19. 07. 2018 address on taking up office as a member of the council of state pablo hernandez de cos governor madame chair of the council, council members, lawyers, ladies and gentlemen, first i would like to thank mr. alberto aza and mr. juan velarde for having agreed to be my sponsors in the ceremony today. it is a real honour for me to take up office as an ex officio member of the council of state, the highest - ranking advisory body of the government and a time - honoured institution in spain. according to the spanish royal academy dictionary, an “ adviser ” is someone who gives an opinion on what they consider beneficial or necessary for the advisee. it is indeed an important aspect of the functions of the banco de espana, in accordance with its law on autonomy, to advise the government on economic and financial matters. from this dual status as a member of the council of state and as governor of the banco de espana, allow me to take the opportunity here to briefly reflect on what are the main challenges facing the spanish economy. in the past five years our economy has seen sharp growth in activity and a marked reduction in the unemployment rate, enabling a gradual correction of the imbalances built up before and during the economic crisis. availing myself of my recent council member status, i would say that the guiding principle should be to avoid becoming complacent and, on the contrary, to harness the economic expansion so as to adopt the measures that may provide for sustainable growth, a greater degree of stability and more extensive room for manoeuvre in the face of potential future crises. this advice stems from a diagnosis that is worth emphasising : the spanish economy still has significant factors of vulnerability. these include most notably high external debt, a level of public debt close to its historical high, an unemployment rate double that of our european partners and a financial system facing considerable challenges ; and this in a scenario where the economy must face the impact of the phenomenon of population ageing and the structural problem of low productivity. it is further worth recalling that, although the recovery has rested on a diverse set of measures, in spain and in europe alike, it has also been underpinned by the support afforded by the european central bank ’ s extraordinarily expansionary monetary policy. additionally, this expansion has been accompanied by a significant fiscal impulse in recent years. however, the effect of these monetary and fiscal impulses will tend gradually to fade in the coming

was not distributed evenly across households. on the spending side, the restrictions had a greater impact on the consumption patterns of higher - income households, for whom hospitality and entertainment make up a larger share of the consumption basket. on the income side, they were hit less hard than lower - income households, since low - income individuals account for a larger share of employment in the sectors most severely affected by the health crisis. as a result, a very high proportion of the stock of extraordinary savings built up during the pandemic was concentrated in the highest income groups, which have a lower marginal propensity to consume. therefore, going forward, a significant share of these savings is likely to remain in the assets in which they were invested rather than being spent on consumption. to understand the link between households ’ savings and their investment, we must first consider the developments in funding flows. regarding how the savings have been used, a significant share of investment has been channelled towards the real estate sector, where financing tends to be partly in the form of new debt. meanwhile, some of the savings may have been used to repay outstanding loans. between early 2020 and 2022 q3, households ’ net acquisition of financial assets amounted to €196 billion, 77 % of which took the form of cash and bank deposits. the remaining financial investment was almost entirely accounted for by the net acquisition of investment fund units ( €50 billion ). during this period, spanish households divested, in net terms, from financial assets such as insurance schemes, pension funds and debt securities ( in particular long - term debt securities ). meanwhile, a total of €139 billion was invested in housing. all of these investments were financed out of the new savings that had been built up ( €269 billion ) and debt ( some €8 billion net of repayments ). this analysis of overall savings developments in spain during the last few years can be divided into three distinct stages. in 2020, the growth in savings essentially took place through the acquisition of financial assets, mainly the most liquid ones. specifically, investment in financial assets stood at €113 billion, of which €74 billion was allocated to cash and deposits, while investment in housing amounted to €42 billion. in 2021, as the pandemic restrictions were gradually eased, the level of savings lessened and there was a pick - up in new bank lending for investment in real estate. the net acquisition of financial assets amounted to €72 billion in the year