luis m linde : the exit from the crisis and the firming of the recovery in the euro area and in spain speech by mr luis m linde, governor of the bank of spain, at the circulo de economia, barcelona, 13 november 2013. * * * let me begin by conveying my sincere thanks to the circulo de economia and to its chairman – who is unable to accompany us – for the invitation to join you today. it offers me the opportunity to share with you some thoughts on the major issue our economy faces : the exit from the crisis and the conditions under which a recovery may firm. more than five years back now, the lehman brothers bankruptcy triggered the most serious international economic crisis since the second world war. it has severely affected growth and employment in the advanced economies and, among these, the european countries. at certain junctures, most particularly in summer last year, monetary union and the very process of european integration were subjected to serious tensions. but the latest economic indicators point to an incipient pick - up in activity in the euro area, and most international agencies and private analysts forecast a firming of economic growth over the next two years. to assess the scope of this turnaround, we should recall what were the underlying weaknesses over this long phase of crisis and recession. in the euro area, the crisis has most acutely affected those countries whose economies evidenced greater dependency on external funding ( i. e. those running bigger current - account deficits ) and less flexible economic structures. most of these countries had not sufficiently adapted their institutional frameworks and economic policies to the membership requirements of a monetary union, in which exchange rate devaluation is no longer available to bring about rapid adjustments in competitiveness, and in which the basic parameters of monetary policy have ceased to be set independently by the authorities of each member state. having entrusted themselves to the macroeconomic stability provided by monetary union membership and scarcely pressured by markets that remained indifferent, for some time, to the problems being incubated, some of these economies built up significant imbalances, failing to undertake the reforms needed to withstand the shocks that could seriously affect them. the institutional arrangements designed 20 years ago in maastricht did not have the wherewithal to prevent and, where appropriate, correct this lack of adaptation of national policies to the requirements of a monetary union ; and nor did they have the mechanisms to manage the far - reaching and protracted crisis we have

still some frictions affecting most notably lending to smes, which as you know are particularly vulnerable to crises such as that we have witnessed. bis central bankers ’ speeches under its remit, the banco de espana has recently adopted specific measures addressing this sector, such as the redefinition of sme for the purposes of prudential regulation or the early application of the supporting factor for capital requirements associated with sme loans. the banco de espana has also identified possible courses of action in other areas. a far - from - exhaustive list would include exploring ways of strengthening the role of the ico, simplifying the current public framework of financial support to smes and, in the longer term, designing mechanisms to capture homogeneous high - quality information on the most significant aspects of smes ’ business to make it easier for them to access bank credit. conclusion to conclude, the latest data on the euro area and on the spanish economy give us a glimpse of a horizon in which the serious difficulties besetting us have been overcome. but the firming of the recovery and the absorption of the burdensome legacy of the crisis will require perseverance in the strategy adopted to complete and strengthen the design of economic and monetary union and to lay sound foundations for sustained growth in all member countries. in the arena of national policies, there is a risk that a degree of reform fatigue may emerge as the situation improves. on the contrary, the favourable effects now becoming apparent from the fiscal consolidation and structural reform measures should encourage us to maintain these policies. thank you. bis central bankers ’ speeches