close to 5 % in 2018, in line with spain ’ s peers, compared with 12 % pre - crisis. the reduction in housing investment activity came about in parallel with a decline in house prices which, despite the growth observed in recent years, remain in real terms some 32 % below the nationwide levels observed in 2007, albeit with some cross - regional dispersion. all these developments better position this sector to support economic growth, as indeed has been the case in 2018. the weight of non - residential construction, for its part, has also diminished considerably, largely reflecting the impact of the reduction in public - sector investment spending. beyond these improvements, as i stated in my introduction the spanish economy remains prone to certain vulnerabilities and faces significant challenges, which i shall now set out. first, despite the notable above - mentioned reduction in private debt in recent years, on the latest available data for 2018 q3 the negative net international investment position ( iip ) of the spanish economy stood at 81 % of gdp, and that of gross external debt at 168 % of gdp, levels that are high in relation to other advanced economies and which mark a factor of vulnerability for the economy as a whole. the reduction in the iip to less vulnerable levels will require running current account surpluses for a prolonged period. the continuation and deepening of the gains in the economy ’ s competitiveness posted in recent years should, along with healthier public finances, contribute to entrenching a sustained path of external surpluses. closely related to the foregoing point, the second factor of vulnerability of the spanish economy is that arising from the imbalance in public finances. the sectoral breakdown of the net iip shows how, since the onset of the crisis, the general government ’ s net liability position has increased notably, with the liabilities position of the monetary financial institutions and the rest of the resident sectors declining. despite the considerable reduction in the budget deficit relative to gdp from its peak of 11 % in 2009 to 23. 1 % in 2017, spanish public finances continued to evidence a high level of structural deficit ( estimated by the european commission to be 3 % of gdp, the highest in the euro area ) and of public debt, which currently stands at around 98 % of gdp. against this backdrop, it is worth bearing in mind that maintaining a very high level of public debt over a prolonged period may not only hamper economic growth but also lessen the stabilising capacity of fiscal policy in

. funding conditions for banks have generally improved, and there has been increased issuance activity and a re - opening of some segments of funding markets. at the same time, the demand for credit remains weak in the light of still subdued economic activity and the ongoing process of balance sheet adjustment in non - financial sectors. beyond these short - term effects on market conditions, a key aspect in the design of the three - year ltro is its consistency with the ecb ’ s capacity to ensure price stability in the medium term. most importantly, the interest rate on the three - year operations is indexed to the ecb ’ s main policy rate, i. e. the rate on the main refinancing operations. thus, if ecb were to increase this rate, the costs for the remaining period of the three - year ltros would also rise. hence, the three - year liquidity allocation does not stand in the way of an increase in short - term interest rates ; rather, it would allow such an increase to be immediately translated into the outstanding liquidity operations. as in the past, the governing council will be vigilant in order to contain upside risks to price stability. in this context, let me point out that what is relevant for measuring monetary liquidity is not the balance sheet of the eurosystem, but the balance sheet of the euro area banking sector. only the latter shows the interaction with the real economy. this interaction is captured by monetary and credit data which, despite the recent stabilisation i mentioned earlier, are still very subdued. if these conditions were to change in a way that entailed upside risks to price stability, the governing council would use all the instruments at its disposal to continue delivering on its primary mandate. the ecb ’ s monetary analysis pillar serves to assess signals coming from developments in money and credit conditions. i would also like to mention that our monetary analysis is not narrowly confined to the analysis of headline money and credit dynamics, but also tries to understand their determinants. let me summarise. the ecb has taken an active role in mitigating the financial and economic crisis in the euro area, which has been fully consistent with its mandate. reductions in the main policy rates have served to counteract acute downside risks to price stability. non - standard measures have addressed impairments to monetary transmission channels, thereby complementing changes in policy rates when highly dysfunctional and perturbed market conditions impeded their effectiveness. to preserve