the adequacy of capital and the recognition of npls. we challenged progress every step of the way, going to the outer edge of our remit to do so – challenging the organisational structure and resource capacity, challenging skills and experience, challenging governance and oversight, policies and procedures, workout strategies and execution ability. we challenged the implementation of the plans, challenged credit management and impairment recognition, challenged provision coverage and collateral valuations, challenged short - term vs sustainable resolutions. and we continue to challenge the irish banks today. and while it is slower than i would like, this approach is working. this has been achieved through better cohort by cohort borrower engagement strategies, working out and sustainably restructuring loans, and some portfolio sales. importantly, legislation has been passed to enable borrower protections to travel with loans that have sold outside of the banking system. 4 / 7 bis central bankers'speeches accounting write - offs have not yet featured to the extent warranted. npls in ireland have reduced for fourteen consecutive quarters. it represents a 58 % reduction from peak, a decrease of over €50bn. in some ways, this graph understates the progress, because the npl ratio has been materially reduced at the same time as there has been a very sizeable deleveraging in the system – loan books ( both good and bad ) in aggregate are much reduced. but there remains much more to be done, primarily now on long past due mortgage arrears, which remain a blight for distressed borrowers, banks, and the system as a whole. the reason i am recalling recent irish history, is that, in many respects the journey we took in ireland is now being followed at a european level. asset quality and balance sheet strength has always been a priority for the ssm, as evidenced by the comprehensive assessment in 2014. when it took on supervisory responsibility for europe ’ s banks, the npl outlook was diverse across the euro area. while certain countries ’ banking sectors had, and still have, low npl ratios, it was recognised that even those countries where banks were not struggling with asset quality, may be affected by spillovers. 5 through the comprehensive assessment, the ssm took early action to gain assurance that problem loans were recognised and that the system as a whole had sufficient capital to manage the problem, both under a base and stress scenario, in the same way as it had been done in ireland in 2010 / 2011. yet npls have remained

##ptible improvements in activity and job creation because many of the measures taken are structural and will take some time to work fully through. the growth outlook for the coming quarters is still not favourable, as shown by the forecasts released by different organisations in the past few weeks, which point to a fresh contraction of activity in 2013. however, the adjustment undertaken is essential in laying the groundwork for a new phase of economic growth which will allow a substantial and lasting reduction in the unemployment rate. the resumption of growth of the spanish economy will depend above all on our perseverance in pushing through the reforms. as i mentioned in my address to the spanish parliamentary budget committee, and as i believe bears repeating here, economic policy has to continue striving towards two main goals : promoting competitiveness and growth, and restoring the sustainability of public finances. i will focus particularly on this second stage of the adjustment. fiscal consolidation in the present circumstances, ensuring the credibility of the process of fiscal consolidation is a priority. after the heavy slippage in the deficit in 2011, it is crucial to dispel doubts as to the capacity to control the upward path of public debt. credibility is the main alleviating factor to mitigate the contractionary impact, in the short run, of the necessary adjustment measures. for the consolidation to be credible, the expenditure - reducing and revenue - enhancing measures have to be well - designed and consistent with our chosen path ; in addition, experience indicates that to prevent slippage, it is advisable to work with a highly conservative projection of public revenue. when forecasting revenue, underestimates are more acceptable than overestimates. also, adequate early warning tools are required to detect in advance any possible deviations and to make, where necessary, the required corrections in time. the budgetary stability law provides an appropriate tool for controlling expenditure. in the area of credibility, it is highly advisable to define a multi - year bis central bankers ’ speeches budgetary time horizon which offers certainty to agents and, moreover, to deploy fiscal measures which combine actions with a short - term impact and others acting on the sustainability of public finances in the medium term, impinging, among others, on those expenditure items most affected by population ageing. regional government finances let me begin my analysis of the 2013 state budget by looking at regional government finances. spain is today a country characterised by strongly decentralised public expenditure. on 2011 figures, central government accounted for 22