Consequently, particular attention must be paid to the fiscal policy stance and to monetary and financial conditions. The year 2001 saw the attainment of a balanced budget, without the slowdown in the Spanish economy preventing strict compliance with the commitments made under the Stability Programme, consistent with the requirements of the Stability and Growth Pact. Last year, moreover, new fiscal discipline measures were adopted which will contribute to maintaining sound public finances in the medium term. I refer here to the budgetary stability legislation and to the new regional government financing arrangements, which increase the degree of fiscal co-responsibility of the regional governments under the transparency requirements demanded of general government. I have already mentioned that monetary and financial conditions in the Spanish economy were more generous than in the rest of the euro area, although the significance of this difference lessened as demand lost momentum. The credit aggregates grew at high rates for the third year running. That said, they did slow during the year, in step with cyclical developments, although this remains insufficient. The growth of financing to Spanish households and corporations translated last year into a fresh increase in this sector’s debt as a percentage of GDP, with the rise in lending to households for house purchases proving particularly notable. The greater ease with which the private sector has been able to finance its spending decisions has contributed to limiting the depth of the ongoing cyclical slowdown, but at the expense of incurring high debt levels.

Opposition to infrastructure reform by those firms that have in the past benefited from complexity and lack of transparency must be firmly overcome. At the same time, we need to keep in mind that central counterparties themselves can become single points of failure, with potentially devastating consequences. Central counterparties must therefore have sufficient financial resources to withstand the default of the largest participants. Operators and regulators should carefully evaluate the adequacy of the risk management models and financial resources of central counterparties. Only if central counterparties are financially sound can they play their critical role in preserving financial stability. Finally, as an ultimate resort, we cannot ignore the need to consider measures that address the size of banks, indirectly or directly. 13 Admittedly, there are some benefits from size. But the empirical evidence suggests that these benefits are rather limited. Economies of scale, whereby larger amounts can be produced at lower average cost, already appear to have been exhausted in the case of relatively small banks. 14 Obviously, banking systems made up of only small banks are not immune to crisis episodes. But let us not make the mistake of using another problem as an excuse to shy away from the severe moral hazard problem associated with the largest banks. It is also sometimes argued that interconnectedness matters more than size when it comes to systemic importance. It is evident that both size and interconnectedness matter. Recent empirical evidence, however, indicates that systemic importance increases more than proportionately with size.