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Kingdom of Spain Economic Policy and 2010 Funding Strategy Secretary of State for the Economy February 2010 • Highlights • The long growth cycle and the crisis • Fiscal consolidation and structural reform • Funding Strategy of the Kingdom of Spain ~2009~ 1 Highlights • Long growth cycle previous to the international crisis • Important challenges ahead: Unemployment and deficit, consequence of the crisis but also symptoms of underlying structural shortcomings • The Spanish Government is determined to act: • Fiscal consolidation: A cut of 5.7% of GDP in structural primary deficit in 2010-2013 • Structural reforms to boost potential GDP: Sustainable Economy, Bank Reorganisation, Pensions, Labour Market • Strengths: Sound financial system, low Debt/GDP, institutional ability for reform 2 • Highlights • The long growth cycle and the crisis • Fiscal consolidation and structural reform • Funding Strategy of the Kingdom of Spain 3 1994-2008: Convergence and Debt reduction • GDP per capita has leapt forward, exceeding the average of EU-25 • Fiscal rigour during the good times allowed debt to GDP to be more than halved GDP Debt to GDP (Year on year real growth rates) (% nominal GDP) 80% 6% Euro-area Spain 4% 2% 70% 60% Euro-area 0% 50% -2% Spain 40% -4% 2009 2008 2007 2006 2005 2004 2003 2002 2001 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 Source: Eurostat. 2000 30% -6% Source: Eurostat. 4 Investment binge: housing and beyond • What has fuelled domestic demand is a soaring investment rate, with the national savings rate staying close to Eurozone average • The housing boom is part of the story, but not the whole story Savings rate Investment rate vs. Savings rate (% nominal GDP) (% nominal GDP) 34 30 30 25 2000 Source: Eurostat. * 2009Q3 2005 2009* Savings rate Source: Eurostat. 2009 2008 Italy 2007 France 2006 Spain 2005 Germany 2004 Belgium 2003 18 2002 10 2001 22 1999 15 2000 26 20 Investment rate 5 Investment binge: housing and beyond • The residential real estate sector grabbed a non-sustainable share of GDP and employment… Construction Sector: Gross Value Added and Employment (% Total Value Added and of Total Employment) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 14 13 12 11 10 9 8 7 6 Full-time equivalent employees Source: National Statistics Institute, Spain. Gross Value Added 6 Investment binge: housing and beyond • …but Spain has also invested heavily in equipment, infrastructure and Research and Development Investment equipment Investment in equipmentin (average growth, 1995-2008, %) (average growth, 1995-2008 in percent) Public Investment EU-27 GERMANY FRANCE ITALY UK 2008 2007 2006 2005 2004 2003 2002 2001 1999 1998 1997 1996 1995 Spain 0.0 France 0 Italy 1.0 UK 2 Denmark 2.0 EU-15 4 Austria 3.0 Finland 6 Netherlands 4.0 Germany 8 2000 (% of GDP) 5.0 10 SPAIN Source: Eurostat. Source: Eurostat 7 Intensive in employment • Residential construction attracted low skilled labour, dragging productivity lower • Labour supply matched this demand with the help of immigration flows Active population Labor productivity (Growth rates from 2005Q1 to 2009Q3) Source: Eurostat. Labor Force Survey. 2009 2008 2007 2006 2005 United Kingdom Italy France Spain Germany Belgium 0% 2004 2% 2003 4% 2002 6% 2001 8% 2000 10% 1999 107 106 105 104 103 102 101 100 12% Source: Eurostat. Labor Force Survey. (Relative to EU-27, PPP) 8 Cost competitiveness • Loss of competitiveness has been moderate in the tradable sector • Nominal divergence stems from non-tradables (where the bulk of the adjustment is taking place) Unit labour cost index Manufacturing ULC index (Relative to eurozone 1999=100) (Relative to eurozone 1999=100) Source: Eurostat. Italy Germany Spain France Source: Eurostat Italy Germany 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Spain 1999 140 130 120 110 100 90 80 125 120 115 110 105 100 95 France 9 Exports show underlying improvement in supply • In spite of brisk competitiveness… domestic demand and waning price • …Spain's market shares have outperformed most of peers Share in world merchandise exports (Index 2000=100) Share in world exports of services* (Index 2000=100) 150 120 110 125 100 100 90 80 75 70 60 2000 50 2001 2002 Spain 2003 2004 Germany 2005 2006 France Source: International Monetary Fund. 2007 2008 2009 United States 2000 2001 2002 Spain 2003 Germany 2004 2005 France 2006 2007 2008 United States Source: World Trade Organisation. * Services other than transportation and travel. 10 Services Exports’ market share has increased significantly • Among others, services related to architecture, construction and engineering have more than doubled market share Share of service exports in the OCDE, by service 10 2000 2007 8 6 4 2 Source: OECD. Government Entertainment Other Professional services to Royalties and patents Information services Financial Insurance Architectural, construction, and engineering Communications Tourism Transportation services Total 0 11 FDI flows have increased significantly • Outward FDI stock per capita has grown faster in Spain than in the Eurozone • Remains a major destination of international investment Top receivers of FDI in 2008 Outward FDI stock per capita relative to Eurozone (Stock in millions of US $) 2500000 0.90 0.85 2000000 0.80 1500000 0.75 1000000 0.70 500000 0.65 Source: World Investment Report 2009 US France UK Hong Kong Germany Netherlands Spain Belgium Canada 2002 2003 2004 2005 2006 2007 2008 China 0.60 Switzerland Italy 0 Source: World Investment Report 2009 12 The crisis prompts an abrupt adjustment • Rapid downsizing of residential sector: output, L (mainly in temporary contracts) • Ripple effects on employment in other sectors Unemployment rate (In percent) 20 Sectoral employment (total number) 16 july 2008 Total 12 8 sept 2009 dif % 19.382.121 17.935.095 -1.447.026 (100) Construction 2.361.177 1.752.157 -609.021 (42,1) Industry 2.731.068 2.377.211 -353.857 (24,5) Services 13.150.027 12.599.061 -550.966 (38,1) Sources: Eurostat. Labor Force Survey. 4 2005 2006 Spain 2007 2008 2009 Euro area (16 countries) Sources: Eurostat. Labor Force Survey. 13 Changes in sectoral and external balances • Large swing in private sector balance: plummeting Investment and soaring Savings • Government Deficit jumps, but 2.5 points of GDP are one-off • Current Account deficit has halved in 2009 Sectoral balances (% of GDP) 8 6 4 2 % 0 -2 -4 -6 -8 -10 -12 -14 Public Sector Balance 1,9 -4,1 -5,0 -11,0 2007 Source: National Statistics Institute, Spain. 6,5 Private Sector Balance -11,4 2008 2009 14 • Highlights • The long growth cycle and the crisis • Fiscal consolidation and structural reform • Funding Strategy of the Kingdom of Spain 15 Policy Strategy for Sustainable Growth • Prudent Macroeconomic Scenario 2010-2013 • Agreement on Fiscal Consolidation to bring the deficit back to 3% in 2013 • Structural Reforms: • Structural Reforms in the goods markets • Public Pensions System • Labour Market • Banking sector Restructuring 16 The Government’s Macroeconomic scenario • The output gap will be closed by 2013, after peaking in 2010 • External demand contribution to GDP will gradually wane as domestic demand gathers steam • Potential growth will recover from a trough of 0.6% in 2010 to 1.6% in 2013 Macroeconomic scenario 2009-2013 2009 2010 2011 2012 2013 GDP -3.6 -0.3 1.8 2.9 3.1 Final Consumption Expenditure Gross Fixed Capital Formation -2.4 -15.7 0.3 -6.5 1.7 0.3 2.2 4.2 2.1 5.9 National Demand (contribution to GDP growth) -6.4 -1.4 1.4 2.6 3.0 Exports of Goods and Services Imports of Goods and Services -12.4 -18.7 2.8 -1.3 5.2 3.7 6.9 5.8 7.4 6.8 2.8 1.1 0.4 0.3 0.1 (Growth rate in percent) External demand (contribution to GDP growth) Source: Annual update of the Stability Programme. 17 Fiscal consolidation strategy • Substantial reduction in Spending and moderate increase in Revenues • Already in 2010 a 2.2% cut in structural deficit Fiscal Adjustment Path 2009-2013 (Growth rate in percent) GDP General Government Budget Balance (% of GDP) General Government Gross Debt (% of GDP) 2009 2010 2011 2012 2013 -3.6 -11.4 55.2 -0.3 -9.8 65.9 1.8 -7.5 71.9 2.9 -5.3 74.3 3.1 -3.0 74.1 Source: Annual update of the Stability Programme. 18 Starting and final points of fiscal consolidation • Temporary measures (changes in tax collection, one off investment funds) account for 2.4% points of GDP in 2009’s total deficit • Total size of fiscal policy adjustment (structural terms): 5.7% of GDP Fiscal position General Government Balance (1) Cyclical component (2) Interest payments (3) Temporary measures (4) Structural Primary Balance (1)-(2)-(3)-(4) 2009 -11,4 -1,4 -1,9 -2,5 -5,6 2013 -3 0 -3,1 0 0,1 Source: Annual update of the Stability Programme. 19 Fiscal restraint measures Measures adopted and announced (% of GDP) VAT Excise Taxes 400€ Tax Rebate Reform 2010 Budget Savings Tax Reform SME Corporate Tax Reform Government Expenditure Additional cut in 2010 Expenditure New Measures* Central Government Austerity Plan 2011-2013 Regional and local government Spending cuts Revenues 0.7 0.3 0.4 0.1 -0.1 Expenditures -0.8 -0.5 -2.6 -0.5 Source: Annual update of the Stability Programme. • Restraint in wage outlays for all public administrations through: • 10% replacement rate • No new temporary hiring • Strong moderation in wages • Sizable cuts in investment, transfers and subsidies 20 Can we implement this? • We have done it in the past, which proves our compromise, the quality of our public finances, and the success of our fiscal discipline. • Shared commitment to fiscal discipline and margin to secure further reductions in the deficit Net Lending (+)/Borrowing (-) of General Government (% nominal GDP, EDP) 4.0 2.0 0.0 -2.0 -4.0 -6.0 -8.0 -10.0 -12.0 * Annual update of the Stability Programme. 2013* 2012* 2011* 2010* 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 -14.0 21 Debt dynamics • Even after the impact of strong stabilisation policies, Spain's Debt to GDP is significantly lower that the Eurozone average Gross Debt-to-GDP (%) Gross Debt-to-GDP (%) 2000-2010 2010F 90 80 125.0 France Germany Spain 112.5 100.0 Eurozone Average: 84.0% 87.5 70 75.0 65.9 60 55.2 50 62.5 50.0 37.5 25.0 40 39.7 30 12.5 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Spain Ireland France Germany Italy Sources: European Commission, Annual update of the Stability Programme and International Monetary Fund. UK USA 22 Lowest interest burden within affordable limits Ratio of interests to GDP of General Government (% nominal GDP, EDP) 13 11 9 7 5 3 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 * 20 10 * 1 Spain Germany France Belgium Italy UK Source: European Commission. * European Economic Forecast Autumn 2009, European Commission. 23 Structural Reforms in product markets • Improving the institutional environment for business: by modernizing and simplifying government activities as well as increasing general government discipline • Fostering competitiveness: by reducing the administrative burden of creating companies and reducing red tape • Fostering modernization: promoting sectors that are at the base of economic activity (R&D, innovation and training), improving support for their integration into the overall value chain, and facilitating the internationalization of businesses Estimated impact on GDP ⇨ + 0.32% in Potential GDP 24 Residential Real Estate Sector • Phasing out fiscal incentives for housing ownership from 2011 (deduction of mortgage payments) • Removing barriers to the development of the rental market: • Same fiscal treatment than ownership • Creation of REITS • Legal changes to strengthen certainty for landlords • Tax Incentives for refurbishment provide some support 25 Preventive financial support measures Credit Credit stimulus stimulus Liquidity enhancement enhancement Liquidity FROB ICO lines FAAF funding Bank guarantees (20082009) Capital enhancement Reorganization and reorganisation 9 bn€ capital- 27 bn € guaranteed funding authorized. Independent funding and management M&A banking arm of supervisor 20 bn € since 2007 Risk sharing Second tier funding Extended 30 June 2010. But markets open 48 bn€, around 150 bonds De facto, phased out. 19.3 bn€ High quality collateral 26 The financial system remains resilient • Main source of perceived vulnerability regards losses stemming from lending to real estate developers • Bank of Spain stress test: Operating income over 3 years is able to absorb losses of 40% of the portfolio of lending to real estate developers. • Extreme assumptions of stress test: PD of 40%(3 times the peak of 1993) and LGD of 100 % (highly implausible) 27 FROB: a tool for restructuring the banking sector Governance Rationale for the initiative - Overcoming fragmentation savings and banks sector. in the - Achievement of economies of scale to digest low interest margins and real estate impact. - Independent management. - Strong accountability to Parliament. - Authorized by DG Competition. Asset Operations Funding - Support to integration processes subject to conditions set by the banking supervisor. - Public-private mix of capital (9 bn€). - Instrumented through convertible preference shares with market-oriented remuneration. - Agency-like coordinated programme. funding with the programme sovereign 28 Pension System Reform Proposed Measures: • A progressive increase in the retirement age (to 67 years) • Strengthening relationship between contributions and benefits • A more flexible relationship between complementary social security and the public system • Possible adjustment of other parameters of the current system Expected Results: Sustainability of the pension system 29 Labour Market Reform • Five main guidelines: • Stability in employment, by reducing market segmentation • Reform of Collective Bargaining system • Incentives for young workers’ employment and education • Promotion of the integration of women in the labour market • Worker intermediation and greater control of temporary occupational disability claims 30 • Highlights • The long growth cycle and the crisis • Fiscal consolidation and structural reform • Funding Strategy of the Kingdom of Spain 31 Highlights of Funding Strategy • Significant reduction in net funding requirements and persistence of sound risk metrics • Liquidity, transparency and predictability will continue as guiding principles for the execution of our auction program • As for syndications, timing is dictated by the limit size of the line to be replaced (16.5 bn for longer tenors) and market conditions. • Innovations for 2010: 18-month T-bills reappear, Euro inflation linker still a project • Maintain our stable and diversified investor base 32 The funding strategy Tesoro Funding in 2010 (Billion euro) 1: Funding requirement = Net Issuance 2: Redemptions bonds 2010 3: Net issuance medium long term 4 = 2 + 3 Gross Issuance Medium-Long Term 76.8 35.4 61.6 97,0 5: Net Increase T-Bills 6: Assumption of RTVE debt 15.2 1.5 7 = 3 + 5 + 6: Net change outstanding debt 8: Forecast Outstanding Central Government Debt at end 2010 78.3 553.5 Source: General State Budgets Bill 2010 33 Funding programme in perspective • Cut in Net Issuance: lower cash deficit and no exceptional increase in net financial assets Funding Programme. 2010 vs. 2009 (Net issuance in billion Euro) 140 120 116.7 2009 2010 100 80 82.3 76.8 61.6 60 34.4 40 15.2 20 0 Total Net Issuance Letras del Tesoro net Medium & long term issues net issues* (*) Includes foreign currency issues. Source: Dirección General del Tesoro y Política Financiera. 34 Short-term funding • Net issuance in 2009 in line with initial announcement: 34.4 bn€. Gross issuance breakdown: • 3-month Letras: 19.7 bn€ • 6-month Letras: 31.6 bn€ • 12-month Letras: 58.0 bn€ • Innovations in 2010: • Calendar change: 3- and 6-month Letras auction 4th Tuesday • 18-month T-bills relaunched: auction 3rd Tuesday 35 Medium- and long-term funding • Gross issuance: 2009 overshooting (ca. 25 bn €) due to higher than expected impact of the crisis • Auction procedures unchanged: Quarterly calendar + potential offthe-run lines announced Friday prior to the auction • Limit size per line: increased to 16.5 bn € for longer lines • Bonos del Estado: • New 5-year benchmark in March • Current 3-year benchmark B 2.30% 04/2013 issued until 15 bn € • Obligaciones del Estado: • New 10 year O 4.00% 04/2020 (5 bn €) successfully syndicated in January • Next syndication a 15 year line, to replace the matured O 4.80% Jan2024), expected for February depending on market conditions 36 Diversification of funding sources • Recent foreign currency issuance: • Eurobond 2.75% March 2012 ($ 1.0 billion) • Eurobond 2.00% October 2012 ($ 2.5 billion) • Tesoro Público is open to additional foreign currency issuance • Floating Rate Note 3-Month EURIBOR-10 bps, October 2012 (€ 3.0 billion). Possible retapping in 2010 • Projects: • European inflation-linked issues (HICP-ex tobacco) • Schuldschein loans 37 Main features of Treasury funding strategy Spanish debt portfolio 600 554 (€ billion) 475 500 400 358 319 312 307 300 229 200 100 Foreign Currency Other Letras Source: Dirección General del Tesoro y Política Financiera. 2010 (f) 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 0 Bonos y Obligaciones 38 Recent widening might be an opportunity Spread of the Spanish 10-year bond vs. main European peers (in bps) 150 125 100 75 50 25 0 -25 -50 Source: Bloomberg. Germany Italy France Belgium Netherlands Jan-10 Feb-10 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Apr-09 May-09 Jun-09 Jul-09 Feb-09 Mar-09 Nov-08 Dec-08 Jan-09 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Sep-07 Oct-07 -75 39 Cheapening concentrated in the front end Spread of the Spanish 5-year bond vs. main European peers (in bps) 150 125 100 75 50 25 0 -25 -50 Germany Source: Bloomberg. Italy France Belgium Netherlands Jan-10 Feb-10 Nov-09 Dec-09 Aug-09 Sep-09 Oct-09 Jun-09 Jul-09 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Nov-07 Dec-07 Sep-07 Oct-07 -75 40 An atractive market to invest in Attractive prices Liquid instruments Solid and efficient infrastructure Diversified investor base 41 Increase in market liquidity Average outstanding size: 13.5 bn € Target for average outstanding <10 years: 15 bn € Target for average outstanding >10 years: 15 bn € 20 18 16 On-the-run bonds 3.25% 5.40% 4.10% 3.90% 5.35% 14 6.15% 5.00% 4.75% 5.50% 4.30% 4.20% 4.80% 4.60% 3.80% 5.75% 4.25% 2.75% 12 4.40% 3.15% 3.30% 4.20% 6.00% 4.10% 4.90% 2.30% 10 8 6 4.00% 4.70% 4 2 Source: Dirección General del Tesoro y Política Financiera. Jul-41 Jul-40 Jan-37 Jul-32 Jan-29 Jan-24 Apr-20 Oct-19 Jul-19 Jul-18 Jul-17 Jan-17 Jan-16 Jan-15 Oct-14 Jul-14 Jan-14 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Oct-11 Jul-11 Apr-11 Jul-10 0 42 Low Debt Refinancing Risk… Redemption profile of Bonos & Obligaciones (Million Euros) 50.000 45.000 40.000 35.000 30.000 25.000 20.000 15.000 10.000 5.000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020- 2024 2029 2032 2037 2040 2041 2023 Source: Dirección General del Tesoro y Política Financiera. 43 Low Debt Refinancing Risk… Central Government Debt refinancing risk (in % of the total portfolio) 50 42 (%) 40 30 20 20 21 24 22 21 10 18 18 7 0 1 year or less 1 to 3 years 31.12.1995 31.12.1999 3 to 5 years 31.01.2010 Source: Dirección General del Tesoro y Política Financiera. 44 …Thanks to relatively high duration and average life to maturity… Duration & Average Life to Maturity of the Portfolio (Letras, Bonos and Obligaciones) (in years) 8.0 6.69 6.0 5.52 4.79 4.0 6.78 4.77 4.16 Average life France 6,24 Netherlands 6,88 Belgium 5,94 Italy 7,07 2.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Duration Average life Source: Dirección General del Tesoro y Política Financiera. 45 …while achieving lower Funding Costs Average Funding Costs (in percent) 6.0 5.5 5.0 4.32 4.5 4.0 3.81 3.5 3.49 3.0 2.5 2.27 2.0 1.5 1.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Average cost of Debt outstanding Average cost at issuance Source: Dirección General del Tesoro y Política Financiera. 46 Reliance on foreign funding relatively moderate External public sector debt in 2009 United Kingdom Argentina United States Spain Finland Germany Netherlands Ireland France Austria Belgium Greece Italy (% of GDP) 100 90 80 70 60 50 40 30 20 10 0 Source: OECD. 47 Banks financing of government debt in line with Eurozone average Holdings of government debt November 2009 (% of bank assets) 25 20 15 10 Finland Portugal Austria Germany Netherlands Ireland Euro area France Spain Italy Greece Belgium 0 Slovakia 5 Source: Citi. 48 Spanish Banks’ funding from ECB around Eurozone average Recourse to ECB funding (% of total bank assets) 10% 8% 6% 4% 2% jul-08 BE FR FI AU GR PO ESP IT IRL GE NL 0% oct-09 Source: Deutsche Bank. 49 Stable and diversified investor base Government Bonds by Holder (Term investment, % of total portfolio) 100% Spanish official institutions 90% 80% 33.37% Non residents 70% 43.94% Households & Non financ. 60% 50% Pension & Mutual Funds 40% 30% 20% Insurance Companies 10% Credit Institutions 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Dirección General del Tesoro y Política Financiera. 50 Stable and diversified investor base Letras del Tesoro by Holder (Term investment, % of total portfolio) 100% 90% Spanish Official Institutions 80% Non-Residents 70% Households & Non financ. 60% 50% Pension and Mutual Funds 40% 30% 48.97% Insurance companies 35.57% 20% Credit Institutions 10% 0% 1999 2000 2001 2002 2003 2004 2005 2006 Source: Dirección General del Tesoro y Política Financiera. 2007 2008 2009 51 Stable and diversified investor base Government Bonds by Holder (Term investment, % of total portfolio) 30% 25% 20% 15% 10% 5% 0% France Japan Germany Italy 2006 BENELUX 2007 Source: Dirección General del Tesoro y Política Financiera. Rest of EU 2008 Asia, Afica and others America Rest of Europe 2009 52 Top Primary Dealers in 2009 Bonos y Obligaciones Barclays BBVA Calyon Santander Société Générale Letras BBVA Santander Société Générale 53 Thank you for your attention José Manuel Campa Fernández– Secretary of State for the Economy Soledad Núñez – Directora General del Tesoro y Política Financiera [email protected] Gonzalo García Andrés – Subdirector General de Gestión y Financiación de la Deuda Pública ggarcí[email protected] José Ramón Martínez [email protected] Rosa Moral [email protected] Leandro Navarro [email protected] Pablo de Ramón-Laca [email protected] Ignacio Vicente [email protected] Rocío Chico [email protected] For more information please contact: Phone: 34 91 209 95 29/30/31/32 - Fax:34 91 209 97 10 Reuters: TESORO Bloomberg: TESO Internet: www.tesoro.es 54 Annex: the Social Security Reserve Fund Social Security Reserve Fund asset holdings 70 (Billon €) 60 50 40 30 20 2009 2008 2007 2006 2005 2004 2003 2002 2001 0 2000 10 The Social Security Reserve Fund amounted in December 2009 to approximately 5.7% (€ 60bn) of GDP. 55 Annex: Ley de Economía Sostenible & General Agreement on Fiscal Sustainability Tax measures Competitiveness - Society of Information. Science, R&D. Internationalisation of SME’s. Education. Reduction of administrative burden. Fiscal Sustainability Environment - Energy Policy. - CO2 Emission-reduction. - Efficiency of transport infrastructure. - Rental market: equal treatment with ownership. - Elimination of tax rebates: i.e. relief on mortgage payments, 400€ rebate on income tax. - Corporate Income Tax rebates related to R&D and to the environment. and - Spanish regions to formulate quarterly reports to the Fiscal Policy Council. - Correction and surveillance of fiscal deficits. - Debt/GDP ratio to reach limit of 60% by 2013. 56