​Speech and subsequent Q&A session with the President of the Government on the Desayunos Informativos programme by Europa Press

Madrid

Ladies and gentlemen,

Good morning to you all and thank you very much for being here today. I apologise for not mentioning you all by name but my gratitude extends to you all. I am very grateful to everyone.

Through its Chairman, Asís Martín de Cabiedes, and its Director, Javier García Vila, I would like to thank Europa Press for the invitation to take part in this breakfast news programme which was made in order to celebrate such an important milestone as the tenth anniversary of this brilliant initiative.

Since it was launched ten years ago, this news programme by Europa Press has become an essential benchmark for analysing the issues that define economic, political and social current affairs in Spain. I would even go so far as to say that this type of forum for debate is more necessary today than it ever has been in the past.

Talking calmly, defending positions, reasoning and exchanging ideas and suggestions is an essential recipe for any country and any society that intends to increase the strength of its institutions and the well-being of its citizens. Great countries are built on dialogue and discussion; in short, through the pursuit of harmony. Demagogy and frivolity merely guarantee regression and a loss of importance and influence.

Hence, I think it is only right to congratulate Europa Press on this anniversary and on having worked towards ensuring our country is one of dialogue, calm suggestions and shared objectives.

Ladies and gentlemen,

Ten years is a round number, a period of time that encourages a look back at achievements, to rise above the circumstances of current affairs, to remember the path we have all travelled since 2005 and, above all, to glimpse the future that we all wish to build for ourselves.

Personally, it allowed me to spend some time going through the archives and remembering where we were ten years ago and what we were talking about back then. Ten years ago, the newspapers were discussing - as always - a wide variety of topics. Some of them still seem important to us today, others not so much.

I won't go into details but suffice it to say that, apparently, Spain was then experiencing an untroubled economic situation. Although it is also true that in those same newspapers on 27 April 2005, albeit in the back pages and with no major importance or repercussions, we could also find such headlines as: "Trade deficit up by 43.3% in first two months of the year"; "Caruana - Governor of the Bank of Spain at the time - calls for urgent reforms to foster competitiveness"; "Bank of Spain warns that homes are over-valued by more than 20%"

These stories - all three of them - correspond to the press taken from one single day, a day like today but ten years ago.

Re-reading these stories today, knowing what we have all had to experience since then, is truly a good lesson that we should all learn for the future.

The information was there for all to see, but nobody paid any attention. The warnings were also there but, with all due respect, I must say they were ignored by everyone and especially by those with the greatest duty to pay heed, i.e. those in power as part of the country's government. I don't know whether it was through incompetence, laziness, a lack of courage or some other reason, but the obvious fact is that no attention was paid to what mattered and the need to implement reforms was ignored.

As a result of that inaction, the Spanish economy accumulated lethal imbalances which triggered the worst crisis that Spain has suffered in generations; because nobody paid any attention to what was important or because they paid attention when it was already too late.

Ladies and gentlemen,

From this simple exercise of reading the press from one day ten years ago, we can extract some quite clear and important lessons; lessons that help us explain what happened to us and what should not happen again in the future:

• Lesson One: the economy is to a country what health is to a person - we tend not to pay it much attention when things are OK and we only appreciate how much it means when it is gone. When things are going well for a country, there is no talk of economics and we only remember it and discover its full importance in the midst of a crisis. Just remember how many mornings you woke up to hear about risk premium trends as the first news story on all the radio stations and think about the amount of economic terms we have learned in recent years: risk premium, seniority, structured products, etc., etc.

I repeat, the economy - just like people's health - is the basis on which everything else rests: social benefits, pensions, public services and, if you push me, even political confidence. Therefore, it is important to keep an eye on the economy and look after it, even when things might be going very well, because that is the best way to ensure they keep going well and don't get into a mess.

• Lesson Two: Ignoring the symptoms of a disease only makes it worse, whereas taking swift action helps shorten the treatment and make it more effective. In other words, in this globalised world that is changing at breakneck speed, only those flexible countries willing to maintain a constant drive for reform and adapt to new circumstances can lead the development process. Those who disregard that fact ensure themselves a place in geopolitical irrelevance or an extremely harsh process of adaptation to make up for lost time.

I will come back to that later but I wanted to make those two points now because, at this point, I am going to talk about economics. I know there are many other topics we could talk about this morning and, no doubt, we will have the opportunity to touch on them during the Q&A session, during the round of questions, but, for now, allow me to focus on those issues that most - and by some margin- concern the people of Spain: the economic situation and employment.

Ladies and gentlemen,

In order to structure such a complicated and far-reaching issue, I will try to answer a few simple questions: Where did we start, what have we done, where are we and - most importantly - where are we going?

Where did we start? I can answer this one quickly, because we all know.

At the start of this legislature, the Spanish economy was showing some very serious imbalances that needed to be addressed:

• a ludicrous public deficit;
• a considerably uncompetitive economy, with higher inflation than our partners;
• high public and private borrowing; and
• a very weak financial sector.

What did all this mean?

• Recession, negative growth for the economy;
• Increased unemployment - 3,400,000 people lost their jobs during the legislature that began in 2008 and ended in 2011;
• Revenue for the public administration services fell through the floor, over 70 billion euros less than before;
• And enormous difficulty in financing ourselves, as shown by the drop in foreign investment and the constant rise of the risk premium.

That, generally-speaking, was the situation. That is what we found on the books when we came to power. That was the legacy left behind by those who came before us.

Faced with this situation, there were some who said we only had two choices: leave the Euro or ask Europe to bail out our economy. Do you remember that? Some people's memories are already starting to fail them, but I very clearly remember all the suggestions, petitions and even orders I was forced to listen to from both within and beyond Spanish borders about the infamous bailout.

The fact of the matter is that the choice made by my government was neither of those two: we neither left the Euro and nor did we ask for a bailout. We committed to a third option. It was neither the easiest nor the quickest but we believed it was the fairest, wisest and most sustainable. We opted for a wave of reforms to become more competitive and, as I said in my investiture speech, get back on the path of economic growth and job creation.

What have we done? Overcoming the crisis, growth and job creation were the priority objectives we set ourselves when we came to power and, in fact, they still are our main priorities. We have focused all our efforts on achieving those goals.

We based our work on three cornerstone targets:

• Firstly, a programme of fiscal consolidation that would enable us to recover the confidence that had been lost in Spain while, at the same time, guaranteeing the sustainability of essential public services, such as healthcare, education, pensions and unemployment benefits.
• Secondly, a clean-up of the financial system, a part of which was practically bankrupt and was having a detrimental effect on confidence in our country, and, moreover, was failing to meet its basic mission of providing credit to households and companies.
• Thirdly, implementation of all those reforms necessary for our economy to recover competitiveness. These reforms affect a multitude of areas: the labour market, energy, administration, education, market unity, taxation, transparency and good governance, etc. All these reforms, taken as a whole, represent the greatest and most vigorous modernisation effort experienced by Spain in its recent history.

Well, after everything we have done in these three long years, we can now ask ourselves where we are today.

Ladies and gentlemen,

As a result of all these policies, the country has clearly been brought back on track.

Spain has corrected its fundamental imbalances and gained competitiveness:

• Our public deficit has been reduced from 9% to 5.7%. We had to do this during a recession and while maintaining the basic pillars of the Welfare State.
• For 18 months, our rate of inflation has been lower than that of Germany. In other words, we are gaining competitiveness and export capacity. Today, in terms of gross domestic product, we have more export power than the United States, Japan, the United Kingdom or France.
• Our banks have successfully passed the European stress tests and credit is starting to flow again.
• The risk premium has fallen sharply, we are paying the lowest interest rates in our history and we have even begun to finance ourselves at negative interest rates. Who would have said that only three years ago?

However, most importantly of all, we have achieved economic growth and job creation. Last year, following six years of crisis, the Spanish economy posted positive growth once again: 1.4%. This was the second-highest growth rate in the Eurozone. At the same time, and also for the first time since 2007, we started creating new jobs - a trend that has been consolidated according to the latest Labour Force Survey.

Ladies and gentlemen,

Jobs have been created in Spain for several months now and created faster, at a pace of 3% per year. In other words, over half a million new jobs in the last 12 months.

More jobs are being created and the majority of those new jobs are permanent. According to the Labour Force Survey, 488,000 people left unemployment in the last 12 months. In other words, we are already below the unemployment rate posted at the start of this legislature and I am convinced that this figure will improve even further over the course of this year.

I am in no doubt whatsoever that we will see confirmation of our forecast total of one million new jobs in the period 2014-2015 - I repeat, one million - and I sincerely believe that those one million Spaniards who have a job today are the best reflection of the transformation undergone by our country in only two and a half years. A truly impressive turnaround.

Naturally, this has been seen and recognised overseas. I will not enter into too many details, because that recognition has been shown in many ways. However, besides the ease with which we can now access financing, the main manifestation of that recognition can be found in the amount of foreign investors we are welcoming into Spain. I also believe that the change is being recognised within Spain by all those who ask themselves - sincerely and without ideological blinkers - whether we are better or worse off than three years ago.

I am perfectly aware of the difficulties being experienced by the many people as yet untouched by the recovery. They are the main focus for our efforts right now. Nonetheless, just as I recognise that many people are yet to feel the effects, I can also assure you that an increasing number of Spaniards are indeed feeling the turnaround in their everyday lives: because they are spending more on their shopping basket, because they are buying cars, because they go on holiday or enjoy leisure time with greater passion than before, because they have started to buy homes, because banks are issuing credit again and because they say so when you ask them.

No doubt, many people have yet to feel the positive effects, a great many people. But the objective fact is that household income grew last year by 1.4% and, in fact, the pace of growth in this regard for the last quarter stands at 3.5%. Remember, it was falling by 4% in 2011.

These are objective data; figures that confirm a turnaround, no matter how many people ignore them and despite those who disregard them. Similarly, objective data also show that all the recovery efforts made in the Spanish economy have been made while preserving the essential public services:

• Pensions have been increased every year. They have been neither frozen nor lowered, as needed to be the case in other countries, especially those subject to a bailout.
• We have 800,000 more people registered with the public healthcare services than in 2012 and the highest number of university grants in the history of Spain.
• Increased protection has been afforded to the most vulnerable people through various mechanisms, such as the PREPARA Plan, increased equality in pharmaceutical spending, the Second Chance Act and others.
• Similarly, increased support has been provided to families under the tax return through new deductions and new minimum thresholds.

And there is one issue that concerns me greatly - I repeat, greatly - and to which I would like to draw your attention: the poverty and inclusion indicators, those produced by Eurostat - the EU statistics office, which were consistently rising during the years of crisis but started to fall in 2013. I am in no doubt that, when we see the data corresponding to 2014, they will have improved considerably.

Ladies and gentlemen,

Let's move on now to the most important question, the future: Where are we heading, what can we expect and, above all, what should we do? Consolidate the recovery, avoid falling back and losing the ground it cost us so much to make up.

In short, this is the first and top priority: not regressing to the situation in which we found ourselves in 2011. The goal is to guarantee and further develop the new economic cycle, to protect the growth and job creation process.

This very week, on Thursday the 30th, we will send our Stability Programme and National Reform Plan for 2015 to Europe. I can tell you now that this document will include a new growth forecast for our Gross Domestic Product. As you know, our initial forecast was 2% when drawing up the budget. Subsequently, during the State of the Nation Debate, we revised that figure upwards to 2.4%. Today, I am in a position to announce that, in 2015, growth in the Spanish economy will stand at 2.9% and next year, in 2016, growth will also be around that figure.

Ladies and gentlemen,

This is not a question of wilfulness or fanfare. Cautionary forecasting is something for which my government will be remembered. And with that same degree of caution, I can tell you that Spain will be the fastest growing of the leading Euro economies and by quite a considerable margin above the Eurozone average. Who would have said that only a couple of years ago?

That growth forecast means that we will create over half a million jobs this year. In fact, as I have just said, that is the pace of job creation reflected in the latest Labour Force Survey.

In order for these forecasts to be realised or even improved upon, we are going to keep up the drive for reform that has underpinned this entire legislature, with a particular focus on such areas as public administration services, training for employment, support for the self-employed, market unity and innovation.

I will not go into detail now, but I would like to stress that priority has been given to R&D+i in the 2015 budget through an almost 5% increase in allocations to this area, and that our intention is to maintain similar progress in the years ahead - if the people of Spain so choose.

The second major objective is to improve well-being for the middle classes and combat inequality and exclusion.

Ladies and gentlemen,

The real cause of poverty and inequality is unemployment. What jeopardises public services is the fall in revenue: 70 billion between 2008 and 2011.

It is the crisis, and not the struggle against the crisis, that is the threat to social policies. This is why we have made job creation our main priority.

However, we have also implemented a tax reform that pays special attention to middle- and low-income groups, as well as the most vulnerable in society. As you know, three negative taxes have been created - also known as "family cheques" - for large families, single-parent families and families providing long-term care. The second stage of the tax reform will come into effect next year and, in total, we calculate that nine billion euros will have been returned to taxpayers' pockets.

The third major objective is to guarantee the sustainability of our Welfare State for the medium and long term. This is the most important issue for the future of our country: to guarantee the pension system - 40% of spending by my government - and public healthcare services. I repeat, the major national objective for the medium and long term: to guarantee the sustainability of our Welfare State.

Allow me to spend a few moments sharing my thoughts with you on this point because I believe, as I just said, that this is the biggest challenge we face - not only in Spain but everywhere in Europe, because Europe is where we have what we refer to as the Welfare State; basically, we enjoy something here that does not exist anywhere else in the world - the Welfare State.

Let me give you an example: As I just said, Spain allocates practically 40% of the State Budget on pensions. China, that great economic giant that successfully competes in every market, allocates 0% to pensions.

I could find many other examples. Not long ago, you will all remember that someone was treated for a disease - an almost unheard of disease in the West, Ebola - here, in Madrid. They were treated and cured, for free. At the same time, in Houston, someone with the same disease would have to walk into a hospital with a cheque for 500,000 dollars.

I give you these examples to highlight the nature of the nation and country in which we live. I could give many more examples but I don't think I need to. These two examples speak volumes.

We all want Europe to continue being the same Europe we grew up in and where, despite all the difficulties, people can feel safe, confident and protected against hardship. That should be our legitimate aspiration.

To maintain that Welfare State in a global and competitive world, we are required to be extremely ambitious in the implementation of reforms and extremely efficient and balanced in the management of our resources. For that reason, our objective for the next legislature will be to return to the normality provided for in Article 135 of the Spanish Constitution; that which states there should be no deficit, which is the same one that states the percentage of public debt of GDP should also be reduced. There is no doubt that the fiscal consolidation efforts made by Spain and involving all public administration services - local, regional and central - stemmed from one of the decisions that gave our country the most credibility in recent years.

Hence, economic stability and reforms are factors that simply must characterise the future of our country in the years to come. During the recent Debate on the State of the Nation, I proposed what I believe should be the great national objective: 20 million jobs by the end of the next legislature. This is the threshold that ensures the sustainability of our Welfare State. 20 million jobs to be safe from possible future scenarios and to continue growing in well-being and in security.

It is a feasible objective. We will have achieved it during the next legislature merely by maintaining in the years to come the pace of growth and job creation that we have today in Spain.

Ladies and gentlemen, on a closing note.

Together, everyone in Spain has joined forces to achieve something that seemed impossible; remember 2012. Spanish society has conducted itself in an exemplary fashion and has once again shown that, with good policies, it is capable of achieving goals that seem entirely out of reach.

We have overcome many difficulties and problems that seemed unsolvable. Each one of you and everyone listening could probably give a list of sacrifices made in recent years. I offer my heartfelt gratitude to you all. Your individual efforts have enabled a great collective achievement.

We now have the opportunity, a real opportunity, to enter a long period of growth and well-being for all Spaniards. My government and my party, the Partido Popular, will do everything in their power not to shatter that hope.

Now we can talk about whatever you want. Thank you very much.

Q&A session with the President of the Government

Moderator: Mr. President of the Government, I have dozens and dozens of questions, as I'm sure you will understand. It would be impossible to ask them all, much less answer them all. I have organised the rest of the programme into five main areas: the economy, obviously; corruption; Catalonia; the upcoming elections, the emerging parties and their influence on the political system; and, finally, the situation within the Partido Popular. And, let me tell you, Mr. President of the Government, I have many, many colleagues who are interested in your personal future. Perhaps you will be able to say something about that.

But first of all, Mr. President of the Government, current affairs always crop up when you least expect them and I simply must ask you about the terrible earthquake in Nepal and, above all, the condition of the Spanish citizens over there, whether you have any information, whether any contact has been made with the 100 or so who were missing or out of contact.

President of the Government: The events in Nepal are truly... The earthquake was tremendous, the situation is dire. Many, many people have been killed. The Minister for Foreign Affairs is in India and I have spoken with him several times in the last few hours. We have established contact already with many Spaniards over there, either living there or who simply travelled there recently for one reason or another.

There are still over 100 Spaniards in Nepal with whom we have been unable to make contact as yet. It is possible that some of them are no longer in Nepal at this time but, in principle, we are trying to contact all of them and we are going to send a Spanish Air Force plane to bring them back to Spain as soon as possible. I am unaware of whether it has already arrived in Nepal or not, but that was the last conversation I had with the Minister for Foreign Affairs, who, I repeat, is in New Delhi.

Moderator: Thank you, Mr. President of the Government. Let us now talk about the economy.

You have given us a figure of 2.9% growth for this year, for 2015, and 2016. It's true that we are not approaching growth data of a similar nature before the crisis. However, I wanted to ask you this: will the macroeconomic chart to be approved by the Council of Ministers on Thursday also include a number of pending reforms? I ask this because the Eurogroup once again asked Spain on Thursday to undertake reforms, more reforms, in two areas especially: the labour market and the tax system.

President of the Government: As I said in my speech, the economic policy we have applied in recent years - and which has been tough but need not be the same in the future - is what enabled us to overcome the crisis until now, return to economic growth and create jobs. It was fundamentally based on five pillars, which I announced when I presented myself to Parliament asking for the vote in late 2011.

Generally-speaking, two of those five pillars were domestic in nature and three depended on European decisions. The two domestic decisions were fiscal consolidation - in other words, public deficit reduction - and structural reforms. And three decisions over which Europe held power, to put it one way, but over which we also held power because we are the fourth-largest Eurozone country in terms of GDP in Europe, and of the 28, also surpassed by the United Kingdom in terms of GDP.

Firstly, it was necessary to continue with the reforms, not only at a national level but also at a European level; mainly to further develop the internal market. I don't want to bore you, but one of the most important issues is the Single Energy Market. There are other important areas, such as the Digital Single Market, the services market... There is still much work to be done in Europe.

The second European issue relates to increased integration. A Banking Union has already been achieved with the Resolution Mechanism and the supervision already of the vast majority of financial entities to be undertaken by the European Central Bank; but we still have to work on the Fiscal Union, which is a tough issue, and the Political Union, which is even more complicated.

And then there was a fifth area that was also very important, which was to provide liquidity to the European economy. Personally I welcome the latest decisions by the ECB; but they would have been far more welcome if they had been taken in 2012 instead of 2014.

But that is neither here nor there. Of all the reforms undertaken in Spain in recent years, I think that the fiscal consolidation policy was very important; but equally important were some of the situations that arose beyond our borders, which did not help us to begin with but are helping us now. One of them is the fall in oil prices and another is the fall in the exchange rate against the dollar, which has no doubt been fundamental to Spanish exports.

Therefore, efforts must continue in that regard. I mentioned Article 135 of the Constitution in my speech. We have to continue lowering the deficit. I mean, the deficit stood at 5.7% in 2014; but the target set for us by the European Commission was 5.8%. We wanted to make a commitment and go further. We said 5.5% and we would have achieved 5.5% had it not been for the ruling on the "healthcare cent" handed down by the European courts that we were forced to comply with. However, a tenth of one percent here or there is not important; what matters is the willingness to make an effort and follow through on commitments, the implementation of sensible and reasonable policy.

So, we still have to continue working in that direction. Public debt has continued to rise in recent years but the problem is that we still have a large deficit: 9% in 2011. We were forced to take steps with suppliers and we had to cover the public deficit of many regional governments that were, to put it simply, unable to pay for basic public services. In other words, a major clean-up operation was completed but the public debt will start to fall as from 2016.

So, firstly, it is essential that we maintain the public deficit reduction policies and actually start reducing the public debt; secondly, we must continue with the structural reforms; and, as far as we can, if the people of Spain so desire, we will continue lowering taxes.

As you know, we raised taxes only ten days after coming to power, on 30 December 2011. Then we had to raise VAT, right in the middle of July 2012, when the Spanish economy was on the verge of bankruptcy and a bailout was only 15 minutes away from my office. We have already taken a number of decisions for this year, 2015, that affect Personal Income Tax, and others for 2016. Nine billion euros will be left in taxpayers' pockets and the government's idea - depending on the level of economic growth and depending on whether the economy can generate more activity to increase revenue - our plan is to continue lowering taxes.

The reform of the public administration services is also very important. What we are doing in this regard is involving some huge efforts. Believe me when I say it is practically impossible to sum this up in just one line. I understand it is not very exciting but I can assure you that it is one of the most important reforms to have been undertaken in our country for many years.

We have also implemented - and this is also difficult but what matters is that steps are being taken in the right direction - a reform of the Market Unity Act.

There is no question that we must improve, and we have taken some steps in the right direction; all the work on training, for example. In other words, we need to do away with the school drop-out rate, which is a huge blow to equal opportunities. We need to improve the quality of our education. We need to have more positive data in the PISA Report than we do right now. The number of people in our country studying vocational training courses is on the increase, considerably; this is very positive news. Dual vocational training, which has also proved highly successful in both Germany and in Austria, is improving in our country. It's true that bringing this to small enterprises is difficult.

But, as I've been saying, this is very important and it's also very important for Europe to grow. It is good for us that our neighbours do well - all of them, without exception, those to the north, south, east and west - so things improve for us too.

Moderator: Mr. President of the Government, might that tax reduction include a lowering of the cultural VAT when possible?

President of the Government: That tax reduction could include the lowering of any tax.

There are some sectors in which we have not raised taxes and even some others where we lowered them. I mean, we increased Personal Income Tax and we increased VAT but we took some very important decisions elsewhere, especially regarding small- and medium-sized enterprises, and the self-employed. And Corporate Income Tax was also lowered in the latest reform.

Then there are some other by no means minor decisions to which very little attention has been paid. Let me give you an example: the Social Security Flat Rate scheme, the 50 euros. And the latest measures adopted by the government: for the first 500 euros of the wage paid to someone hired under a permanent employment contract to not be counted for Social Security purposes. That is indeed a reduction to Social Security, which some people describe as a tax against employment.

Hence, everything here is open; but, in any case, we need to have a fair tax system and we need to have National Insurance contributions because we now have 9,250,000 pensioners in our country; let's not forget that. Some countries have zero, but here we have 9,250,000 and the average pension stands at over 1,000 euros per month.

Moderator: Mr. President of the Government, I have nearly finished with the questions about the economy. One of the issues that could muddy the waters - not only in Spain but throughout Europe, or at least delay progress - is Greece. On Thursday, the Eurogroup was very tough on Greece. How do you think all this might end? Will there be an agreement finally?

President of the Government: You make a very good point. In my opinion, the enemies of the recovery in Spain at the moment are political instability - that is a possible enemy of the recovery; it is hard to say to what degree - and then, Greece.

The situation in Greece is this: Greece was subject to a programme; Greece was unable to turn to the markets; only the European Union is financing Greece, the States or the ESM, which is a European financing mechanism; and, in exchange for that financing, Greece had to follow the programme, which was a commitment to reduce its deficit and public debt, and it had to implement structural reforms to generate growth and jobs. It was doing it. In fact, last year, things weren't going badly. Then there was a change of government. The new government decided not to accept anything the Commission, the European Central Bank and the Monetary Fund told it. However, the problem is that those three bodies are the ones holding the purse strings and, if Greece doesn't play ball, it runs the serious risk of losing its financing.

Negotiations are currently ongoing. A lot is being said about this. Greece's main creditor is Europe. Spain has issued a bilateral loan of almost seven billion euros. That bilateral loan will start to be repaid in 30 years - imagine if you were in the same boat - and the interest must start to be paid in 10 years. Greece also owes a very significant amount to the ESM. Spain has 18 billion of that guaranteed; in other words, if Greece doesn't pay, Spain will. This amount also starts to be repaid in 30 years, and the interest in ten years.

But Greece's problem is not one of debt restructuring because there is no great difference between starting to repay in 30 or 50 years. There is a difference, yes, but that's not the issue. The key is being able to generate economic growth and jobs; for that, they need to do what everyone has done, which is fiscal consolidation, structural reforms, etc. etc.

I would very much like... I think it would be very bad news for some unwanted situation to arise within the Greece affair. I am absolutely convinced that the best thing for the people of Greece, the best thing for the people of Europe, for Greece, for Spain and for everyone, is for Greece to stay where it is and meet its commitments. I believe it will be possible to negotiate and talk with the European Union, and a position of common sense can be reached. Naturally, Spain - at least my government - is the first to be interested in things going well for Greece and we are always willing to help Greece, its leaders and its governors resolve these problems. But there is one very important thing in life, and you all understand this perfectly well: when you give your word, you should keep it because otherwise there is no way to order the life of anybody, not in society, not between countries, not between people, nobody.

Moderator: Neither, Mr. President of the Government, do I understand the problem. You will have to forgive my almost ironic tone. The problem is that the Eurogroup doesn't hate Varufakis either, as he claims is the case.

President of the Government: No. It is very important in life to be careful what you say, isn't it? I will make no comment on the statements made by Mr. Varufakis. Naturally, that is not true. Nobody hates Greece, nor Mr.Varufakis, nor anybody else for that matter. I understand that people sometimes feel like saying certain things. It happens to me sometimes, but it's also important...

Moderator: Mr. President of the Government, let us move on to more complicated issues. You are giving us economic data that are genuinely positive, especially when compared with our starting position. However, why is there an impression that the people and many PP voters are not attributing those results to the government?

President of the Government: I suppose there must be many reasons. If I knew exactly what those reasons were in a clear concise manner, as you might well understand, I would have already taken steps for that not to be the case.

I think the Partido Popular has assumed the responsibility of governing in Spain at probably the worst economic moment in decades. We have had to take very complicated and very difficult decisions. We have spoken about tax increase and we've also been able to talk about tax decreases, fortunately, and I think we will be able to be even more precise in the future. We've had to make some important reductions in the General State Budget: the ministerial department budgets fell by 25% in the first two years. And we've had to implement a few structural reforms that many sectors were unhappy with, I am fully aware of that.

But we did that for two reasons: firstly, because we believed it was what had to be done for things to improve in Spain and, of course, we tried to prioritise. What did we say we wouldn't touch? Pensions, and we didn't touch them. It seemed the reasonable thing to do. There are more than nine million pensioners in Spain and, naturally, someone who is 80 or 90 years old has far fewer ways to get by than others who are 50, 60 or however many years old. It seemed fair. The same applied to the unemployment benefits: we spent over 30 billion euros - it was the second-largest heading, after pensions, in the General State Budget - on unemployment benefits. And again, it seemed the right thing to do.

All the basic public services have been maintained, despite what some people might say from a clearly political standpoint. Spain still has a welfare system like almost no other in the world.

So, some of our decisions have been tough and difficult, and come at a price, and I hope to be able to recover that cost and convince the people of Spain over the next few months.

We've had problems with corruption that have come to light and that have greatly damaged the Partido Popular, of that I am in no doubt. The party has been badly hurt. I believe we have been capable of taking important decisions. None of the people who were involved in events such as those are still with the Partido Popular today. I believe we have approved a series of laws and legislative initiatives like no other since 1977 in Spain. Whether we have been able to explain them properly is another matter. However, from the point of view of preventing those events, I believe we have taken important steps forward: there are four projects under way, some of them constitutional laws, in Parliament.

I also think that all those institutions that may have something to say in the fight against corruption have worked independently: the State Tax Agency, the General Intervention Board of the State Administration, the Public Prosecutor's Office, the Courts and, naturally, the State law enforcement agencies.

We have done everything that was within our powers. We will continue doing everything we can in this regard but, having said that, I must also say that I cannot accept the shadow of suspicion or general feeling that everyone who dedicates their life to this noble activity - politics - is someone who does what they shouldn't be doing. I have been in public life for many years and I've seen tens of thousands of people dedicate themselves to public duties who are entirely honest and trustworthy, people who spend hours on this endeavour - sometimes without even being paid, as is the case with the majority of the town councillors in our country. It is therefore very important for restraint, wisdom, common sense and balance when judging others, as in all walks of life, to start taking hold in our country.

A certain amount of damage is indeed caused by these events. However, that said, I must also say that the Partido Popular won the European elections last year, albeit losing support; but it was Le Pen who won in France, the UKIP in the United Kingdom, Mr. Grillo was second in Italy and Tsipras won in Greece.

Hence, I believe we are in a position - because I also believe this is fundamental for the economic future of our country - to maintain the policies we have been implementing in recent years.

Moderator: Mr. President of the Government, the latest case to shake up public opinion, and especially opinions surrounding the PP, is that of Mr. Rodrigo Rato. On this issue, my colleague Cristina de la Hoz, from "Zoom News" asks: Do you think the "Rato affair" has been blown up out of all proportion? And adds: Has it been handled well?

President of the Government: I have said absolutely everything that I had to say about this matter. Mr. Rato was a colleague of mine, personally, in government and of many others who are in government today. He did a great job in his day. That said, things are what they are and, right now, I think it best to let the pertinent institutions reach their own decisions on this matter because I think that is good for them; and I think Mr. Rato should be able to freely and calmly defend himself against the accusations made of him, if any have been made.

The government has already done everything it had to do and I am not going to say anything more on the matter.

Moderator: But, only two weeks from the start of the election campaign, how can this be explained away? I mean, how can you explain this to Partido Popular voters?

President of the Government: I think it is I who has not explained myself very well. I have already said I'm not going to make any more statements and that the institutions in our country work.

Moderator: Another current affairs topic and then we will move on. This time from my colleague Patricia de Arce, from the EFE Agency. She asks: "Does the President of the Government believe in restricting or increasing the list of activities compatible with the work MPs do in Parliament?"

President of the Government: Some strange things occur here sometimes, for example when someone thinks that a country is its government. No. Look, we are 46 million Spaniards and everyone has their own responsibilities. The government has some very important responsibilities but so do the business leaders in this country, as well as important roles, as do the trade union organisations, the political parties and the members of parliament.

The government has already taken decisions that affect the government itself in this regard, such as presenting Parliament with one of the laws I mentioned earlier: the Charter for Senior Officials. This text establishes the government incompatibilities, which are all of them. The incompatibilities of Parliament is something to be decided by Parliament, the Speaker of which I would like to thank for being here today.

Now, that said, I am not going to get any deeper into this issue because, as I said, my responsibility is the government; that said, I am a member of parliament and I have voting rights. It is very important not to distance members of parliament too much from the real world. I believe we currently have some tough and very demanding incompatibility rules, the broadest in the European Union, and the decisions in this regard must fall to the members of parliament. They might say: "here, nothing. Incompatibilities? Absolutely all of them". But we obviously run the risk then that politics could become the realm of only those people with unlimited resources or those with few resources. Parliament should be highly representative of the nation.

I repeat, I have already taken the decisions I needed to take on those in high office; anything else falls under the jurisdiction of Parliament, but I don't think demagogy is by any means useful; in fact, it is harmful to Spain.

Moderator: Mr. President of the Government, let us speak for a while about Catalonia; this issue cannot be ignored. I wanted to ask you whether you know what referendum elections actually are.

President of the Government: Yes, those that aren't going to be held on Catalonia on 27 September.

I think it is important to tell the truth to everyone who wants to listen: there is no such thing. The elections they are going to hold in Catalonia, if they are held, which is a decision to be made by the President of the Regional Government of Catalonia, are regional elections. That is what the Constitution and the entire legal system in Spain say.

So, people should be told the truth. Everyone is entitled to think what they want and have their own opinions, and we will all give our reasons and present our arguments if we have them and are capable of doing so. However, there is no such thing as referendum elections.

And my opinion on the... I have reiterated my opinion on many occasions: the Government of Spain is willing to talk to everyone who wishes to do so; it has a duty to do so. That said, there is only one thing that is not up for discussion and, if you will allow me, I don't think anyone who has been or could be President of the Government of Spain in the future would discuss this, and that is national unity, national sovereignty, the equality of all Spaniards and fundamental rights and freedoms. I think finding someone to discuss that in the Government of Spain yesterday, today or tomorrow will be a very tough job. Aside from that, we can discuss anything that happens to be in the best interests of the general interest of the people.

Moderator: Including a reform of the Constitution?

President of the Government: That is one thing that certain people are calling for and I am not opposed to. The thing is that I would like them to tell me exactly what it is they wish to reform because, naturally, saying "let's reform the Constitution"... But, if we don't know what it is we want to reform, we could end up having a problem.

Two reforms of the Constitution have taken place in Spain since 1978: one, with a very clear target, to allow foreign citizens to vote in municipal elections in Spain - I don't know if that was compliant with the Maastricht Treaty, I wouldn't like to say, but it was compliant with the reform of a certain Treaty of the European Union; and the second great reform was a reform of enormously far-reaching effects, a reform in which every country of the European Union committed to achieving public deficit and public debt levels set by that Treaty. That led to a reform that was completed in 15 minutes. I received a call from the previous President of the Government, José Luis Rodríguez Zapatero, in 2011, in the summer, and he told me: "listen, it is very important that we do this". I said OK and it was done, it was done correctly.

So, reforms are necessary sometimes; but their purpose must be perfectly clear.

I have spoken with a number of people. Everyone clearly has their reasons for thinking a certain way, they have their arguments, and it is not written anywhere that they are either right or wrong; this is very important.

As things stand now, I don't see it happening. I don't see it happening because I don't see sufficient consensus in Spain for a reform of the Constitution. It is probably Chapter Eight where certain people believe this reform should take place; but the initial draft of Chapter Eight was hard enough at the time in 1978, with its Article 150.2 and its transitional and additional provisions.

I see that there are people now who would like the State to have more powers than it currently has and the regional governments less, and I see other people who think exactly the opposite. I am unclear as to what exactly could be drawn up in terms of regional financing. What happens if someone asks for the scrapping of financing systems other than the general systems included in the Constitution or if someone asks for a system such as those? On what grounds should they be refused?

I think it is best not to make changes in times of difficulty and tension, especially when ideas are unclear, when there are no majorities of sufficient size to take it forward. But the issue is there and it should not be cast aside. In fact, the idea has never been cast aside. But today, at this moment in time, and more so this year, with various elections taking place, I don't think this is the best time.

Moderator: To conclude on this issue, there are three questions from my colleagues in the Catalan press, who all ask exactly the same thing. I will read the question from Jordi Armenteras, from RAC-1: "Are you thinking of holding general elections on 27 September, to coincide with the date announced by the Catalans?"

President of the Government: Look...

Moderator: The question is straight-forward enough, Mr. President of the Government.

President of the Government: Yes, absolutely. I understood it perfectly.

I am not going to rule out anything at all. However, that said, anyone who knows me knows that my countless flaws do not include doing things in the short term. I have never done things like that and I am not going to start now.

Moderator: But you aren't ruling it out?

President of the Government: I don't like closing doors. The idea is to hold the elections towards the end of the year.

Moderator: We have five minutes left and I want to touch on these last two issues: the ongoing election processes and the situation within the PP. So, let's get through them quickly.

Mr. President of the Government, polls are obviously polls and, furthermore, difficult to interpret. However, they are all showing a significant decline in votes for the Partido Popular on 24 May. At any event, it seems there will be a need to negotiate from then on. Who would be the natural ally of the Partido Popular for possible negotiation?

President of the Government: The natural allies are the voters and they are our focus for now. The Partido Popular aims to win the upcoming municipal and regional elections. We will do everything within our power and we are going to devote all the time possible to explaining what we have done to the people of Spain and, above all, the Spain we want looking forward; a Spain where the role played by the local councils and regional governments is very important. So, our goal is to win.

In 2011, as everyone will remember, we posted some excellent results - the best results in our history. We are going to work flat out to ensure our results are just as good this time around.

I don't think it makes any sense to talk about pacts and agreements that might be reached in the future right now. Now is the time for the people of Spain to speak and then, if necessary, such arrangements will be sought: agreements, no agreements, or what sort of agreements should be reached, or not.

However, I repeat, the Partido Popular is a political force that was not invented yesterday: it is a political force that is represented throughout Spain. The electoral lists have already been presented. We are the party in Spain that has presented the most candidates in the eight thousand odd local council authorities. Most political forces are putting themselves forward in very few places. We are there and we aim to win. I believe we are in a position to win. It has fallen on us, as tends to happen, to lead in the most difficult situations but one is in politics for a reason and the same can happen in all walks of life. Anyone can deal with easy situations and the Partido Popular continues to be there for the people of Spain in the toughest of times, as always.

I think we are a party that formed in opposition, that we have gone through some very complicated times over the course of our history, as well as some good times; but we have always stood up to the plate and that is why we have earned the confidence of many people in our country.

Moderator: Mr. President of the Government, how is the Partido Popular doing?

President of the Government: The Partido Popular is fine. I have been a member of the Partido Popular for many years. I have been town councillor, I have been provincial member of parliament, I have been a militant, president of a local council; later president of a provincial council - Pontevedra, for eight years - and then I was general vice-secretary of the party, general secretary and president. I have dedicated my life to the Partido Popular.

All organisations, and especially all organisations with as many people as this, will always have their ups and downs. We are not all the same within the Partido Popular - as is the case in any walk of life, where people have their own characters and viewpoints - but I think it is a party that has demonstrated itself to have a great deal of solidarity, great fortitude, enormous courage and lasting stamina in difficult times.

I have had difficult times in my own political career, others not so difficult; but this party is a safe political choice. This is not a party where someone leaves, someone else steps in, where the people keep changing... No, it is a safe political choice and its militants have always shown themselves capable of facing up to tough times. If anything guarantees the Partido Popular, it is security and stability. It is true, perhaps, that this is not a party that takes orders or plays up to many people; but that is also complicated in life and neither do I think it negative for the general interest of the people.

I am very proud of my party. Listen, as I said before, I have dedicated my entire life to this party and I believe it is a sure thing for the people of Spain, and that is precisely the message we will try to convey.

Moderator: The last two questions, Mr. President of the Government. The penultimate: would a hypothetically bad result on 24 May lead to any internal changes within the party?

President of the Government: I have no intention of causing any change within the party, absolutely not. I will also tell you something else: if I did, I wouldn't tell you, obviously.

Moderator: I suspected as much.

President of the Government: However, that said, focus on my first statement.

Moderator: To conclude, I have nine questions from colleagues asking about your personal future.

President of the Government: Thank you very much.

Moderator: I will read you the question asked by Sara Medialdea, from the ABC newspaper. It reads: "amid so much news and rumours about internal schisms and manoeuvres related to "post-Marianism", do you still want to stand for the PP in the 2015 general elections no matter what happens on 24 May?

President of the Government: Yes, yes. I want to be the candidate. And trust me, It will go well for them.

Moderator: A bad result wouldn't lead to any reflection?

President of the Government: Take heed of what I say.

Moderator: We have stuck to our timeframe scrupulously, Mr. President of the Government. It has truly been a pleasure and an honour to have you with us.

Thank you very much. Thank you everyone.