1984 reform. if the 1984 reform allowed spain to create millions of jobs and to increase the welfare of spaniards during upswings, the reform approved this year should put an end to a situation in which dismissal and an increase in unemployment are the only way of adjusting the economy. this reform leaves workers and employers free to agree to increase competitiveness by increasing productivity and / or adjusting wages, with the only obstacles or impediments being those laid down by law. it is sometimes said that all this has been done too late. should labour - market reform have been carried out five years ago? it certainly should have. or ten years ago in 2002, when we were enjoying the long upswing? it would certainly have been better for spain. the same can be said about financial reform. why were savings banks not reformed during the good times? why were bank resolution schemes, such as the frob, not drawn up ready to resolve the banking problems created by the upswing? these questions merely lead to gloominess and, moreover, ignore the fact that, not only in spain, but almost worldwide, key reforms are introduced at the worst times. more encouraging is the principle of better late than never, and the important thing is that spain initiated the process of bank restructuring, now nearing completion, in 2009, that significant measures to reduce the budget deficit began to be adopted in may 2010 and that an ambitious labour - market reform was introduced in february this year. spain has proven itself capable of making adjustments and reforms and this is essential to restore long - lasting upswings and sustainable growth. but this reassurance must not lead to complacency. what we have done so far, despite its huge importance, is not sufficient. and some of us have the thankless task of pointing this out. for example, when each financial reform has been approved it has always been argued that the result will be more credit, but although bank restructuring is certainly an absolutely necessary condition, we have always seen that it is not sufficient by itself to make credit flow again. we have to restructure the financial system so that, as in any process of industrial adjustment, the resulting banks can generate a healthy profit and be sufficiently solid to meet demand when the adjustment process is complete. however, credit will not improve until solvent demand increases. hence the importance of other economic reforms to boost consumer and investor confidence, such as reducing the budget deficit and reforms, such as the labour - market one, to increase the

the task is an arduous one but not impossible if we believe that, though it is very difficult, we are capable of changing and reforming. this is why i shall begin my speech with an optimistic message, offering you some examples showing how spain has already progressed with some adjustments and has undertaken major reforms during the difficult times we have faced during these years of crisis. i ’ m aware of the risk of showing optimism amid the crisis, in the same way that during the bubble whoever dared denounce the imbalances being built up was called a pessimist. but i hope my optimism is qualified by my reminder that complacency, that is to say believing that we have already done everything that has to be done and that nobody can teach us any lessons, is the arch - enemy in the battle to exit the crisis. to earn the confidence provided by the knowledge that spain has been capable of adjusting and reforming during these years of crisis, i have chosen two examples. first, the rapid improvement in our current - account balance ; and second, the headway during these years in restructuring our banking system. bis central bankers ’ speeches as is well known, under normal conditions the current - account balance is very easy to finance in a monetary union, but its size is a good indicator of two of the deepest imbalances that came about in spain during the expansionary phase : the explosion in debt and the loss of competitiveness. indeed, from 1996 credit began to outpace gross domestic product, doing so systematically until 2006, when its annual growth peaked : at a rate of over 25 % for total credit, and more than 40 % for credit extended to real estate development activities. over the same period, spanish cpi growth was systematically higher than that of the euro area. although the growth rate of credit began to fall as from 2006, growing debt and the loss of competitiveness over the 12 years to 2008 led the external imbalance to an unsustainable position, with a current - account deficit of 10 % of gdp and a strong increase in spain ’ s external debt. but what counts is that spain has since adjusted its current - account deficit at a spectacular pace. from almost 10 % in 2008, the deficit fell at the end of last year to 3. 7 % – an adjustment of more than 6 pp of gdp in three years – and at the end of 2012 we might already be in balance. the climate of pessimism accompanying the crises leads some to under