arising with the crisis was eminently structural. that is to say, it was not only due to the downward cycle, or to the temporary discretionary measures with no lasting effect on public finances. in any event, the outcome has been that the public debt / gdp ratio has not stopped growing since 2007, and bis central bankers ’ speeches we will end the current year 2012 with a level close to 85 % : i. e. an increase of almost 50 pp of gdp over a period of only five years, which in itself is an indicator of the seriousness of our crisis. reducing the budget deficit from its 2009 peak is proving anything but easy. indeed, the correction made in 2010 and 2011 was very scant, and was of course less than that initially planned and desired. the budgetary adjustment is being made in highly adverse economic and financial circumstances, compounded by the impact in the short run of the austerity measures on economic activity. moreover, stabilising the proportion of debt to gdp, which is a key figure for restoring market confidence, is all the more difficult against a backdrop of meagre growth or recession and of high interest rates on public debt. yet these contractionary forces can be mitigated if credibility in the process of fiscal consolidation can be attained. from this standpoint, following the heavy slippage in the deficit in 2011, the target of 6. 3 % of gdp for this year and the fiscal adjustment path to which we have committed to 2014 should be the means by which the doubts of the european authorities and the markets are dispelled. the information currently available ( on central government figures to august ) indicates that there are risks of slippage from the target set for 2012. given the importance of achieving the target, additional measures under the budgetary stability law should be considered that provide for the target to be met. i have some points to make in this connection. first, most of the slippage seen has originated from adverse developments in public revenue, partly deriving from the very nature of the adjustment under way in the spanish economy. the fact that, at present, the only source of improvement in economic activity is the external sector ( neither higher exports nor lower imports generate, per se, increases in tax revenue ) means that the prospect of buoyant public revenue is scant, and is compounded by the intensity of the real estate adjustment. against this background, maintaining a prudent projection of public revenue is essential. second, instruments are needed

irish bank ). the national authorities also felt that it would not be necessary to use all of the €35 billion pencilled - in to the loan agreement for bank recapitalisation. the capital required as a result of the aggressive pcar 2011 stress test of march 2011 was met with about a half of that, thanks in part to the bail - in of subordinated debt holders. without access to the private financial markets, the irish government would have had to constrain spending suddenly and drastically. in addition, without support from the ecb it would not have been able to continue in the euro. bis central bankers ’ speeches fact 3 : “ the eu and imf insisted that the programme would not contain a bail - in of senior bank creditors. ” many involved imf staff had envisaged a partial haircut on senior debt, but they were not supported when a majority of finance ministers of the g7 decided that bail - ins of senior bank bonds was a bad idea. ( attitudes subsequently changed : bail - in later became an emphasis of eu resolution policy ). irish officials had already been exploring whether and how it might be possible, post - guarantee, to bail - in remaining unguaranteed senior bondholders of anglo and inbs. they could have continued to plan for this and – who knows – might possibly have been able to do so during 2011 had the matter not already been raised abortively at the time of the bailout negotiations in november 2010, thereby pre - emptively sensitising some of the lenders to the issue. ( admittedly, though, “ fact 4 below suggests that this notion may be somewhat fanciful. ) fact 4 : “ the lenders again refused in march 2011 to countenance bail - in of senior bondholders of the failed banks anglo and inbs. ” while bail - in was not part of the programme, the irish authorities had not undertaken that the old unguaranteed debt of the failed banks would be repaid, but was strongly discouraged from keeping the bail - in option publicly on the table at the time of the announcement of the stress test results of march 2011. although the amounts involved here at that stage were less than €5 billion ( or about 3 % of gdp ), this widely known episode is the one hardest to rationalise, even taking account of the persistent stress in european banking market conditions at the time. myth 4 : “ the eu partner countries used the crisis to leverage irish policy