The lacklustre consumption and investment of recent years are telling in this connection, and denote the presence of structural shortcomings which dampen household confidence and dent corporate profit expectations. Accordingly, questions such as the uncertainty over the viability of the public pension system currently in place or the constraints preventing higher productivity growth not only have long-term repercussions but also exert a contractionary effect on the present economic situation. These overall characteristics of the area do not apply to all the member economies. Growth rates vary considerably, largely due to the different degrees of vigour shown by internal demand. Amid these divergences, Spain is one of the countries that has consistently posted substantially higher-thanaverage rates of expansion. The Eurosystem monetary policy has retained an accommodative stance, with the intervention rate set in June 2003 unchanged at 2%. Although the forceful oil shock has hampered the reduction of inflation, medium-term inflation expectations have held at a rate compatible with the Eurosystem’s definition of price stability, partly as a result of sustained wage moderation. The favourable trend of labour costs is a natural corollary of the prevailing sluggishness of activity and of employment creation, but it also reflects the credibility of the anti-inflationary goal of monetary policy. The European Central Bank has been able to sustain monetary conditions propitious to the strengthening of activity although, as indicated earlier, these have so far proven insufficient to achieve a satisfactory degree of dynamism.

The Banco de España, in accordance with its competence in the accounting regulation of Spanish credit institutions, decided to undertake a project to extend the use of IAS from consolidated financial statements to the individual, regulatory and prudential ones, thereby avoiding the cost and uncertainty of diverse accounting criteria. This initiative gave rise to the new accounting Circular 4/2004. Through this Circular, the Banco de España acknowledges and shares the benefits derived from the efforts to achieve greater accounting harmonisation, while pursuing, in its supervisory capacity, a legitimate interest in the quality of accounting standards and in their effective implementation. Also, since the process of approval and adoption of the new international standards was marked by its complexity and underwent certain timetable difficulties, the Banco de España’s new Circular was also intended to endow the process, as far as possible, with a greater degree of certainty. The complexity of the new accounting standards arises not only from the process referred to, but also basically from the modifications contained in them, since they involve notable changes in numerous matters that are very important in credit institution management and that impose new responsibilities on managers in the election of accounting policies. Although it is too early to make a detailed assessment of the introduction of the new accounting standards, which have only been in force for a few months, the initial evaluation by the Banco de España is positive, and the major efforts and work by financial institutions in this connection should be acknowledged.