spanish economy is to consolidate this position against a background of heightened competition, rapid technological change and future european union enlargement. the annual report presented today illustrates the benefits that the spanish economy has obtained from participation in economic and monetary union, even under the particular circumstances of a generalised slowdown in the world economy, as was the case in 2001. the advantages stemming from price stability, budgetary discipline and the reforms undertaken are enabling the phase of lacklustre growth to be overcome without halting progress in real convergence. the pattern has differed from previous cycles, where the imbalances incubated in expansionary phases would inescapably result in periods of recession and job destruction. in this first part of my address, i shall give an overview of world economic developments last year and discuss the response of the euro area economy to the new international setting, paying particular attention to the performance of the spanish economy. in the second part, i shall refer to matters relating to financial stability, banking supervision and the role of the banco de espana in these areas. the world economy the slowdown in the world economy in 2001 was more short - lived and milder than expected, despite the emergence of several adverse shocks which it was thought, at the time, would have a strongly negative impact. first, there was the correction of the speculative bubble in the industries most closely related to new technologies and telecommunications. this prompted a substantial decline in these companies'earnings and their share prices on the stock market, and a rapid adjustment to the overinvestment that had built up. next were the repercussions of dearer oil prices in 2000, which were partly corrected in 2001 but which have rebounded again this year. further, the crises in turkey and argentina once more highlighted the vulnerability of some emerging economies and certain shortcomings in the architecture of the international financial system. and finally, there were the attacks of 11th september, which had a specific and strongly depressive effect on confidence. despite this build - up of adverse effects, the world economy proved notably resilient. this was all the more striking considering that on this occasion the downturn coincided in the three main areas ( the united states, the european union and japan ), which a priori heightened the risk of a deep and prolonged decline in world output. with the exception of japan, the industrialised countries avoided going into recession, while the emerging economies, although seeing a decline in their growth rates, have on the whole remained more

brexit entail additional sources of risk. in spain, the current parliamentary fragmentation also adds uncertainty over the future course of our economic policies. against this background, it should be stressed that notable headway has been made in recent years in correcting some of the imbalances that had built up in the spanish economy during the expansion prior to the crisis. contributing factors here, in addition to the more temporary factors i have just mentioned, were certain structural reforms introduced during the crisis. of note, first, is the intense deleveraging, carried out by households and non - financial corporations. specifically, the corporate debt / gdp ratio has fallen by 42 percentage points ( pp ) from mid - 2010, when it peaked, to 2018 q3, meaning that this indicator now stands some 2 pp below the related figure for the euro area. in the case of households, the process has been slower ( partly on account of the greater average life of the debt incurred ), but also very significant. over the same period, households ’ debt ratio fell by 25 pp and its level is but 3 pp above the related euro area figure. accordingly, in both cases, the deleveraging 3 / 7 process is at a very advanced stage, although some heterogeneity is evident. in particular, in the two sectors, certain agents continue to face situations of high financial pressure as a result of debt incurred. in parallel, the banking sector has been subject to an intense process of clean - up, recapitalisation and restructuring. and in the past four and a half years its basic parameters – such as asset quality and profitability and solvency levels – have improved notably. from december 2013 to september 2018, non - performing loans have declined by more than €120 billion and foreclosures have contracted by €20 billion. likewise, the return on equity has returned to positive territory above the euro area average since the 2012 collapse, when it stood at - 25 %. the total capital ratio, meanwhile, has increased by 1. 7 pp in the past four years, whereas the leverage and liquidity ratios are above the european average. the recent european banking authority and banco de espana stress tests reveal that spanish banks ’ resilience to adverse scenarios is considerable. the spanish economy ’ s external balance has also undergone an intense adjustment process. just before the start of the crisis in 2007, the spanish economy posted an external deficit of 9. 6 % of gdp, one of the highest figures