But we should be mindful of the fact that we are at the start of a long process in which the credibility of the policies adopted plays a fundamental role. To ensure that the medium-term budgetary objectives are realistic, economic policymakers must convey to economic agents their resolve to exert rigorous control over the deviations in revenue and spending that may occur. In this connection, and given the high degree of decentralisation of the Spanish State, it is vital that the regional and local governments should be committed to controlling and reducing the deficit through compliance with the principles laid down in the law on budgetary stability. It is particularly important that the regional government budgets that are approved in the coming months should accept the fiscal consolidation strategy as a key objective, that they adopt far-reaching structural reforms on public spending and that they ensure their budget outturns are rigorously in compliance with this objective. Finally, in light of the huge amount accounted for by the public spending component linked to the deterioration of employment, it should be stressed that the viability of any budgetary consolidation strategy for the Spanish economy will depend on this strategy adopting a jobgenerating growth pattern that, as occurs in other countries, provides for a significant reduction in unemployment. To this end, the main instruments available to national economic authorities are supply-side and structural reform policies geared to promoting job creation, smoothing the switchover to new productive activities and increasing the economy's efficiency and productivity.

While the Spanish financial system has shown notable resilience to the direct and indirect effects of the international financial crisis, the intensity of the adjustment the Spanish economy is undergoing against a background of protracted financial tension adds further factors of pressure in terms of asset impairment, an increase in bad debts and a narrowing of bank margins. Faced with these risk factors, not all banks are equally prepared, whereby the availability of appropriate mechanisms, such as those offered by the FROB (the Fund for the Orderly Restructuring of Banks), will help banks face the restructuring necessary with the best results for the functioning of the economy and the least cost to taxpayers. However, I must say that, if reforms are not adopted promptly, high unemployment might be prolonged, which would contribute to increasing financial institutions' difficulties and would prevent the soundness of the financial system from acting, as it has to date, as an essential pillar of economic growth in Spain. Allow me to conclude by stressing that the Spanish economy is at a decisive crossroads. If far-reaching reforms are not promptly adopted, we face the prospect of slow recovery with high levels of unemployment and public spending. Conversely, if the right – although not easy – decisions are promptly taken, we will be able to resume a path of high growth based on a more productive and sustainable pattern. To achieve this it is vital to apply medium-term stability strategies and ambitious structural reforms, which should be well co-ordinated and credible.