##6 https : / / www. imf. org / en / publications / policy - papers / issues / 2017 / 07 / 31 / pp073117 - collaboration - between - regionalfinancing - arrangements - and - the - imf 6 / 8 adhering to a plurilateral agreement in due course ( making the agreement multilateral in essence ), while maintaining peer pressure to avoid free riding. 9 furthermore, the new global governance system should recognise that both regionalism and multilateralism are compatible, as some problems are of a local nature and are better tackled locally. regionalism and multilateralism are not mutually exclusive. on the contrary, both approaches can support and complement each other, generating synergies that strengthen the global financial safety net. indeed, bilateral and regional agreements have in many cases brought about improvements in the multilateral trading system. e - commerce is a good example of this. 10 in this regard, the european union, for example, should maintain its proactive approach to preserve the rules - based global trade system. and indeed the european union is fully engaged in working, together with other members, on proposals to strengthen the wto in areas such as subsidies, e - commerce, property rights and ensuring enforceability of existing wto commitments with a well - functioning dispute settlement system that cannot be blocked by any single country. 11 at the same time, it is important that the european union should continue to negotiate trade agreements with other partners. although, as mentioned earlier, this is not a first best solution, it is time to recognise that regional and multilateral arrangements open to others can succeed where multilateral negotiations have failed to bring many countries into the international trading system. in the financial arena, the emergence of regional initiatives has generated a more robust and better resourced global financial safety net. however, coordination between the different layers should be strengthened, on the understanding that a regional system can complement, but not substitute, the role of the imf. in my view, the imf is still essential, for at least four reasons. first, it has unique expertise in crisis management. second, the participation of the imf in adjustment - programme design adds an objective view that regional institutions cannot provide, one that is respected both by domestic authorities and by the private sector. third, in cases of interconnected economies, the involvement of the imf can dissipate the potential regional concentration of risks. fourth, the imf is the only institution that can

economy continues to face significant challenges and vulnerabilities. headway in correcting these is needed in order to shore up the economy ’ s long - term growth capacity. most notably, i would stress here high public and external debt, progressive population ageing, the high unemployment rate, the strengthening of the banking system and, as i said in my introduction, low productivity. let us take first high public debt. this stood at end - 2018 at around 97 % of gdp, over 60 pp up on 2007, and is one of the main vulnerabilities that arose in the wake of the crisis. also, the budget deficit is still high ( 2. 5 % of gdp in 2018 ) and, on available estimates, still has a significant structural component into which no inroads had practically been made in the past four years. eliminating this vulnerability of the economy requires resuming the budgetary consolidation process. cutting the deficit and public debt would, moreover, give fiscal policy greater leeway for countercyclical action in the face of any future negative shocks. 6 / 18 meeting the guidelines of the preventative arm of the european stability and growth pact should show the temporary fiscal consolidation path to follow in the future after having managed last year to cut the budget deficit to below 3 %. at the same time, a review of the composition of public spending and revenue might also contribute decisively to improving the economy ’ s potential growth. there is room both to increase the efficiency of public spending and steer its composition towards those items exerting greater influence on the accumulation of physical, technological and human capital, and to re - define the structure of the tax basket in order to make it more conducive to growth. the presence of high tax benefits in our tax system, arising from numerous exemptions, allowances and special low rates, which generate substantial revenue - related losses and distort the efficiency and fairness of the tax system, are a good example of the headroom existing here. secondly, despite the notable correction to date, the negative net international investment position is still at 77. 1 % of gdp. and the nation ’ s gross debt amounts to 166. 7 % of gdp, only slightly below the peak seen during the crisis. to bring down the debt vis - a - vis the rest of the world, spain will have to run external surpluses over an extended period of time. and that, in turn, requires maintaining the gains in competitiveness, which throughout