Speech and subsequent discussion with the President of the Government at the closing ceremony of the 31st Meeting of Círculo de Economía

Sitges

Ladies and Gentlemen, good morning to everyone.

I would like to thank the Círculo de Economía for its invitation to address this forum again. It is the 12th time that I have the pleasure to be with you and I am going to talk about economic recovery, because that is what I have been asked to do. It really is something that I like to talk about because I do agree that there has been an economic recovery in our country; but I think in my speech I will also touch on some of the things to which Antón Costas referred in his opening presentation.

Social crises do not occur at the height of economic crises; rather, the truth is that they occur afterwards. I agree with this idea and I will make a comment about it. I think it's also important for recovery to reach everyone, and I will also comment on that. Also, with respect to what has to be done in the future, I will say something about political reforms and repeat what I have just heard: the Minister for the Economy said it is essential not to reverse the reforms that have been passed in these years. And, of course, I will make a very important reference to the social dimension of the crisis and the obligations of a government to the Welfare State, to what is happening here and what is happening elsewhere in the world.

So I will try to give a full response to all the issues to which he referred in his speech; but I can tell you here and now that I agree substantially with what he said. What I do not agree with so much is the generosity, or rather I agree with some qualifications. I believe that the generosity of some is compatible with the talent of others. So, I can admit that there has been generosity if the talent, effectiveness and consistency of one who continues to be in the first division is also recognized. So in the end it is clear that we can agree even about that; and that I have nothing against those from the South, even though they have won here. We simply restricted ourselves to a draw.

Thank you very much for your words of welcome and thank you very much to all of you for being so kind as to join me at this event. This is the last time I will be with you in this term in office. Next year I intend to come back, if I'm invited, and do so in the same situation as today and, of course, I assure you all that I will work to that end.

I was here for the first time as President of the Government in 2012, on 2 June 2012. I'm sure some of you will remember and, of course, I am absolutely convinced that everyone recalls how things were back then in the Spanish economy, which is what brings us here today.

At that time I said some things and I would like, with your permission, to recall them: "The difficulties are very serious, no one can doubt that; however, while the difficulties are great, much greater still are the waves they are triggering. We are witnessing now" - and I remind you, this was June 2012 - "a constant flood of comments, alarms and prophecies of doom that appear to be a prelude to the end of those times. It is as if all the sources of bad news have agreed to create the impression that something important is about to capsize, but haven't told us clearly what it is. Naturally, in these circumstances we are experiencing fear, misgivings and concerns. It is natural and it is reasonable. What is not reasonable is to feed the fears and allow them to grow beyond reality, dragging us into the dangerous terrain of irrationality.

"We are not at the edge of any cliff, ladies and gentlemen. That is not the reality. Neither are we walking along a path of roses, but nor are we at the verge of an apocalypse. There is turbulence, but what matters is that we should be able to resist it and then successfully emerge from it. And there are solid reasons to be sure of that."

I spoke these words here, with many of you in the audience, on June 2, 2012. I am quite sure of that. What did I mean with those words spoken to many of you here today? Quite simply, that I was not going to give up, however adverse the circumstances that might arise. I also said that I would not submit to any pressures that may be put on me from inside or outside Spain. You may rest assured that there were such pressures. Pressures for us to accept the intervention of the Spanish economy as if we were unable to emerge from the situation under our own steam. Put bluntly, the idea was that we the Spanish were going to rescue ourselves, because that is what we thought, because we had confidence in what we were doing and because we were aware of the social consequences that could occur otherwise: just consider, for example, some of the countries of the European Union which had to reduce their pensions substantially because they were subject to intervention.

That same day here, apart from making it clear I had no intention of asking for what everyone knows as a bailout, I explained to all of you what my alternative would be. I presented the five core elements that made up my government's economic policy. The first two depended solely on ourselves and were, as you surely remember, fiscal consolidation and structural reforms. The other three core elements corresponded to the European framework and referred to the structural reforms that had to reform the internal market, the firm commitment to greater economic integration, understood in the broadest sense, and finally, the most difficult, to find solutions to the problems of finance and liquidity in our economies.

I also recalled then that from the very start, in other words from 30 December 2011, we began to work on what was down to us, fiscal consolidation and structural reforms, and to introduce into the European agenda some other issues of concern to us: the deepening of the internal market, banking union, fiscal union, and a solution to the problems of liquidity. We also talked at the time about the exchange rate. The aim, in short, was to achieve the issues that were of most interest to Spain as EU objectives; and they were in fact also of the greatest interest, at least in my opinion, to the European Union as a whole.

Well, ladies and gentlemen, what I told you here on 2 June, 2012 that I was going to do, is just what the Government of Spain has done since then; of course, with the necessary adjustments and at the appropriate pace, and with the indispensable and priority objective that was also announced here on 2 June, of overcoming the crisis, growing and creating jobs.

Ladies and Gentlemen,

I will not overwhelm you with an exhaustive list of all the decisions we have taken over these three years. You know them well and I already told you about many of them in the speeches I made here in 2013 and 2014. I will only point to the major reduction in the budget deficit that has occurred, despite being a period of recession; also remind you of the labour and energy reform and the Budgetary Stability law; and recall too what was not an easy operation, as many of you know, the restructuring of the financial system, the reform of the administration, vocational training ... Anyway, as I said I don't want to overwhelm you. But I will tell you that there have also been important achievements within the European Union itself: there is continued progress towards economic union; Banking Union is now a reality, something that very few spoke of when I was here in 2012; the European Central Bank has relaxed its position and the exchange rate today helps our foreign sector. It's a pity that this only happened a short time ago, but that's the way things are.

I don't want to go on further. In 2013 and 2014, I repeat, I went into some detail on the content of reforms and I think that is now irrelevant. I'm not going to overwhelm you with the results, because you also know the change that has occurred in the Spanish economy since that 2 June in 2012; because, at the end of the day, the question that has to be asked is: three years after that 2 June 2012 is the situation of the Spanish economy today, 30 May, 2015, worse, the same or better than back then? The answer to that question is the bottom line. Here, I'll just remind you of some important information.

With respect to the correction of imbalances in our economy, something that as you know is very important, the public sector deficit will be reduced from 9% in 2011 to 4.2%, which is the target for this year 2015; and this despite two years of recession, the years 2012 and 2013, as I mentioned before. Inflation has fallen from a 3.2% in 2011 to -0.1% last year, standing at -0.2% in the last 12 months. We have had nineteen months of prices performing better than in the European Union as a whole and better than in Germany.

The foreign sector is positive for the first time in a long while and exports are breaking records. As a proportion to gross domestic product, only Germany is doing better than Spain. We are doing better - I'm talking about exports here - than the United States, United Kingdom, France and Japan. The contribution of Catalonia and Catalan business is very important in this process: exports are rising by 6.6% here compared with the Spanish average of 4.4%. The financial system is healthy and the stress tests carried out by the European Central Bank prove it. And families and businesses are deleveraging.

In short, without going into further details, sound foundations are being laid for future sustained and stable economic growth.

As regards economic growth, after several years of negative growth we emerged out of recession. We did so in the third quarter of 2013 and last year, 2014, we grew at 1.4%. This year, we will at least double that figure and we will be the fastest-growing economy in the Eurozone, perhaps with the exception of Malta or possibly a Baltic country. Who would have said that on 2 June 2012?

In terms of unemployment, which is the main and most notorious problem of Spain according to the Spanish people themselves, net employment was finally created in Spain in 2014, with 433,900 more people in work, which has not happened since 2007. The figures on the fall in recorded unemployment and increase in contributors to the Social Security system point in the same direction, and I will not bore you with them. And this year, 2015, there will be at least 600,000 more people at work: and I am convinced, although I don't have the figures, that next Tuesday when we get the data on recorded unemployment and workers registered in the Social Security system, we will have reasons to be cheerful, as happened when we learned the April figures.

I will not go into more figures, but it is worth remembering the turnaround that has occurred in investment and consumption. You are well aware of the data on retail trade, car sales, home sales, mortgages, foreign investment, tourism, the recovery - only a slight recovery, but a recovery none the less - in the construction sector, etc, etc.; all these data confirm that Círculo de Economía was right when it decided on the title of this conference.

Ladies and Gentlemen,

I would now like to make some comments looking to the future, which I imagine is what matters most to everyone; but first let me refer to something that worried me and that continues to concern me a great deal, something that Mr. Antón Costas referred to in his opening speech.

When we arrived in government, as you well know, the public deficit was over 9%. In two years, only two years, revenues had fallen by 70 billion euros, certainly no small sum. At the time, the price of money was prohibitive for those who could actually get finance, and I am not going to remind you any more about that. We were forced to reduce our public deficit; there was no alternative, because the risk was, quite simply, that no one would lend to us any longer and so we would need the bailout that I have mentioned before.

We had to raise taxes, and we did so eight days after forming the Government, and we had to reduce expenses. It was very hard for everyone, not just for the Government of Spain; it was very hard for the Spanish people, but also for those who were in charge of other public institutions.

We decided to set priorities and meet them. Pensions are untouchable, I said at the investiture debate, and that was the case. The second red line was not to leave people who lost a job by the roadside: for three years the Spanish taxpayers were contributing 30 billion per year to pay for unemployment. And I also remind you that the major public services in our country are still in place, despite the notoriously exaggerated claims made by some people. Spain still has a system of universal and free public health, an education system and good social services; and the Government of Spain, as I must say was its obligation, has helped the other public authorities that were administering these public services, some of whom had neither money, nor anyone to borrow from.

Ladies and Gentlemen,

What I mean by this last statement is that in the most difficult situation for decades Spain maintained the pillars of the Welfare State, which is very important and something that surely requires us to reflect positively with a view to the future. Not long ago I was in the second biggest country in the world in terms of GDP. In the second biggest country in the world by GDP spending on public pensions was equivalent to zero. The Government of Spain spends almost 40% of its budget on public pensions, and I imagine that these figures are similar in the other European Union countries.

Not long ago - and I always like to give this example because it is very revealing - the terrible cases of Ebola hit some African countries very badly. A Spanish woman from Becerreá, in Lugo, got infected, entered a Spanish public hospital and was cured. At the same time, in the world's largest economy another woman, who was also a nurse, entered a hospital and was also cured; but her admission required a check for 500,000 dollars up front.

That should be preserved and it is something that very few in the world have.

Ladies and gentlemen, dear friends of the Círculo,

That, in very brief outline, is the story of a very difficult time for Spain and very painful one for many Spanish people; and, I would repeat, also for their leaders. And there is something else I would like to tell you: we are over the worst, but there are still many wounds left to heal. The most important is unemployment, but there are people in work who are also in difficulties.

I am well aware, as Mr Antón Costas said, that the effects of economic crises do harm beyond the duration of the crisis itself. So we have to persevere and the major goal for the future, at least for the next four years, must be job creation. Employment is, in itself, both an end and a means, and it is also a means for the recovery to reach out to everyone. Employment dignifies individuals, allows them to make plans for their lives, to feel useful and fulfil ambitions; but it is also a means, and more than a means, I would say "the means" to create wealth and improve the welfare of all because, at the end of the day, pensions, health, education, any activity by the government is paid for by the contributions of individuals, mainly from the contributions of those who are in work.

In our next term in office as the national government we need to create at least two million jobs. I think it is possible, because last year, 2014, and this year, 2015, Spain will create a million net jobs and the aim is to maintain this pace. But it is not only possible, it is necessary if we are to reach the levels prior to the economic crisis and to maintain and improve government spending on basic public services and, in general, central government spending, spending by regional and local governments, etc. To do so, we must persevere in the economic policy that we have implemented over the years, with any adjustments that may be needed according to specific circumstances.

I believe we should continue to meet our commitments to reduce the public sector deficit. I believe it would be ridiculous to take a step backwards; but not because it is a commitment to our European partners and the commitments have to be met, but because it is good for Spain, for the Spanish economy, to create jobs and improve the welfare and wealth of its citizens. I therefore think we need to continue to meet our commitments to reduce the deficit.

We must maintain the reformist policies and improve competitiveness. In our next term in office we will have to talk about very important issues, such as regional funding; we have to continue with the reform of the public administration and we must make a strong commitment to innovation. We have restored some important sums in the State Budget that we had to cut because of the situation in 2012 but, again, I think is very important. And some political reforms will have to be implemented, or may be planned, as Mr Antón Costas said in his speech.

Now is also the time to cut taxes. We have started with the cuts this year and they will continue next year because the law passed in Parliament says: the first cut in Income Tax and Corporate Tax in 2015, the second cut in Income and Corporate Tax in 2016. And as long as revenue increases, we can continue with tax cuts. I can tell you that this year the trend in receipts is good, much better than last year, even though taxes, both Income and Corporate, have been cut; but the tax bases are higher. The general improvement in economic activity, growth and employment, obviously lead to situations such as this.

We will also have to be very active in the European Union. We must work more on the internal market, which is very important for Spain. The Internal Energy Market is key. We are still an energy island, but there has been some modest progress in recent times. We have worked hard. The reception given us by the French authorities, the President and the Prime Minister himself, is now much better than some time ago; but for Spain it is essential. It could resolve many problems affecting our competitiveness, as well as being of key strategic importance. We would have been saved many problems and many debates and controversy on the subject of gas with Russia. We could help some countries in North Africa that would have a possible niche market here for the generation of wealth, etc. But we must deepen the Internal Energy Market, as well as in the digital market and financial services. These are objectives we must not forget.

We also need to think long term. We are in Europe, we will remain in Europe and that is where our life will develop in the future. The Government of Spain has made a contribution to the Four Presidents Report on strengthening Economic and Monetary Union. We have opted for more Europe and better Europe. We have made a commitment which, I would stress, is not short term; it is medium term or rather even long term. We have talked about a specific budget for the Eurozone, about a common debt agency as a treasury instrument, all governed by a Minister for the Treasury, and we have also discussed democratic control.

These are matters that are not for tomorrow. They are issues that must be kept on the agenda, because the European process is being built little by little. It has been a long time since the adoption of the Treaty of Rome, even more time since the creation of the European Coal and Steel Community. But again, these are matters that are not normally matters of public opinion, though they are questions on which we could have a lot to lose in the future.

Ladies and Gentlemen,

I am coming to the last part of my speech. The year 2015 will be good in terms of growth and will be good in terms of employment. What happens next will depend, as always, on what the Spanish people want. My party and I are willing to continue the work we are working on now. It has not been easy so far, it is not easy today and it will not be so in the future but, I insist, we are still at the behest of the Spanish people.

Last Sunday there was an election with which, as chairman of the party in government, I can't be satisfied. We are still the largest party, the party that most Spanish people have trusted and I thank those six million-plus Spanish people who deposited their trust in us for doing so. We will work hard not to lose that trust, but despite that, the decline has been significant. A good number of Spaniards who once voted for the People's Party no longer did so. Clearly there are things we have not done well and, therefore, we should take note, we have to analyse in depth the message that many Spanish people have sent to us, learn from mistakes, correct our faults and continue the tasks that remain outstanding.

We have to change some things, and we will do so; but not in economic policy. We will not change our economic policy. We believe it would be a monumental mistake, because this economic policy creates jobs and improves the lives of people. When I hear proposals to reverse the budgetary stability law, and even in the reform of Article 135 of the Constitution, the labour reform or the energy reform, I believe that these proposals are the worst thing you could do at this point in time for the whole of the Spanish economy.

I believe the policy has benefited Spain and has benefited the Spanish people, although - and here I would note and refer again to the words of Mr Antón Costas at the start of this session - there are many people who have not yet felt the effects of this economic policy. But they will come. And the challenge for the future, when I have spoken of creating two million jobs in our next term in office and of there being twenty million in work, lies in precisely this: to ensure that little by little the effects reach the Spanish people as a whole.

I think that Catalonia has benefited greatly from this policy and, in addition, Catalonia has contributed much with the dynamism and the commitment to exports of all its businesses. I think - and I call it as I see it - this economic policy is good for Catalonia, and I tell you that if we maintain it, we will in the future have the possibility of achieving the longest cycle of economic growth that any of those here today has seen. And I call it as I see it.

Thank you very much.

DISCUSSION WITH THE PRESIDENT OF THE GOVERNMENT

Anton Costas: If you would allow me four or five questions in the time I have been given, and let's see if I can be sure of the sense of what has been passed on to me. In any case, I have no interest in asking any ad hominem questions; but, Mr President of the Government, if you would like to suggest or give us some kind of hint, I promise to be more perceptive than I was last year; because, probably, you don't remember Mr President of the Government, but when we were already on our way to the car to see you off, and at the car door I said, "Mr President of the Government, this weekend is a little difficult for you." And you asked me, "Why?" And I said, "Because Deportivo is playing, it's playing to win promotion to the first division and it's going to be difficult." He said, "No, that doesn't make me nervous, other things do." Without thinking, I immediately asked: "What, Mr President of the Government?" I withdrew the question straight away and said: "Sorry, sorry ...". But you said one thing: "It's a question of heights." And that made me think for a little while afterwards and I wondered what you meant by "question of heights." But my insight as an analyst is tremendous, and I wasn't able. And the first event on Monday morning was when we got news of the change in the Head of State, on 2 June.

So if today you would like, Mr President of the Government, to give us some kind of hint, I promise...

Mr President of the Government, I remember several of your expressions, but I will only use one of them, the last: "We have to change some things and we will do so," you say, "but not economic policy." My impression, Mr President of the Government, is that with respect to the economy there are several notes that agree with what I would say; admitting to some extent that you have won the battle against the economic crisis to a certain degree, my impression is that the economy is no longer enough to win elections, that it takes more. In this respect, I would ask you for your opinion on the elections held last weekend, how you see them, what your considered judgment on the results is, and whether they confirm to some extent what I have just mentioned: that although an improvement in the economy is essential, and there are many reasons to be happy with it, the impression is that it is not enough in itself.

President of the Government: That's a process that we are currently working on in the People's Party. Sometimes we are asked to make decisions in twenty-four hours and that's fine; but I like to study things properly and take decisions. Once the decision is taken, what has to be done is to stick to it, because the idea of taking a decision because something has happened in the last twenty-four hours ... well, it's fine. What can be done is to give an opinion; but, of course, it's not the same thing to give an opinion and to have to take a decision; and that is what I have to do at the stage of life I'm currently experiencing.

I believe some things have hurt us. For me, the most surprising election result is that the main opposition party, after the difficulties the Government has had to deal with in recent years, not only did it not increase its vote, but it actually fell back. I really think that from the point of view of the election result that's the most surprising thing; but, well, that's not really my issue, although of course it affects me.

I think there are two or three things that have hurt the Popular Party in this election. First, corruption. I think that corruption and the continued sledgehammer coverage of all the cases, especially on television, have hurt us. But the fact that corruption has hurt us, and how to deal with it, are two very different things.

You yourself pointed out in your opening speech something that relates to the economy. It is important to reduce the deficit and it is important for interest rates to go down, as it is for the risk premium and the ten-year bond. All these things are important because if they're not in order, it is metaphysically impossible to create jobs, generate wealth and prosperity and so for things to be better. But of course, this has to be done, precisely because of what I just mentioned; but that's not something that extends to public opinion as a whole, and there is no reason why public opinion should be concerned about those things. People want results and they are right to ask for results and demand them from the Government.

We have achieved some results, because job creation has started already, as I said; the pace of job generation is significant and the figures on Social Security reflect people, not figures. The 175,000 people who in April started to contribute to the Social Security system are people who can work, so they are doing alright. But there are many people who are not doing alright, because there are still many people who are unemployed. In recent years there has been a major adjustment in Spain. Salaries have been frozen for several years in the Civil Service and obviously that affects people, even if inflation is low. About wages in the private sector you no doubt know much more than I do; but they are what they are.

So that too does not help the Government, which is faced with the responsibility of governing. It means that we, and that includes me, have to make a much greater effort to explain these things. People see that on 30 December 2011 the Government of Spain increased Personal Income Tax. The question is: "And why did you increase the tax? Did you do it to annoy, because you said you wouldn't raise Personal Income Tax?" We probably did not make enough effort to offer reasons: explain that the situation was on the very edge of bankruptcy and that I therefore had to take measures that I didn't like; and as soon as I could, I'd start putting them right, which is what we have started doing in 2015 and, as I said, we will continue to do so in 2016, because it has been passed into law.

Then there are some Spanish territories where we have done better than others, and some mayors have more electoral pull, and others less.

In other words, there are a number of reasons but when all is said and done, the People's Party remains a party chosen by many Spanish people, who have done so at a difficult time - and of course, I am very grateful. Above all, what matters most to me is that I believe that the People's Party, if it puts right some things that have to be put right - I don't know whether or not others will have to put anything right... I'm convinced that the People's Party will again deserve the broad-based trust of many Spanish people, and it will earn that trust.

A. Costas: Thank you, Mr President of the Government. I am receiving so many questions that it's difficult to listen to the President of the Government and at the same time read them all; and I imagine I won't be able to read them all, because I have twenty of them; but I will try to convey to the President some of the things that emerge from them.

Mr President of the Government, let me return to that thought. You said, "We have to change some things and we will do so," and I think that's an important phrase. I told you at the start, and it's on our opinion paper, that we thought, partly to consolidate the recovery and partly to start a new long cycle of economic growth and social progress... I said that we considered that political reforms could be a major constraint or, conversely, a major boost. Looking at what I have received, and also the opinion paper, I would say that there are four reforms that we think are important and on which there will probably be a great deal of agreement.

One is corruption, as you said. Our opinion is that corruption is a very powerful solvent of the glue that a free society and a market economy need to function well. I imagine it is very difficult for you, and for any other political leader, to ask society to make an effort, as you have done, when in some ways you are undermined by the effects of corruption on this glue. In this respect, Mr President of the Government, I encourage you to persist in this aspect, and the fact that you have mentioned it now gives me grounds to stress this question. I believe it is fundamental.

But we think that eradicating corruption, going beyond mere rhetoric, means you have start with the democratisation of the parties, their systems of funding mechanisms, because the evidence of the cases you mentioned, not to mention specifically those concerned, shows clearly that there is an area where the lack of internal democracy and funding mechanisms are contributing to such cases of corruption, perhaps not systemic corruption, but corruption none the less.

The third is the reform of the public administrations and your minister also mentioned it. The reform of the public administrations in the sense of increasing the professionalism of the public administrations, re-introducing controls again specifically in the field of local government. These controls were lost and I think this situation has led to the operation of a kind of Gay-Lussac's law on gases (if you will allow me the comparison) within the public administrations, in the sense of a kind of takeover of the public administrations by the political parties.

And finally, Mr President of the Government, we come to government reform and in particular, some aspects of the system of autonomous regions. Of course, this is where the Catalan question comes up; but I think this is a Spanish problem and in part, or in large part, I wouldn't say all, what is wrongly called the "Catalan problem" is, in fact, a manifestation of the Spanish problem we have with the current way the State of Autonomous Regions operates. In Catalonia I have often had the feeling that, speaking of the "Catalan question" people only identify the desire for independence, which is legitimate if carried out by appropriate means; but that does not cover all the people's aspirations in Catalonia. The figures say that between 70% and 74% of Catalans want to have a better place within the whole in some way, and I think this is a desire that is common to Spain.

It has just occurred to me, to lighten the situation a bit, because I wouldn't want to lead you to... But sometimes I have the feeling that in Catalonia we are living in one of Eugenio's jokes. One of his jokes goes: "There's this guy who is driving along a winding mountain road, and the car veers off the edge on a bend, but is stays hanging on to a tree. The man's inside, and seeing what the situation is, and looking down, he says, 'Is there anyone there, is there anyone there?' And suddenly, a heavenly voice is heard saying: 'I am here, my son. Let yourself fall, and a choir of angels and archangels will come to gather you and bring you back again.' And there is a silence and suddenly, you hear the voice in the car saying, 'Okay, thank you; but is there anyone else?'"And I have the feeling that we are asking: "Is there anyone else?"

Mr President of the Government, I'll leave this issue here; but there are three areas on which I believe there is general agreement across Spain. There are institutions here from other parts of Spain with which we have relations and I think there is relative agreement in society that we have to address three things, and not for the benefit of Catalonia but for the benefit of Spain, of the Spanish people - and also of Catalonia, needless to say.

The first is an area where I believe that the operation in question is possible and it must be addressed within the horizon of the next term; and I would like your government and yourself, Mr President of the Government, to take the lead in this in some way in person. First, you must change the model by which the autonomous regions are financed; not in favour of Catalonia, but of all of them. Second, we must see how to best handle the solidarity fund in the future. I meet people in many parts of Spain who agree on the need to introduce some sort of criterion, some kind of principle, whether that of maintaining the order in the ranking, or whatever else; and then you have to include the Basque Country and Navarre in the solidarity fund. It is a common fund, it is for everyone.

Second, you need to sort out the division of powers after thirty years, and I believe that the experts know how to do that. In the case of Catalonia there is the matter of three strategic competences that are very important: language, education and culture.

And finally, Mr President of the Government, I believe, and there are mechanisms for it, but I'm no expert, that this operation in these two or three areas must be carried out via a consultation of the kind that was carried out at the time with Catalan Statute, so that all the people of Catalonia can say whether they are comfortable with it or not. I think that whatever is necessary also has to be possible and in this respect, this is what I said: we are looking for some kind of extra voice. The call for independence is there, it is legitimate, is has its justification; but I think you have to talk to the whole of Catalan society in these three areas. That is my opinion, Mr President of the Government. I would not want to put you in an awkward situation. I imagine that you have enough on your plate these days, but I think this is something that needs to be addressed and I hope that it is covered by that expression: "We have to change some things and we will do so."

President of the Government: No, you don't make me at all uncomfortable. You are right to raise the issues that matter to people. If you didn't, what would we be doing here, you and me?

On the issue of corruption. Yes indeed, I have referred to it and I absolutely agree with the analysis that you have made. I mean, it's terrible, especially in a situation where we had to ask a lot of effort from people, to see how every day we have had cases of this kind.

I hope that everything that has occurred in Spain in recent years will serve as a vaccine for the future. We have made some important decisions; we have presented a major legislative package. Some of the problems that you mentioned in your presentation are contained in these Bills. For example, on the issue of funding political parties we have already banned donations from legal entities to political parties, which is very important. Also very important is the whole limitation of election expenses. You will have noticed in these past election campaigns the spending of the various political parties has been much lower than at any time during the recent period of democracy in Spain. Anonymous donations, unless such donations are tiny sums, are no longer permitted. In other words, some decisions have been made and some laws introduced.

We have approved the Charter for Senior Officers and the Law on the Funding of political parties. In other words, the legislation we have proposed in the Lower House is legislation that increases controls and makes unilateral decisions by individuals more difficult. So I think that there we have taken a step in the right direction.

I believe, moreover, that those who have to punish such conduct have been able to act with complete independence. Both the Public Prosecutor and, of course, the judges, the State Tax Agency itself and the General State Comptroller itself, have acted independently. Although we have heard all kinds of criticism of the government on this score, the instructions they have had are: do what you think you should do. And it has affected many people and in many different ways.

Finally, I believe that political parties have been more responsible and, when some people were involved in corruption, they have taken decisions and these people have been removed from the party itself.

In any case, this is an issue that is out there, it is a major challenge to put an end to this kind of behaviour; and, of course, I will do everything in my power either to improve the laws, to give the Public Prosecutor more resources or to be more forceful. But, undoubtedly, it is one of the biggest challenges, because putting an end to these practices also dignifies the actions of politicians and their own country.

On the reform of the public administrations, we have launched a reform of the public administrations that is very important. Believe me; what is most difficult is to explain to the public as a whole that a reform of public administration system is underway, and to make sure they accept this fact. It is easier to get a cover story in a newspaper about anything else than a topic that from a journalistic point of view may not seem too exciting.

But there has been a significant effort. I put the Vice President of the Government in charge of this project to reform the public administrations. There is a team of highly qualified people dedicated solely to this matter; in other words, they have been moved away from any other responsibility in government and are working on this issue. I think they have achieved very positive results. We have also amended the Law on the Rules for Common Administrative Procedure and the Law on the Legal System Governing the State Administration. We are making progress, a great deal of progress, in e-Government and, of course, this has to be the goal for the future. And a huge number of autonomous agencies and public bodies have been closed, a huge number, run by the autonomous regions and in the local authorities, which were those with most, but also those run by the central government itself.

You then said something that is important: controls. We have recovered the controls and believe me it was not an easy operation. In other words, believe me, recovering the role of auditor in local government was not an easy operation, because one thing a leader is entitled to is to implement his government agenda, but his agenda has to comply with the law; and those who decide whether or not it corresponds to the law are the auditor and the secretary. We recovered these positions and I think that will continue to be very useful for the future.

But I agree, in any case, with what you said and it is one of the most important reforms we are carrying out.

Related to this is another controversial matter, which is market unity. Sometimes someone who is appointed director general believes that his function is to approve five Royal Decrees, but perhaps his function is to repeal five Royal Decrees. That is a point on which we also need to continue to remove regulations, obstacles and red tape from people, and be very persistent about this in the future.

With respect to the reform of the State and the matters you have referred to, this is a very complex and very difficult issue. I will try to respond to all the issues you raised.

First, regional funding. Regional funding, it is true, has to be reformed. It has to be done next year. You said that regional funding should not be arranged for the benefit of Catalonia, but for the benefit of the whole. There is no one who does not agree that regional funding should be the interests of the whole; so the problem lies in the details. That is what ends up generating difficulties, as happens in so many facets of life. Here we have the Basque Agreement Concert and the Navarre Convention, which is precisely the situation there. It is something that all the Spanish people decided voluntarily when we adopted the Constitution in 1978. As you know there was a historical justification for this and the privileges were maintained in some regional territories, in Alava and Navarre, I seem to recall, during the previous regime. It is a model that has worked and that, I repeat, is in the Constitution.

Having said that, the experience that I have had and that I have even experienced at first hand... I negotiated the model of regional funding as vice president of the regional government of Galicia; in other words, I have experience from the perspective of the government of the nation, from one regional government, and also as a member of a political party, because I was in charge of regional and local matters in the party when we were in opposition.

It is an issue of enormous complexity. Some say, "The criteria for funding for people must be people; so if a million people live here, they should be given so much, and if two million, it should be double." That is a very respectable opinion; but, of course, providing public services to fifty thousand people who all live in one town is not the same as providing for fifty thousand people who live miles away from each other. Of course, if the fifty thousand live in one town, the health centres are there, the school transport is much less expensive than if they live in different localities. So the dispersion of the population is also an important criterion when it comes to distributing resources.

The same applies to the case of people's age. In a healthcare system you can decide: we are going to share it out per person. But a region where the average age is sixty is not the same as a region where the average age is in the thirties; of course all these figures are by way of example. In other words, it is an issue of great complexity.

The subject of solidarity is also very difficult. Solidarity can be exercised in many different ways. For example, solidarity between people, intergenerational solidarity, when those of us who work pay Social Security contributions and these pay the pensions. It is a very important form of solidarity. Solidarity is between the whole of Spain in the matter of pensions. There are places where pensions are much higher than others, because salaries were much higher, and there are places where, if we apply the figures strictly, we could generate an absurd situation, because there are many places where Social Security contributions are much lower than the pensions received by people living in those places.

I can give you examples. There are some representatives of the financial sector here. If you study deposits and loans in depth, you will see that there are many regions in Spain where there are many more deposits than loans, and there are other regions where there are many more loans than deposits. That means that deposits from one region in Spain are used to finance others.

So of course, we don't get anywhere with this kind of conflict, if we are at each other's throats. What is the solution for this? It is what we have always applied: it is to reach an agreement together. There is no other. In other words, if we try to create a model of regional funding imposed by the majority, we won't get anywhere.

Again, that's an issue that we have to work on during the next term in office. It will be one of the most important matters. And I'll tell you why we have not done it yet. We have not done it, simply because there was no money. The traditional model of funding worked on the basis that the State put more money in and then the debate was about how much each region would take out. The discussion was then not about who lost out, because no one lost; it was about how your relative position ended up compared with the previous model. But this time, what regional funding model could we create when on arriving in government we had to cut the State Budget by 25%, including the cooperation budget by 80%? What did we have to put on the table? Nothing. What could we have done? Call the autonomous governments to a meeting and say "I will take something from you and and give it to another one"? It was absolutely crazy.

In life it is very important to know what our priorities are. The priorities for this term were to overcome the crisis, grow and create jobs. Other things have been put aside for the future; but that is a fact of life, because if everything could be done in a period of four years, no one, at any rate the current government, would have an election manifesto for the future. So this is a very important matter.

You then raised the issue of distribution of powers, the Constitution and its reform, etc., etc. I'll give you my opinion on this matter as well, which is no small matter.

My opinion will probably be expressed in a somewhat disorderly manner; but I would like to say one thing: the great change that is occurring in Spain is Europe. I have spoken here, in my speech, about one of the possibilities in the future: a European Minister for the Treasury. I am talking about "possibilities for the future", a European budget and a common treasury. The fact is that Banking Union is already a major change and the governor of the Bank of Spain who is with us here today knows that very well.

Look at what is being discussed now in Europe with respect the unfortunate events that are occurring again today in Italy, with people dead. We will have to formulate a common immigration policy, but the answer to immigration policy now is quotas. Quotas, yes, they seem fine to me, but the issue is not one of quotas, the issue is that we must have an immigration policy that addresses the problem in its entirety, and as long as people can't live decent lives in their countries, they are going to come here in any way possible and many people will continue to die. Look, let's do something smart. We will spend ... to help these countries, to help them do better in the future. Let's reach agreements with them, give them institutions, control the mafias, but let's cooperate and do it all together.

What I mean is that the most substantial change that is occurring, and this is just an idea I am putting out there, is the issue of Europe.

Second idea. It was also not a priority for this term either, just as regional funding wasn't and couldn't be, to propose a reform of the Constitution. I will just tell you one thing: unilateral decisions on these matters are not good and it is not good to circumvent the law, because the law is what identifies us as a civilized and democratic country. That is absolutely crazy.

And looking to the future? I have often said: I am willing to talk. Probably the time to do so is now in the next term, but of course, when there is an announcement that elections will be called, and I don't know how the announcement will be made, it makes things difficult. In other words, having elections next September, honestly, I think is a mistake because it is not the set time and they have already been called early twice; and because what we have to do at this point in time is to consolidate the economic recovery. These elections do not help the recovery, these elections are generating instability and what's best for Spain at this present time is stability. That is what is best and based on this we can discuss the income tax reform or anything else. The most important thing is stability.

Having said that, I am ready to speak, there are some good reports on the table for discussion and one a few years old from the State Council, which was requested by the President of the Government before me. It is an issue that is important and I agree that it is not a Catalan matter: is a matter for all the people of Spain that we have to resolve together.

A. Costas: In fact, the title of Nuestra Opinión paper is "In the new Legislature" and I understand that you are also considering that possibility during the new term. In Nuestra Opinión we say, explicitly and something along the lines of what you said, that this last term had priorities that had to be tackled; but we believe, and we are stubborn, politely stubborn, that in the next term we should talk about this.

Mr President of the Government, I would ask you, and I have it noted down here, to talk a little about Europe, which interests us, because I think it is a time of opportunity we are living in now. We were looked on, I imagine, as the ugly duckling or the sick man of Europe in 2010, and I believe that today the deep roots shown by the democratic feeling in our country, given the social effects of the tremendous crises... There has been no social explosion here, no xenophobic party or ultra-nationalist party has appeared. That is spectacular. I don't know if the word is "spectacular"; it is a marvel that Spanish society has such strong democratic roots. And now the recovery has begun.

So that's why we think it's a good time to get rid of this sort of ugly duckling syndrome and in the coming years acquire a major presence and influence in Europe.

That was my question but, Mr President of the Government, we also want to have you with us a little while for the buffet. You see, when I mentioned to you about corruption, there are six or seven people who put some emphasis on corruption and there is a question, almost a reflection, very similar to that raised by someone else with the president of the Catalan regional government, saying "I always supported you in the general elections and now, for reasons of consistency, I can't do so." And he has noted down, "What a pity," and says: "Mr President of the Government, what do you think?" We have spoken about this, but I'm telling you only so that you can see I didn't invent it, far from it, it's here.

There are many issues, but I ask the members for their understanding, because I have a huge pile and couldn't fit everything in. But there are several, Mr President of the Government, in which you perhaps have a special interest, and that refer to... I'll read this one first, but there are several. It says: "Mr President of the Government, there is a certain obsession on the part of your Government for investment in the high-speed AVE train rather than the funding problems, regional spending, education, healthcare and various social programmes." There are also several about the AVE, but I think the idea is whether there is no margin or if there has been no margin for a change of priority between different investments - here it mentions those for the AVE - and the more social investments.

Finally, I leave open, and I think it would really interest us, the European question. Europe currently determines a significant part of our daily lives and therefore your perspective on what is happening and the anticipated European developments is also of interest to us.

President of the Government: It seems to me unfair that, for example, Galicia and Bilbao do not have a high speed train; it seems unfair. The bulk of the different government budgets are mainly devoted to social spending. That is to say, pensions account for the biggest expenditure item... in this case the pensions are the responsibility of the Government of Spain. The second biggest expenditure item in all the levels of government is health; and infrastructures is the budget item on which least money is spent.

I'll explain it to you clearly. Central government has three major blocks or three major expenditure items: pensions, interest on debt payments and unemployment benefit. And the regional governments have a further three main expenditure items: healthcare, education and social services. All of these items, except for debt interest payments, are social expenditure.

Before we were talking about the model of regional funding. What we have to resolve in the model of regional funding is precisely this: these are the three major blocks of expenditure for the State.

I can tell you another fact that is also very significant: the sum of the expenditure of the ministerial departments of Justice, Home Affairs, Defence and Foreign Affairs - four of them - is less than half of what we spend on unemployment.

In Spain the vast bulk of expenditure by the different levels of government, whether regional government, central government or local government, is social expenditure.

Having said that, Spain has extraordinary transport communications: in some people's opinion, there is even an excess in the case of the airport networks. I believe there is discussion about whether or not they are profitable. And I believe that in the coming years we will probably have to make investments focusing more on competitiveness, but competitiveness is not everything in life.

For example, the Mediterranean Corridor. That is a very important investment to which funds have to be allocated. But, I repeat, competitiveness is not everything and not the only thing. The high-speed train, among other things, has opened up the world to many cities in Spain, and has ensured that many cities in Spain have begun to construct, have grown, have improved.

I believe that major efforts have been made in Spain in this respect, but I believe that some of the major projects underway in the north and all the north-west of Spain have to be concluded, of course. We still have to continue to make a great effort.

On the subject of the vote in the general election, I understand it, and as I said in my initial speech, we are going to make an effort to recover it. The only thing I would say at this point in time is that I think, as President of the Government of Spain, that I have fulfilled my duty. I believe that I may have made mistakes, and I have undoubtedly done so on many occasions; but on the core matters I have fulfilled my duty and therefore the only thing I ask of this person who has submitted this paper is that he puts his trust in me again precisely for this reason.

Europe. In Europe we have two problems: Greece and the United Kingdom. My position is that Greece and the United Kingdom must continue in Europe, and it would be very bad for the Eurozone if Greece should leave and for the European Union if the United Kingdom should leave as well.

The problem of Greece - and we have had various months of interminable discussions since the arrival of the new government - is that it has payments pending imminently to the International Monetary Fund. I hope that this can be resolved, but I would like to say two things: Greece at this present time can't go to the markets and Greece's main creditor is the European Union or individual European countries. Specifically, Spain has a bilateral loan for nearly seven billion euros and this loan has a ten-year grace period: the interest is payable after ten years, and the loan is repayable within thirty years. And then there is a very significant loan from the ESM. Spain has guaranteed 18 billion euros and Greece begins to pay it within 30 years and the interest within 10. In other words, the interest paid by Greece at this time is clearly lower than the interest payments of many other countries in the European Union, in terms of GDP.

There is a willingness to help Greece, but of course Greece also has to meet its commitments, because what can't be done is to have a club with rules, rules of the game, that are accepted by everyone, and then every time a government changes to ask for the rules to be revised. I hope that we can reach an agreement, and that Greece complies with the commitments it has with the European Union.

The United Kingdom initially announced a referendum for 2017 and has now proposed the year 2016. I would like the United Kingdom to be in the European Union, to remain in it. Spain, at least as long as I am President of the Government, will be constructive, but what can of course not be done is to turn the whole system we have been constructing for more than sixty years upside down. So we all have to be constructive, but above all, the party that has to be the most constructive of all is the government of the United Kingdom that has put this whole issue in motion.

And with respect to how Spain is viewed, I will simply give you one example of its influence. I attended a meeting of the G-20 for the first time in 2012, which took place in Baja California, in Mexico. At that meeting - it was in May, I seem to recall, in 2012 - the only talk was about Europe, and above all, within Europe, there was talk of Spain. The talk wasn't about Portugal or Greece, the talk was about Spain and people were eyeing Italy to see what its situation was. We had a very tense meeting, because the issue wasn't easy, and many very important countries explained to us the enormous concern felt about what was happening in Europe and the enormous concern, above all, about what was happening in Spain. That is the background to what I told you about the famous bailout of Spain. You will no doubt understand that the meeting held in Baja California was not exactly pleasant for the Spanish delegation.

Two and a half years later, in November 2014, I returned to another meeting of the G-20. In between there had been one in Saint Petersburg, but the meeting of 2014 was held in Brisbane, Australia. There were 20 countries from around the world there. I was assigned a speech and the speech was about how economic reforms could lead to recovery. That happened to me, it's not something someone told me about. That is the difference between how we were seen in the world in 2012 and how we were seen in 2014; because believe me, neither I nor any of my collaborators asked anyone for Spain to be assigned the speech about how economic reforms lead to recovery.

So, what we have to do in Europe, taking into account that our future lies there and that is where we are going to be - in my opinion for centuries to come - is to be very constructive and to comply with the rules and try to help those in difficulties, but of course also to be more demanding with those that do not comply with the rules and with those who try to climb over the backs of others, because if not it is impossible to construct anything in the future.

A. Costas: Thank you very much, Mr President of the Government. I would like to have you stay a little more, if it is possible, during the buffet. We have already overrun the time we had agreed. How could I cheer you up? Perhaps with that saying that goes: "Courage to change what can be changed, serenity to accept what cannot be changed and the wisdom to know one from the other." Our issues fall into the first category. What we have proposed to you are reforms that can be carried out and that can be changed, and I hope that you, your party and your Government are moving along that path.

President of the Government: Thank you very much. I can assure you that I have courage and I am not going to weaken; I have proven patience, and as to the third, I don't consider myself with the capacity to judge myself. But in any event, it has been an honour for me to be here. I thank you all for your attention; and as I said at the start of my contribution, if you invite me under the same conditions, I intend to be here, and will be here, next year.

A. Costas: The honour is all ours, and you are hereby invited.