the permitted retirement age in their sustainability mechanisms. others have undertaken a broader change, adopting a notional definedcontribution accounts system, which has some advantages in terms of increasing the transparency of the system. moreover, against the background of a significant rise in the dependency ratio and future reductions in pension replacement rates, it might make sense to extend the role of retirement saving to complement the resources of the public contributory system with the accumulation of financial assets supplementing future public pensions. in any event, implementing a funded system is complex and requires detailed prior analysis of issues such as the length of time needed to implement it, whether it is voluntary or compulsory, the returns it can offer in a scenario of demographic stagnation and sluggish productivity growth, and how the costs associated with implementing this change are to be shared out intergenerationally. 2 ) as regards new sources of funding, the alternative is to raise social contributions or other taxes, or permutations along these lines. increasing social contributions may have adverse consequences for employment, since their weight in overall taxation is already higher in spain than in other comparable countries. for example, the elimination of ceilings on the contribution base would significantly raise revenues, but it would also mean a substantial increase in labour costs, and if there is no parallel increase in maximum pensions the relationship between contributions and benefits which, in my opinion, should be preserved, would be considerably weakened. another option would be to confine the concept of contributory pensions exclusively to retirement pensions, which would continue to be funded from social contributions, while other pensions would be funded from general taxes. clearly, this would require increasing general taxes, or reducing other public expenditure in order to be able to pay for the pensions transferred from the social security fund to central government. as regards raising general taxes to pay for pensions, it is crucial that the resulting tax basket has the mildest possible distortionary effects on growth, bearing in mind the point of departure. 5 / 6 to conclude, i would like to share three considerations with you. firstly, i would like to highlight that the recent reforms have built in an automatic mechanism for the financial equilibrium of the pension system ( sustainability factor and revaluation index ), bringing it closer to other european public pension systems. this automatic mechanism, as it is currently defined or under alternative definitions in the future, should be preserved. secondly, current regulations or any additional reforms should be implemented as transparently as possible in order to give the public the necessary information about

this backdrop, i would like to focus my address on the outstanding structural challenges and the economic policies best equipped to address them, as further explored in the banco de espana's latest annual report, published in may. these challenges can be illustrated, first of all, by acknowledging the spanish economy's failure in recent decades to converge consistently towards the per capita income levels of the euro area. spain's per capita income today stands 17 % below that of the euro area, a gap that is 4 pp narrower than was the case in 1978, but 8 pp wider than in 2005. behind this persistent negative gap lie two well - known shortcomings in the spanish economy : low productivity and a low rate of employment, which have moreover historically been negatively correlated. today, if i may, i will focus on the first of these factors, since productivity is the only failsafe means of improving living standards. 1 what's more, our low productivity issues are very closely related to some of the weaknesses of our labour market, which, in turn, condition our ability to converge in terms of the employment rate. second, it is well worth stressing that the convergence of the spanish economy should be sustainable over time. with this in mind, it must be acknowledged that some of our economic problems these past few decades have stemmed from a failure to understand the obligations and restrictions that come with forming part of the european integration process and, in particular, of the euro area. this led, for instance, to the build - up of serious financial imbalances after joining the euro, which meant that our economy was particularly hard hit during the global financial crisis. since the outbreak of that crisis, the spanish economy has displayed a healthier pattern of growth that has, in fact, partly corrected the imbalances built up over the previous upswing. in particular, there has been extensive deleveraging by spanish households and firms ; an increase in the solvency and liquidity of the balance sheets of credit institutions ; an improvement in competitiveness ( which has enabled a current - account surplus to be maintained since 2012, even after the outbreak of the pandemic and the energy crisis ) ; and a reduction in the share of construction investment in activity to levels similar to those seen in the euro area as a whole. however, certain structural vulnerabilities remain, which shape the outlook and sustainability of economic growth going forward. notable among them is that arising from the high level of public debt ( up by