Moreover, the market preoccupation with short-term stock price, rather than long-term creditworthiness also presents potential risks to financial stability. Notwithstanding these challenges, several recent positive developments in emerging economies have augured well for market discipline to have a more effective role in reinforcing sound governance. In particular, the development of financial markets have resulted in more efficient markets with wide options for investors to exert discipline. The adoption of international financial reporting standards, efforts to strengthen auditor independence as well as financial capability initiatives will also reinforce market-based discipline going forward. All of these initiatives will improve the prospects for financial stability by preventing problems from occurring at the level of individual institutions. However, the recent events in the international financial environment have demonstrated the increasing complexity of banking activities which has raised the broader challenges for financial regulation and the design of safety nets in the context of managing systemic risk. Regulators have begun to carefully consider the need to re-calibrate current regulatory approaches to appropriately address risks to the financial system stemming from large and complex institutions that are increasingly engaged in non-traditional activities. This has, in turn, placed new demands on financial regulators as well as for institutions to develop a deeper understanding of the interlinkages between the financial system and the economy, and in particular, the macroeconomic transmission of financial risk.

In our case, total productivity – the variable that seeks to approximate the level of efficiency of the economy and which depends, among other factors, on the effects of technological improvements and on the efficiency of the institutions and the regulations in place within an economy – worsened significantly during the years of expansion prior to the crisis, posting slightly negative rates as from 2000. Despite some improvement as from 2008, linked to the disappearance of unproductive firms, Spain continues to post significantly lower productivity growth than the average for the developed economies. There are simplistic analyses that would seek to explain these developments by resorting to singular and even anecdotal macroeconomic aspects; but the factors that appear to lie behind our mediocre productivity performance are varied and complex. Apart from the fact that Spain has significantly lower levels of technological capital than other developed countries, factors are often cited such as the high costs and administrative obstacles facing business start-ups, the low level of competition in certain sectors and the small size of our companies. Low productivity can also be related to some of the labour market aspects I referred to earlier, such as the disconnection between remuneration conditions and the specific situation of each firm, and labour market duality, which hamper the reallocation of resources across companies and human capital accumulation decisions. Conclusions To conclude, allow me first to refer to the situation of the euro area, and then to the Spanish economy, on the road to recovery from the crisis.