As a result, households continued to reduce their saving ratio and to increase their net demand for financing. The principal new development in 2005 was the marked recovery in corporate productive investment expenditure, which focused particularly on the acquisition of capital goods. This pick-up was accompanied by a strong increase in credit, favoured by accessible financing conditions. Credit was directed especially at small – and in principle more dynamic – companies, and it spread to all sectors of the economy, including manufacturing industry. Public-sector demand also quickened last year, driven by the rise in investment that characterises the initial years of a legislature and by the increase in government consumption. As stated, the unbalanced features of this growth pattern were manifest again in 2005, especially in the behaviour of the external sector. Flat goods exports, despite the burgeoning growth of foreign markets, combined with a fresh and significant increase in imports to give rise to a further deterioration in the negative contribution of net external demand, which had already been very marked in 2004. A mix of factors was involved here: first, the increase in the energy bill and the greater buoyancy of demand in Spain compared with its EU neighbours, which partly reflects Spain’s different cyclical position; and further, the losses in competitiveness that have built up in recent years (and to whose source and consequences I shall refer later), along with other structural factors relating to the sectoral and trade composition of our economy.

But growing co-operation with counterparts in other countries is also vital for supervisors, because a global financial system cannot be effectively supervised without a suitable degree of co-operation providing for mutual trust and information exchange. International co-operation, in sum, is a cornerstone of global financial stability and of the extension of best international practices in this field. Within Europe, the new capital directive reinforces this approach by establishing colleges of supervisors for transnational financial groups, but also through the role of lead supervisor on a consolidated basis. Moreover, the extension of the so-called Lamfalussy approach from the securities industry to banking and insurance is a clear commitment to a co-operative and evolutionary approach, constructed on the strength and knowledge of national supervisors. This supervisory co-operationintensive model increases the responsibility of national supervisors, since it is only sustainable insofar as it provides appropriate responses, eliminates obstacles and encourages the necessary financial integration. Although only about 40 of the 8,000 European deposit institutions engage in significant transnational activity, the European banking market is integrating at considerable speed. Even though the pace of integration may seem limited, with few cross-border operations annually, international competition in each of our domestic financial systems is increasingly patent and intense. Further, some market segments have undergone unprecedented growth. The euro interbank market and the asset-backed bond market are now fully integrated and fully accessible to more than these pan-European institutions.