. • second, workers should understand that inflation cannot be offset by demanding wage increases that are not justified by productivity developments. this would just keep inflation persistently high, as the 1970s experience painfully showed. from the perspective of gdp growth, if we are to see a quick return to our potential, we need flexibility in supply and demand responses. we need to see increased dynamism, particularly in those sectors which are not as directly affected by the current slowdown. other measures are also necessary, such as liberalisation and deregulation policies, to improve competitiveness. policies aimed at improving the human capital of our workers and increasing labour mobility should also be encouraged. finally, a comment on fiscal policy. the current fiscal situation in spain is sound, having ending 2007 with a budget surplus and reduced public debt. indeed, let me recall that our public debt to gdp ratio, at 35 %, is the lowest among the big eu countries. it is important to maintain this stance in the face of the current slowdown. expansionary demand policies could prove counterproductive. we should avoid a deterioration of the budgetary situation beyond that implied by automatic stabilisers. let me turn now to the financial sector. so far, the impact of the recent turbulence on financial stability in spain has been limited. this is largely thanks to the actions of the banks themselves, who have not entered into the kinds of business that have been most directly affected. spanish banks have demonstrated that you do not need to turn to the originate - todistribute model to become an efficient and profitable banking business. plain vanilla, traditional business can be compatible with high returns on equity and efficiency. it also has the added value of implying greater stability. but i think that the bank of spain ’ s approach to supervision has also had a positive effect. let me emphasise two key characteristics in this respect. • the first characteristic, which has set us apart from other supervisors, has been our strong role in accounting rule - making for the banking sector in spain. this has meant that the accounting rules for the banking sector take into account supervisory sensitivities, whilst being also consistent with ifrs. one example of this is the socalled “ dynamic provision ”, which we introduced in 2000. this allowed spanish banks to build up a significant provisioning buffer in a transparent manner, to be used in bad times, when problem loans increase. in 2005, the bank of spain reformed the dynamic provision when adopting international financial reporting

the software, life sciences, and fintech sectors. these businesses will often have a short track record and a high risk of failure, so venture capital offers an important non - bank funding option for these kinds of innovative firms. the role of the central bank of ireland i wish to conclude by providing a brief outline of the new strategic plan of the central bank of ireland, which is launched today and is available from our website. in common with the wider european system, the last decade saw the central bank initially immersed in crisis management, followed by the reconstruction of the regulatory system in recent years. it is now timely to enter a period of consolidation, in which the progress made in recent years is maintained, while the taking on of new challenges is accompanied by a focus on improving our efficiency and capability in delivering existing tasks. the plan identifies five thematic priorities for the bank. first, we will continue to strengthen the 3 / 4 bis central bankers'speeches resilience of the financial system, both through our system - wide macroprudential policies and ensuring that major firms are well capitalised, maintain adequate liquidity buffers and have effective resolution plans if firm survival is called into question. second, we have a clear responsibility to address the implications of brexit for the financial system : this includes taking a rigorous and efficient approach to the authorisation and supervision of the new wave of firms seeking to set up or expand operations ; it also includes assessing and mitigating the financial stability risks associated with disorderly brexit scenarios. financial stability risks arise from direct exposures to the uk market but there are also indirect exposures. for instance, many firms in ireland are vulnerable to interruptions in international supply chains and increased competition from uk firms in the event of a further sharp fall in sterling. in addition, if a disorderly brexit scenario induces an extended phase of uncertainty about the future of uk - eu relations it would have a chilling effect on investment plans and be associated with a decline in a broad range of asset prices. third, we are committed to the further expansion of our consumer protection framework. amongst other measures, this will involve more intrusive and targeted assessments of those firms and products that pose the greatest potential harm to consumers, an enhanced focus on the culture of firms and the individual accountability of the people who run the firms we regulate. these measures are intended to embed high standards of conduct in order to deliver fair outcomes for consumers and will be reinforced by a commitment to