refer to. further, the climate of uncertainty which took hold on international financial markets and the subsequent fall - off in financing flows had a more marked impact on those economies, such as spain, which are more reliant on external saving. nor can we forget that the 2009 recession also disclosed a series of weaknesses in the institutional arrangements for the euro. membership of the economic and monetary union provides for extra stability and resilience. unsurprisingly, then, at the height of the crisis when the very survival of the monetary union and the euro were in doubt, the wave of mistrust affected us most forcefully. that said, strictly domestic factors played a substantial role in the source and development of the crisis in our economy. this was because unsustainable imbalances built up, even in the absence of an international crisis, and our vulnerability to external shocks thereby increased. bis central bankers ’ speeches i shall now briefly review some of these imbalances. during the prolonged expansionary phase before the crisis broke, heavy losses in competitiveness built up as a result of the growing divergence of our prices and costs relative to those of the euro area countries, with which the exchange rate had been set at the onset of monetary union. this was the outcome of the continuous pressure exerted by domestic spending on plant capacity, driven by very loose financial conditions, whose expansionary effects were not countered by a more restrictive economic policy stance, most specifically in respect of budgetary policy or supply - side policies. the financial counterpart of this excess spending was the accumulation by spanish households and firms of excessive debt. this over - indebtedness was moreover accompanied by a strong bias towards the construction and real estate development sector and, inevitably in an economy as strongly banked as spain, this also led to excessive growth in bank lending and excesses in banks ’ risk concentration. the relative ease with which these debts built up and their subsequent effects on activity, employment and financial stability were not, in any event, an exclusively spanish phenomenon. indeed, these and other similar developments have given rise to widespread initiatives at the international level to strengthen the economic policy tool box, with a new instrument – namely macroprudential supervision – being incorporated to head off this type of situation. in any event, the losses in competitiveness and excessive debt led to a large - scale imbalance in our foreign trade, resulting in a deficit of 10 % of gdp in 2007 and requiring the resort to large volumes of external

european markets. in particular, measures by the european central bank and the headway made in correcting the weaknesses detected in the governance of the euro, and in creating a banking union within the area, have contributed to improving the financing conditions of the spanish economy. that said, the cost our households and firms still have to pay for their credit remains overly high for the accommodative stance of monetary policy, revealing that it is not yet appropriate to talk about the full normalisation of the single monetary policy transmission process in the euro area. undoubtedly, however, domestic impulses are playing a decisive role in improving perceptions of the spanish economy, and in laying the foundations for a sustained path of recovery. these include most notably the progress in correcting imbalances and in adopting reforms in different areas. as regards imbalances, the most visible achievement has been in restoring competitiveness and in correcting the balance of payments deficit. the adjustment of costs and relative prices, albeit with some delay compared with what would have been desirable, has ultimately placed the spanish economy in a much more competitive position. the reduction in unit labour costs has allowed virtually all of the losses in competitiveness that had built up in the first ten years of the euro to be absorbed. the process has not, however, been free from difficulties, since it was initially based, as i stated earlier, almost exclusively on job destruction. from 2010, the contribution of the adjustment in wages progressively became more prominent, a trajectory which stepped up following the 2012 labour market reform. the gains in competitiveness and spanish firms ’ greater export - geared thrust are providing for the growing penetration of our products in foreign markets, against a background of increased geographical diversification and higher goods and services exports. the marked decline in imports during these years also reflects the gains in competitiveness, although the weakness of domestic demand has likewise helped contain purchases from the rest of the world. set against these developments, the least favourable aspect of our foreign trade continues to be the high dependence on imported energy. as a result of the foregoing, our economy posted – for the first time since 1997 – a balance of payments surplus, i. e. net external lending, of 1. 5 % of gdp. this trajectory will foreseeably continue over the coming years, meaning that spain ’ s high level of foreign debt will be declining. on the fiscal front, there has been an intensive drive to correct the budget deficit, as indicated by the significant reduction in the structural