the recent revision, the budget deficit ended 2011 at 8. 9 % of gdp, a long way off the 6 % target set in the previous stability programme. the public debt / gdp ratio stood at end - 2011 at 68. 5 %, more than 30 pp above the 2007 figure. the deficit targets have been set at 5. 3 % of gdp for 2012 and at 3 % for 2013. if these targets are met, the public debt / gdp ratio would stabilise in 2014, albeit at a level somewhat higher than 80 %. the consolidation involved in meeting these fiscal targets will be tremendously hard to achieve. events in 2011 show the difficulties of reducing the budget deficit at times of economic weakness. and they highlight the need to improve budgetary monitoring, early warning and control procedures, especially in a country such as spain with highly decentralised public finances. a realistic macroeconomic scenario is the starting point for achieving budgetary targets. here, as you know, the spanish economy has double - dipped, with gdp declining by 0. 3 % in both the final quarter of 2011 and the first quarter of 2012. and the outlook for the coming months is not favourable either. in terms of composition, the pattern of economic activity observed in recent quarters does not differ from that seen at the start of the crisis in 2008, when national demand was considerably weak and its impact on output was softened by the positive contribution of external demand to growth. in any event, spain has not been immune to the slowdown in world trade and, in particular, to the greater sluggishness of some of our main trading partners, such as italy and portugal, meaning that exports have recently been seen to be less buoyant. foreseeably, then, in 2012 we will once again see a substantial decline in gdp. in this respect, the government ’ s macroeconomic forecast of a 1. 7 % fall seems realistic and prudent. but it should be stressed that the uncertainty permeating the current macroeconomic climate is very high. in terms of the composition of the macroeconomic figures, the view of the banco de espana does not differ greatly from that of the government ; the adjustment of national demand is projected to continue further, while net demand will remain the linchpin of the spanish economy, although its considerable contribution to growth will not suffice to prevent a contraction in activity and employment. as earlier stated, it is vital here that companies should harness the flexibility afforded by the new

of them. the law proposes substantially improving general government transparency at the different stages of the budgetary process. in particular, timely detection of budgetary deviations is considered essential so as to adopt measures. consequently, it would be advisable to begin publication of the regional government monthly revenue and expenditure outturns as soon as possible, as envisaged in the organic law ( article 27. 3 ). the law further includes coercive instruments to ensure compliance with budgetary targets by all levels of government. such instruments can be effective in ensuring discipline if rigorously applied and if the appropriate procedures for overseeing the budget outturn throughout the year are set in place. but the pressure of everyday events should not make us lose sight of the medium and long term. allow me to refer here to the major reform of the pensions system approved in july last year. this checked a pension spending dynamic that was endangering the sustainability of public finances over the medium and long - term horizon. but it should be recalled that this reform did not cancel out all the risks arising from population ageing. it would thus be desirable to properly define the so - called sustainability factor, so that the parameters of the system may adapt automatically to future demographic developments. admittedly, the economic difficulties such as high unemployment and low growth that we face are most serious. but the main problem currently confronting the spanish economy is the fall in all confidence indicators in recent months, exacerbated in recent weeks by the management of the latest banking crisis. restoring confidence is the imperative at present, since without it, none of our problems will be resolved. all government measures and all actions taken by economic policymakers and agents should be aimed at restoring the confidence we have lost. and one of the pre - requisites for doing so and for dispelling all uncertainty is that spain should bring its public finances back on to a path of stability in line with its european commitments. i believe there is a sizeable consensus that spain needs to redress its fiscal imbalance and move towards a path of stability, in line with its european undertakings, and that this is a pre - requisite for restoring confidence and dispelling uncertainty. consolidation measures have been tabled that are capable of bringing about this change of direction in budgetary dynamics. and, above all, the national budgetary framework has been substantially reinforced in order to allow the coordination, monitoring, surveillance and, where appropriate, correction of deviations by the different tiers