##wage feedback loop. avoiding this feedback loop from wages, mark ups and prices is precisely the main priority objective of the incomes agreement that we have been advocating in recent months at the banco de espana. it would consist of an agreement between firms and workers, under the framework of social dialogue, to share the inevitable loss of national income that higher commodity import prices entail. and agreement that should also, in our view, include the public sector, by avoiding both an across - the - board fiscal impulse in this context and a widespread use of automatic indexation clauses in expenditure items. the third session of this conference addresses this question. over a longer horizon, the spanish economy faces a series of structural challenges, some of them going back several years or even decades. in our conference we will be focusing on four of these challenges, namely the need to correct dysfunctions in the labour market, to boost productivity growth, to make public finances more sustainable and to address the challenges posed by climate change. first, spain faces the challenge of reducing the unemployment rate and the temporary employment ratio, which have been persistently high in recent decades. in particular, the unemployment rate of the spanish economy was, on average, 15. 9 % over the 2000 - 2019 period, as against 9. 3 % in the euro area. also the share of temporary employment was 28. 3 % over the same period in spain, but only 15. 4 % in the euro area. young people ( those under the age of 24 ) have been particularly affected by this instability, with their rate of unemployment ( 32. 5 % ) and their share of temporary employment ( 69. 5 % ) standing well above the euro area average in 2019 ( 15. 6 % and 52. 4 %, respectively ). reducing this high employment instability is key, especially for young workers, given its adverse economic effects in many spheres. for example, employment instability affects the accumulation of workers ’ human capital and can thus have very persistent effects on their working lives. furthermore, it also increases uncertainty over the future income path of the affected workers. this not only has consequences for spending decisions, but also for emotional well - being, the formation of new households and the birth rate. in this context, one of the main objectives of the labour market reform enacted in 2022 in spain is precisely to combat the high proportion of temporary employment. and indeed, since the approval of this legislation, permanent hiring has quickened significantly and temporary hires have slowed, with permanent

measures to mitigate the transition costs for the most vulnerable groups, public investment and the regulation of economic activity. the fourth session of the conference addresses this topic. last but not least, the sustainability of public finances is one of the most important challenges facing the spanish economy. the spanish debt - to - gdp ratio increased by 82. 7 percentage points between 2007 and 2021, to reach 118. 4 %, as compared with 95. 6 % in the euro area. maintaining high levels of government debt over time represents an important source of vulnerability for spain and leaves less fiscal space in the event of possible future crises. in the coming years, public indebtedness will remain very close to or even exceed current levels, unless an ambitious fiscal adjustment plan is implemented. specifically, various simulations indicate that if no fiscal adjustment is made in spain in the coming years, the pressure exerted by population ageing on public expenditure will drive up the government debt - to - gdp ratio. conversely, under an alternative scenario in which a consolidation effort is made – one consistent with maintaining the structural primary balance envisaged in the banco de espana ’ s latest macroeconomic projections for 2024 –, the government debt ratio will stand at levels close to 120 % of gdp in the coming decades. should there be a greater fiscal adjustment, for example if the structural primary balance improves by 0. 5 pp of potential output each year until reaching equilibrium – a path more consistent with the stability and growth pact rules –, public debt could fall to 82 % of gdp by 2040. were this adjustment also accompanied by an ambitious package of structural reforms, the government debt ratio could be around 79 % of gdp by 2040. in this context, the sustainability of spanish public finances needs to be bolstered in the medium term. to this end, a multi - annual fiscal consolidation plan will have to be carefully designed, and rigorously implemented once the spanish economy is firmly set on a course of recovery. the sooner such a comprehensive plan is designed and announced the better, as this would help boost confidence and reduce the uncertainty surrounding spanish economic policies. such confidence is particularly important in the context of monetary policy normalisation ( with the consequent tightening of financial conditions ) in which we find ourselves. this will be the topic of tomorrow ’ s policy panel discussion. let me conclude. the economy is currently in a highly uncertain environment characterised by the aftermath of two major shocks, the pandemic and the war in ukraine, with consequences that