.10
0.31
6.8%

0.18
0.50
1.01
0.19
-3.7%
10
6.3
9.5%
4.9%

0.16
9.1
0.09
0.03%
0.04%
48.3%
40.4%
0.60
1.51
-1.2%

81.2%
0.09
0.32
7.5%

0.17
0.48
0.84
n.a.
-2.3%
10
-1.6
9.7%
5.4%

0.16
8.5
0.11
0.03%
0.05%
48.0%
37.3%
0.57
1.43
n.a.

79.4%
0.09
0.32
9.3%

0.17
n.a.
n.a.
n.a.
-3.0%
10
4.3
n.a.
n.a.

n.a.

n.a.
0.11
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

n.a.

n.a.
n.a.
n.a.
n.a.

Country-specific notes: 
The year 2011 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN explanations given below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic M aterial Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by M ember States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport (in kgoe) divided by gross value added of industry (in EUR) 
Transport carbon intensity:  greenhouse gas emissions in transport divided by gross value added of the transport sector
Passenger transport growth : measured in %-change in passenger kilometres
Energy import dependency: net energy imports divided by gross inland energy consumption incl. of international bunkers

Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 

Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels

Share of renewable energy in energy mix: percentage-share in  gross inland energy consumption, expressed in tonne oil equivalents

44