higher. in any event, as i have already indicated, all these growth projections, including those underpinning the draft budget, are subject to considerable downside risk. this risk is still difficult to quantify, considering the course the pandemic has taken in recent weeks and the new social distancing measures introduced to contain it, in spain and in our main european trading partners. this will foreseeably have a negative impact on economic momentum in spain in the coming months. in addition, we cannot rule out the possibility either that, in the near future, it may be necessary to adopt more stringent lockdown measures than those that are currently in place. it is important to note that although the banco de espana ’ s september projections did not include many of the other measures contained in the draft budget not directly linked to the ngeu programme – given that these measures had not been specified at that date – the upside risks to growth in 2021 arising from their inclusion would be relatively small. this is because the expansionary tone of this draft budget derives almost exclusively from the funds available under the ngeu programme. these upside risks would be of a lesser magnitude than the downside risks deriving from the potential worsening of the epidemiological situation. i also wish to stress that the assumption contained in the draft budget regarding full absorption of the european funds by the spanish economy and the associated multipliers seems optimistic in the light of historical and empirical evidence. if we analyse the capacity of the spanish economy to mobilise funds linked to other european programmes, seven years after the last three european structural fund programmes ( all with smaller volumes than the ngeu ) were introduced, spain ’ s rate of absorption of the funds available was below 80 % in all cases. in addition, it is important to note that in order for the european funds to have the multiplier effect on aggregate activity that is assumed in the draft budget ( slightly above 1 ), these funds will have to be employed in quality projects, that is to say in public investment initiatives with optimal capacity to boost economic growth potential in the medium term, for example, by enhancing technological and human capital stock. moreover, there must be no negative confidence effects, deriving, for instance, from doubts regarding the sustainability of public finances. 5 hence the pressing need for the medium - term fiscal consolidation programme to which i will refer later and for structural reforms that will boost our potential growth. the extent to which the projects that spain ultimately

) : “ two centuries of economic growth : europe chasing the american frontier ”, cepr discussion paper, no. 4415. see, for example, genre, v., r. gomez - salvador and a. lamo ( 2005 ) : “ european women : why do ( n ’ t ) they work ”, ecb working paper series, no 454, march 2005. his ( 2004 ) : “ the significance of capital markets for dynamic economies in europe. a comparative empirical study by the institute for advance studies ( ihs, 2004 ). see camba - mendez, g. ; j. a. garcia and d. rodriguez - palenzuela ( 2003 ) : " relevant economic issues concerning the optimal rate of inflation ". in o. issing ( ed ) background studies for the ecb's evaluation of its monetary policy strategy, european central bank, frankfurt am main, 2003. unsustainable public deficits damage growth by crowding out private investment. 17 lack of fiscal discipline can also jeopardise the efficacy of monetary policy and lead to higher risk premia in interest rates, which in turn may have a negative impact on investment. there is a wide consensus that policies geared towards structural reforms enhancing these economic factors fostering innovative investments will benefit long - term productivity growth. a number of european policy initiatives and recommendations – largely in the framework of the lisbon strategy – to promote productivity growth in the euro area have already been put forward by expert groups, including the recommendations in the sapir report of july 2003 and the more recent kok report of november 2004. a number of these recommendations are reflected also in the recent mid - term review of the lisbon agenda. in particular, one key priority identified in the mid - term review is to promote “ knowledge and innovation for growth ”, which includes a number of recommendations concerning human capital. these recommendations go in the right direction. for example, the lisbon strategy sets a target for r & d spending of 3 % of gdp by 2010, two - thirds of which should come from the private sector. in 2003, overall expenditure stood at 1. 9 % of gdp for the euro area. by contrast, the us spends 2. 8 % of gdp on research and development. other broad policy measures include more and better education and training. all member states agree on the diagnosis regarding our structural impediments in europe. there is also a consensus on which reforms should be implemented in the various countries, based in