EUROPEAN COMMISSION Brussels, 26.2.2015 SWD(2015) 28 final ...

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Brussels, 26.2.2015
SWD(2015) 28 final
COMMISSION STAFF WORKING DOCUMENT Country Report Spain 2015
Including an In-Depth Review on the prevention and correction of
macroeconomic imbalances
{COM(2015) 85 final} This document is a European Commission staff working document . It does not
constitute the official position of the Commission, nor does it prejudge
any such position. Executive summary 1
1. Scene setter: Economic situation and outlook 4
2. Imbalances, risks and adjustment 12
2.1. External sustainability and competitiveness 13
2.2. Indebtedness and deleveraging 29
2.3. Labour market 43
3. Other structural issues 50
3.1. Fiscal framework and taxation 51
3.2. Labour market, education and training and social policies 57
3.3. Products and services markets 63
3.4. Network industries and environment 67
3.5. Public administration and judicial system 71
A. Overview Table 74
B. Standard Tables 85 LIST OF Tables 1.1. Key economic, financial and social indicators 8
1.2. The Macroeconomic Imbalance Procedure scoreboard 9
2.1.1. Current account and net international investment position
scenarios (2015-24) 23
2.2.1. Distribution of the stock of corporate debt in Spain, according
to the leverage of firms, 2013 (1) 31
3.5.1. Out-of-sample predictions for the impact of efficiency-enhancing
judicial reforms on business dynamics and FDI 68
AB.1. Macroeconomic indicators 80
AB.2. Financial market indicators 81
AB.3. Taxation indicators 82
AB.4. Labour market and social indicators 83
AB.5. Labour market and social indicators (continued) 84
AB.6. Product market performance and policy indicators 85
AB.7. Green growth 86 LIST OF Graphs 1.1. Real GDP growth and contributions 3
1.2. Breakdown of debt by sector (non-consolidated) 4
1.3. Net lending (+)/net borrowing (-) by sector 4
1.4. Breakdown of the change of unit labour costs in Spain 5
1.5. Share of employment in tradable and non-tradable sectors 5
1.6. Labour market indicators 6
1.7. Poverty indicators in Spain 6
2.1.1. Evolution of price competitiveness in Spain 11
2.1.2. Breakdown of the net international investment position 11
2.1.3. Adjustment in the current account 12
2.1.4. Market shares in world exports of goods in the main EU economies
in volume and in value (2000=100) 13
2.1.5. Changes in share of exports of goods in EU economies (volume) 13
2.1.6. Geographical specialisation of Spanish exports 14
2.1.7. World market shares for Spanish exports of services 15
2.1.8. Structure of Spanish exports of goods 16
2.1.9. Breakdown of Spanish exports by technological content 16
2.1.10. Shares of top-quality exports by country (value) 17
2.1.11. Share of export products by quality rank 17
2.1.12. Energy dependency of the Spanish economy 18
2.1.13. Import content of exports of medium-high and high technology
products 18
2.1.14. Spanish imports by broad economic category 18
2.1.15. Average industrial firm size in Spain (2011) 19
2.1.16. Labour productivity distribution by firm size class (2011) 19
2.1.17. Evolution of the share of tradable sectors 20
2.1.18. Non-cyclical current account balance 20
2.1.19. Private and total capital inflows 21
2.1.20. Contribution to changes in the NIIP 22
2.1.21. Savings and Investment by Sector 22
2.1.22. Spain's funding dependence on partner countries (2012) 23
2.2.1. Breakdown of debt by sector 25
2.2.2. Bank loans to the private sector 26
2.2.3. Non-performing loans ratio 26
2.2.4. Bank sector profitability 27
2.2.5. Residential investment as percentage of GDP 28
2.2.6. Evolution of House Price Index and MFI loans for house purchase
29
2.2.7. Breakdown of year-on-year changes in debt-to-GDP ratios,
households 29
2.2.8. Household leverage in Spain 30
2.2.9. Breakdown of year-on-year changes in debt-to-GDP ratios, non-
financial corporations 31
2.2.10. Distribution of corporate debt in Spain by firm size, according
to the insolvency risk of the firm holding the debt, 2013 (1) 32
2.2.11. Distribution of corporate debt in Spain by sector, according to
the insolvency risk of the firm holding the debt, 2013 (1) 33
2.2.12. EBITDA over interest on financial debt, Spanish SMEs 34
2.3.1. Employment and unemployment evolution 38
2.3.2. Activity rates 39
2.3.3. Unemployment by duration 39
2.3.4. Open-ended and fixed-term contracts 40
2.3.5. Wages and unit labour costs 40
2.3.6. Negotiated wages 41
2.3.7. Compensation per employee 41
3.1.1. Tax rates in personal income taxation 49
3.1.2. Environmental tax revenue by type of tax (2012, percentage of
GDP) 51
3.2.1. Youth unemployment 52
3.2.2. In-work poverty 53
3.2.3. Early school leaving in Spain, break-down by macro-regions 54
3.3.1. Allocative efficiency in selected professional services and
countries, 2011 60
3.3.2. Existing restrictions before and after the implementation of the
services directive 61
3.4.1. Evolution of the electricity tariff deficit in Spain, 2000-2013
62
3.4.2. Features of the motorway network in Spain compared with other
Member States, 2011 64 LIST OF Boxes 1.1. Economic surveillance process 7
2.2.1. Long-term projections of general government debt 35
2.3.1. The tax reform and its impact on the tax wedge 43 LIST OF Maps No table of contents entries found.
The recent overall economic and financial developments confirm the
stabilisation that has been unfolding over the last two years in Spain. In
2014 and early 2015, economic growth in Spain was supported by rapid
employment creation, easier financing conditions, improved confidence, and
lower energy and oil prices. These factors are expected to continue to
support growth in the short to medium term, despite high private and public
debt levels continuing to exert a drag on growth. Financial markets have
stabilised, but the country remains vulnerable to sudden changes in global
investor sentiment. Labour market conditions are improving, but
unemployment remains very high. Social indicators are continuing to
deteriorate, although the positive evolution of labour markets may bring
some improvement over the next years. Moreover, negative inflation in 2014
provided some relief in real gross disposable income for households in a
context of continued wage moderation. Housing prices seem to be close to
bottoming out. In March 2014, the Commission concluded that Spain was experiencing
macroeconomic imbalances that require specific monitoring and decisive
policy action. In several dimensions, adjustment of the identified
imbalances has advanced, and the return to growth has reduced risks.
Nevertheless, the nature, magnitude and interrelations between the
imbalances, in particular private and public sector indebtedness, the
negative net international investment position and the various policy
challenges in the labour market still expose Spain to risks. This Country
Report assesses Spain's economy against the background of the Commission's
Annual Growth Survey which recommends three main pillars for the EU's
economic and social policy in 2015: investment, structural reforms, and
fiscal responsibility. In line with the Investment Plan for Europe, it also
explores ways to maximise the impact of public resources and unlock private
investment. Finally, it assesses Spain in the light of the findings of the
2015 Alert Mechanism Report, in which the Commission found it useful to
further examine the persistence of imbalances or their unwinding. The main
findings related to macroeconomic imbalances contained in this country
report are: . Despite a positive development in recent years, the current account
surplus narrowed significantly in 2014. This is caused by the slowdown in
the main Spanish export markets and the rebound of imports linked to
robust domestic demand. Spain's external sector performance is also
affected by the high import content of exports, Spain's energy
dependence, the relatively smaller size of Spanish firms, and the high
sensitivity of exports to changes in relative prices and costs. . The large stock of external liabilities has kept increasing, making Spain
vulnerable to adverse shocks or shifts in market's confidence. The
overall high stock of private and public debt, both domestic and
external, poses risks for growth and financial stability. The recovery of
private sector balance sheets is advancing, backed by credit contraction. . Job creation has gathered pace, but unemployment remains very high. Youth
joblessness is very high, and long-term unemployment risks becoming
structural, and leading to labour and social exclusion. Labour market
segmentation remains a challenge. . Negative macroeconomic developments in Spain would have a s