Publications

The TARGET2 platform, which is owned by the Eurosystem, processes payments in euro
with reserves, i.e. central bank money. The cross-border payment transactions channelled
through this platform give rise to central bank claims and liabilities which, when aggregated
and netted, produce the so-called TARGET balances. Since 2015, when various extraordinary
monetary stimulus measures were introduced by the ECB, there has been a marked
increase in aggregate TARGET balances, to levels above those reached during the sovereign
debt crisis which took place in the first few years of the current decade. Unlike then, the
recent developments do not reflect financial stress or general funding problems in euro area
economies, as during the sovereign debt crisis, but are instead mainly linked to the
execution of the Eurosystem’s asset purchase programme (APP).

Central Balance Sheet Data Office Annual and Quarterly Survey data point to a
continuation of the recovery in non-financial corporations’ activity, both in 2017 and in
the first nine months of 2018, giving rise to growth in ordinary profit and employment in
the majority of sectors and firms. As a result of the good corporate earnings performance,
rates of return rose in both periods and the spread over the cost of borrowing continued
to widen. Extraordinary costs and revenue had a negative impact on net profit in 2017;
however, in the first nine months of 2018 the impact was positive, resulting in very strong
net profit growth in the period. Average debt ratios continued to decline in 2017, while in
the first three quarters of 2018 the debt-to-asset ratio rose slightly and the debt-to-ordinary
income ratio was practically unchanged. Lastly, the debt burden ratio fell in both
periods, driven in particular by the lower cost of borrowing. The article includes two
boxes analysing the recent economic and financial performance of Spanish SMEs and
consolidated groups, respectively, on data up to 2017.

Given the growing real and financial integration of economies worldwide, there is a need for the presence of supranational mechanisms to address crisis situations. The International Monetary Fund (IMF) is the multilateral institution at the core of the global financial safety net (GFSN). The swift development of other elements of this net since the last global financial crisis, such as the regional financing arrangements, has made the system sounder but also poses fresh challenges. The broad membership of the IMF, the volume of its resources and its accumulated global experience in crisis management make the organisation key to shoring up global monetary and financial stability. However, the IMF is subject to recurrent discussions about its governance and lending policies, including the size and composition of its resources, and the distribution of power within the organisation. The IMF is currently immersed in the Fifteenth General Review of Quotas. The backdrop to this negotiation is the risk that, in the absence of a satisfactory agreement on the size and distribution of its resources, the IMF’s financial sufficiency and its degree of representativeness among its members may be diminished in the coming years. This might significantly undermine the stabilising capacity of the GFSN.

The banking sector has traditionally played a key role in the financing of Spanish non-financial corporations (NFCs), much more substantial than other alternative sources, such as securities markets or venture capital. The past crisis evidenced that a high degree of dependence on a single source of funding may constitute an element of vulnerability for firms. Against this backdrop, in recent years there has been a process of financial disintermediation, with firms replacing part of their bank loan financing with the issuance of securities (bonds or equity) in official or alternative markets and with equity financing through venture capital entities. Specifically, in the period 2009-2017 NFCs raised funds for an average annual amount of €50 billion through securities markets, compared with an average annual decline of €34 billion through loans. Also, the recently created crowdfunding platforms have become a new alternative channel and although their volumes are marginal for the time being, they could experience stronger growth in the next few years, as has occurred in other European countries.

The Argentine economy is in a complicated transition phase. To correct the major fiscal and inflationary imbalances built up in the previous decade, the new government that took office in December 2015 opted for a gradual fiscal adjustment, supported by a situation of abundant international liquidity. In parallel, the Argentine central bank assumed ambitious inflation-reducing objectives. However, in 2018 the lack of progress on the inflation front, the tightening of international financial conditions and a severe drought placed Argentina under the market’s gaze and prevented it from pursuing the financing of this gradual adjustment; accordingly, the government decided to apply for IMF financial assistance. The agreement with the Fund, approved in June and amended in October 2018, plans for a rapid fiscal and monetary adjustment that will provide for a reduction in its twin deficits (fiscal and external alike) and an effective decline in inflation, moving the economy onto a stable growth path. The success of the programme, to which the Argentine authorities have made a clear commitment, is nonetheless subject to internal and external risks, and poses a significant challenge for the country.

This article reviews, as usual, the recent performance of the main Latin American economies, in a setting where the emerging economies have faced a series of adverse shocks. There has been a considerable downward revision of the growth forecast for the region in 2018, driven mainly by idiosyncratic factors: the severe recession in Argentina and a slower-than-expected recovery in Brazil. Furthermore, the risks remain predominantly on the downside. One of these risks – a tightening of the pace of monetary policy normalisation in the United States – is analysed in more detail in the article.

In scarcely two decades, the People’s Republic of China has become one of the most prominent countries in the FinTech field. This has been the result of a singular set of factors, including most notably the structural shortcomings of China’s financial system, the growth of its middle classes and their attitude to privacy, a high level of digital connectivity, the volume of e-commerce and a series of public policies and enabling regulations. In addition, the emergence of the FinTech industry in China is marked by the success of the national technological giants, which have recently embarked on an international expansion. The Chinese Government continues to pursue ambitious strategic plans which, for the first time, evidence greater concern for a framework of robust safeguards to protect customers and ensure financial stability.

In 2018 Q3, according to the Bank Lending Survey, credit standards for loans to enterprises eased somewhat, both in Spain and in the euro area, while the terms and conditions applied to such loans also eased. As for lending to households, Spanish banks reported an easing in the credit standards and terms and conditions for consumer credit and other lending to households, and no change in those for housing loans, while in the euro area banks reported no significant changes in the first of these segments and a slight easing in the second. The demand for loans to enterprises fell somewhat in Spain and increased in the euro area as a whole, while in the two segments of loans to households, loan applications increased in both areas. In Spain, banks’ conditions of access to wholesale funding markets deteriorated, while their conditions of access to retail funding markets barely changed. In the euro area as a whole, on the other hand, the changes were very small in both cases. The ECB’s expanded asset purchase programme continued to contribute, over the six month period prior to the survey, to improving the liquidity position and funding conditions of banks in both areas and to easing the terms and conditions for loans, while the impact on profitability was mildly positive in Spain and negative in the euro area as a whole. Both Spanish and euro area banks reported that the ECB’s negative deposit facility rate had led to a reduction in net interest income over the previous six months, and a general fall in interest rates and margins on loans, as well as a slight increase in the volume of lending.

This article analyses a broad set of relevant variables for monitoring inflationary pressures in the Spanish economy. On the basis of these variables, composite indicators are calculated that proxy inflation expectations, the degree of slack in the economy and other inflation pressures, domestic and external alike. On the information analysed, the recent period of low inflation in the Spanish economy is estimated to have come about in a setting in which domestic factors particularly eased, with a notable reduction in inflation expectations.

Distributed ledger technology is attracting the attention of the financial sector, both owing to its use in transactions with crypto-assets and to the proliferation of initiatives which have the potential to increase the efficiency, transparency, speed and resilience of processes underlying financial transactions. This article aims to introduce this technology, describing a series of basic issues surrounding it and attempting to identify opportunities and intrinsic limitations. Additionally, it addresses possible applications in the financial sector and outlines some of the main challenges which its use poses for the authorities.

One of the most visible characteristics of the recent economic recovery is the moderation of wage growth in a good number of advanced economies. This article analyses quantitatively the contribution of several factors to changes in the wage growth rate in Spain and in the euro area during the current upturn. In both cases, the results show that the recent wage moderation is attributable to relatively high levels of labour market slack and low inflation expectations. For the euro area, another significant factor is low productivity growth, in contrast to other similar phases of the economic cycle. The analysis also reveals that, in the most recent period, it is important to take into account broader slack indicators than the unemployment rate, given that the high proportion of involuntary part-time and discouraged workers are exerting some downward pressure on wages.

The effect of the euro exchange rate on inflation has taken on significant importance recently, with the application of the ECB’s expansionary monetary policy measures having coincided with episodes of euro appreciation, such as that observed between the second half of 2017 and early 2018, which tend to exert downward pressure on imported prices. This article analyses the factors behind the fluctuations in the euro exchange rate against the dollar during the recent period, and finds that this appreciation may have largely been due to the higher relative growth of the euro area, compatible with a pick-up in expected euro area inflation. However, the subsequent depreciation, since February 2018, might reflect factors related to changes in the relative confidence of financial markets to the detriment of the euro, and to the lower relative growth of the euro area compared with the United States. Further, it is documented how the pass-through of exchange rate movements to overall consumer-price inflation in the Spanish economy has increased slightly in recent years, owing mainly to the energy component, while core inflation remains much less sensitive to exchange rate changes.

According to data from the Central Balance Sheet Data Office Quarterly Survey, non-financial
corporations continued to see an increase in activity, employment and ordinary profits in the first half of 2018, supporting a continued recovery in aggregate profitability levels. There was no significant change in debt ratios, while the debt burden continued to fall, reaching historic lows, indicating that financial pressure on the corporate sector is currently low. Nevertheless, the simulations included with this article reveal that certain segments of the corporate sector would be particularly vulnerable to rising borrowing costs.

Following the global financial crisis, the external imbalances in terms of countries’ current
account balances have been reduced to a large extent. However, the imbalances measured
in terms of net external wealth (or net international investment position, NIIP) have continued to increase. The empirical analysis presented in this article suggests that there is asymmetry between net debtor countries (negative NIIP) and net creditor countries (positive NIIP), with potential implications for global trade and growth. In the case of debtors, their negative NIIP contributes to reducing current account deficits and is therefore a stabilising factor. Conversely, in the case of the creditors, the NIIP contributes to increasing current account surpluses which, in turn, strengthens the dynamics of wealth accumulation in these countries, compared with the rest of the world.

This article analyses the concept of digital currency issuable by a central bank, highlighting its similarities to and differences from the two main liabilities on its balance sheet: cash and bank reserves. It also discusses the main reasons why some central banks are looking into the potential consequences of the introduction of this new instrument. Lastly, it considers different central bank digital currency alternatives and highlights some of the possible implications for monetary policy conduct and for financial stability.

The results of the Bank Lending Survey show that during 2018 Q2 credit standards for new loans eased slightly in all segments, both in Spain and in the euro area. Household demand for credit grew in both areas, while that from enterprises did so only in the euro area, holding stable in Spain. As regards funding, both Spanish and euro area banks generally perceived some improvement in access conditions to retail markets and a slight deterioration in practically all wholesale markets. During the first half of 2018, regulatory and supervisory measures are estimated to have been conducive, in both areas, to some increase in capital levels, and, in the case of the euro area, also in assets. According to Spanish banks, these measures are not expected to have appreciably impacted either their funding conditions or lending standards or margins on loans. In the case of the euro area, they provided for some easing in institutions’ funding conditions, along with a slight tightening in credit standards, not significantly affecting the margins applied in most segments. Banks in both areas highlighted, as the key factors for the setting of their margins, the search for yield and competitive pressures. Finally, the NPL ratio has not significantly affected Spanish institutions’ lending policies during the first half of 2018, while it has contributed to some tightening in the euro area.

According to the analysis conducted in this article, based on individual firms’ balance sheet information, Spanish corporate investment tended to pick up from 2014 and to do so with greater intensity at SMEs than at large corporations, after having contracted more forcefully during the early stages of the crisis at SMEs. In any event, as regards the stock of productive assets (tangibles and intangibles alike), the investment level attained in 2016 is expected to still be below pre-crisis figures. Analysis of investment determinants highlights the fact that the strength of the financial position and of profitability are positively related to business investment decisions, especially during the post-crisis period. As to the sources of financing used, firms with net positive investment resorted, throughout the period, both to own and borrowed funds, although the relative weight of the latter fell significantly from 2008. Firms investing intensively in intangibles – which were financed, until 2007, both with own and borrowed funds – began, with the onset of the crisis, to depend practically exclusively on own funds. That suggests the possible existence of greater difficulties for firms with a high concentration of intangible assets in gaining access to borrowed funds.

During the crisis, euro area banks’ recourse to Eurosystem funding facilities was closely related to the severe tensions in the funding markets. However, since the latter part of 2014, Eurosystem refinancing operations have been essentially determined by the implementation of the single monetary policy and the need to reinforce the monetary stimulus by means of non-standard measures. The Spanish banking system currently has a relatively high level of recourse to Eurosystem funding, as a proportion of GDP and in terms of its weight in the banking sector balance sheet, although its share of total Eurosystem funding has fallen since 2014. The long maturities of this funding and the favourable conditions in the financial markets in the more recent period have afforded banks more scope to refinance or repay these debts in an orderly manner.

China and India are playing an increasingly significant role in global trade. In 2016, their joint share of the global trade in goods reached around 14%, while their share of services came to 7.5%. They have very different trade profiles, however, also reflecting very different internationalisation strategies. Since opening up in the 1980s, China has taken on a global trade hub role, thanks to its growing integration into global production chains for manufactured goods. More recently, China has undergone a shift in trade specialisation towards a pattern characterised by the export of products with higher domestic value added (i.e. it has moved up the global value chain). India’s integration into global value chains has been much more limited and, since the early stages of its economic liberalisation, services have accounted for a substantial share of its exports. Although India’s export profile has remained fairly stable in recent decades, a growing weight of manufacturing exports with a greater import content has recently become discernible. Against this background, the estimation of goods export demand equations shows how, in the long run, external demand is the factor that wields most influence on developments in both countries’ exports, albeit more powerfully so in China, while price-competitiveness has a greater influence on Indian exports.

On information from the Banco de España Central Balance Sheet Data Office Quarterly Survey (CBQ), non-financial corporations continued to post increases in productive activity, employment and ordinary profits in 2018 Q1, which translated into a fresh increase in aggregate profitability levels; however, signs of some slowdown in the main ordinary operating surpluses are discernible. Debt ratios rose during the opening months of the year, but the debt burden ratio continued to fall; accordingly, overall, there were no significant changes in the degree of financial pressure on companies. The article includes a box that sets out the methodology used to obtain re-weighted rates, resulting from the application of the sectoral weight of firms in the economy as a whole to gross value added and operating income, with the aim of mitigating the sectoral bias of the CBSO samples.

The Financial Accounts of the Spanish Economy reveal that the financial position of households and non-financial corporations once again strengthened in 2017. In the case of households, bank debt stood at 61% of GDP, 3 pp down on 2016 and 24 pp below its 2010 peak. As in previous years, there was a decline in loans for house purchase, which was partly offset by the increase in consumer credit and other lending. The gross financial wealth of households continued on a rising trend, as a result both of investment in financial assets and of the revaluation of financial instruments held by households. In the case of corporations, the flow of total borrowings raised, in consolidated terms, was positive – following the virtual zero amounts of the two previous years and the negative amounts of the four preceding years – of the order of a volume equivalent to 0.8% of GDP, the highest level since 2009. In terms of outstanding balances, this debt accounted in 2017 for 78% of GDP, 5 pp down on 2016 and 39 pp below the 2010 peak. Corporations’ own funds grew by 3.2%, as a result both of the raising of funds and of the revaluation of these liabilities, as has been the case since 2015.

The International Monetary Fund (IMF, or the Fund) has been uninterruptedly providing
concessional financing to low-income countries since 1976. This financing has been
channelled practically in its entirety under the same financial instrument, namely a voluntary
participation trust fund that is separate from IMF finances, but managed by the latter. The
programmes financed with these resources have progressively focused on macroeconomic
stabilisation, the signalling of reforms and attracting other aid, as part of a poverty-reduction
strategy that should be led by the borrower country. In 2009, the IMF overhauled its
concessional financing policy: it incorporated new credit facilities, with a similar design to
that of its ordinary facilities; it boosted the blending of concessional and ordinary resources
for those countries with access to both types of financing; and it staggered the cost of the
financing against a background of very low interest rates. Throughout 2018, the IMF will
again review the concessional financing toolkit available to low-income countries, based on
the experience built up in recent years. This article provides a framework for assessing the
ongoing review.

The trade exposure of Spanish firms to the United Kingdom is significant, albeit lower than that to the main euro area countries. In 2017 the growth in Spanish firms’ goods exports to the UK market that dated back to 2012 came to an end, against a background of sterling depreciation against the euro. The potential vulnerability of Spanish firms with a presence in the UK market to Brexit is somewhat limited by their distinctive characteristics; these companies are on average larger, more productive and more geographically diversified than those that export to the main euro area countries. In any event, the ultimate impact of this process on Spanish firms with a presence in the United Kingdom or with the potential to gain access to this market will largely depend on the terms eventually established for trade relations between the United Kingdom and the European Union.

According to the balance of payments (BoP) statistics, the Spanish economy once again became a net lender in 2017, despite the rise in oil prices and the strength of domestic demand. Factors that are foreseeably temporary, such as low interest rates, and other longterm factors, mainly relating to the increase in the number of exporting firms and the gains in competitiveness accumulated in recent years, contributed to this. The Spanish economy’s negative net International Investment Position (IIP), in terms of GDP, declined again for the third consecutive year (to 80.8%), since Spain’s lending position and the expansion of GDP offset the negative impact of valuation effects and other adjustments on the net IIP.

Against a favourable external backdrop, the Latin American economies continued their recovery in the second half of 2017, although at a somewhat slower momentum. The most notable features of that period were more strongly performing investment and a more negative contribution to growth by the external sector. However, the improved terms of trade allowed the current account deficits to be reduced. Inflation moderated more than expected, allowing the central banks of Brazil, Colombia and Peru to continue cutting their official interest rates. However, prices moved unexpectedly upwards in Mexico and Argentina, prompting a tighter monetary policy. In the budgetary arena, most countries failed to make significant headway in the recovery of fiscal space, an issue which is analysed in the first thematic section of this Report along with the effects on the macroeconomic scenario that would result from the fiscal consolidation needed to make public debt sustainable. Financial conditions, as analysed in the other thematic section of this Report, which calculates financial conditions indices for the economies of the region, remained slack in the period analysed, since the international financial market turmoil had little impact and commodity prices (a key determinant of financial conditions in these economies) recovered. The forecasts are for the dynamism of activity to continue in 2018 and 2019, at a pace near the potential growth rate of these economies, although the balance of external risks (change in macroeconomic policies in the United States which may finally feed through to a tightening of financial conditions worldwide, and a possible widespread increase in barriers to international trade) and internal risks (uncertainties as to what economic policies will be implemented following the elections to be held in the coming months) is tilted to the downside. The Report also includes a box which analyses, as far as the available data allow, the economic situation in Venezuela after its partial default on its external public debt.

The results of the Bank Lending Survey show that during 2018 Q1 credit standards for new
loans in Spain eased slightly in loans to households, remaining unchanged in loans to enterprises, while credit supply in the euro area grew across the board, although unevenly by segment. In Spain demand for credit from households grew and from enterprises remained stable, while in the euro area applications for all types of loans increased. Access to the financial markets by credit institutions has barely changed in the two areas. Credit standards both in Spain and in the euro area are now somewhat stricter than those seen on average since 2003, while in almost all cases they are similar to, or slightly laxer than, the average levels posted since 2010. The ECB’s expanded asset purchase programme has continued to contribute during the last six months to improving the liquidity and funding conditions of institutions in the two areas and to an easing of lending conditions, although it has also impacted profitability negatively. Spanish and euro area banks alike reported that the ECB’s
negative deposit facility rate caused a reduction in net interest income in the last six months,
as well as a generalised fall in interest rates and margins on loans and a slight increase in the
volume of loans granted.

After two consecutive years of slowing global activity, there was a rise in world GDP growth in 2017 which was widespread across advanced and emerging market economies and was higher than expected at the start of the year. Inflation rose moderately in 2017, largely due to increases in commodity prices, but core inflation remained more stable and far from central bank targets. The outlook for 2018 indicates that these global trends will continue. Some of the factors that will influence these developments are analysed in detail in this article. First, several factors (the cyclical recovery, progress in deleveraging, fiscal changes and higher wages) indicate that the momentum of investment recorded in advanced economies in 2017 will continue in the short term, however, over a longer time frame, whether this strength is maintained will hinge on real interest rate developments, technological factors and resistance to the threat of protectionism. Second, the expected change in the macroeconomic policy mix in the United States and other advanced economies towards a more expansionary fiscal policy and a less loose monetary policy may raise short-term growth but, if they are not gauged properly, bouts of instability in international financial markets could ensue. Lastly, global financial conditions remain favourable. However, the turmoil on US equity markets early in 2018 which spread swiftly and vigorously to other stock markets seems to indicate less favourable global financial conditions in the future and, at the same time, warns against the risks associated with a sharp adjustment in international financial markets.

Non-financial corporations continued to create employment in 2017, with the trend extensive to all sectors according to the CBSO quarterly sample. As to business activity, although both gross value added and ordinary net profit continued to grow, they did so at a more moderate pace than the previous year, largely owing to the negative performance of certain large corporations with a high weight in the quarterly sample. The non-recurrent items had an unfavourable impact on the final surplus, leading it to shrink significantly. Lastly, the returns on ordinary activities rose and the debt and debt burden ratios declined, suggesting a further improvement in firms’ economic and financial situation. The article also analyses recent developments in trade credit, where there was evidence last year of a pick-up in this financing arrangement, accompanied by reductions in average payment and collection periods.

The total volume of bond issuance in 2017 remained similar to that in previous years, edging down slightly as a result of the drop in public-sector issuance. As usual, there were significant
differences between the regions and quarters analysed. By quarters, the year got off to a good start, with strong growth in the volume of issuance in the first quarter, followed by a slight deceleration. This pattern possibly reflects some issuers seeking to bring forward their placements in anticipation of worsening financial conditions, given the context of progressive monetary policy tightening. By region, the drop in issuance by the United States stands out, alongside the strong performance of the emerging markets. There was also a marked increase in the volume of placements in higher-risk segments, such as corporate and high-yield bonds, and in emerging markets, which reached record levels.

The yield curve for US government debt securities has flattened significantly since late 2016 and its slope, while positive, has fallen to levels not observed since before the global financial crisis. The inversion of the yield curve slope is considered, on occasions, as a leading indicator of future recessions. And this, given moreover that the current expansionary phase is proving more durable than previous upturns, has prompted debate on the implications of the recent flattening of the curve. However, as illustrated in this article, unlike previous episodes, in which the flattening of the curve was explained by the behaviour of the interest rates expected at different terms, at this current juncture it is warranted substantially by the compression of term premia. Against this background, the historical relationship between the yield curve and predicted recessions in the US economy might have altered.

This study explores the recent dynamics of inflation expectations for the main euro area countries. It uses daily financial data for the main euro area countries over the past 15 years with a wide range of time horizons. The estimation of a model of the term structure of inflation expectations using these data allows the common part to be separated from the countryspecific part. It is found that, for the various time horizons and countries, the bulk of expected inflation is common to the whole euro area. The weight of country-specific factors is low, being most significant for the shorter term. For time horizons between five and ten years, the estimated inflation expectations showed a downward trend from 2012, which has reversed in the last two years owing to the application of a broad set of unconventional monetary policy measures in the euro area since mid-2014. Still, in the past year, medium-term inflation expectations have held below 2%, around 1.7% on average, clearly lower than in the period before the economic crisis.

This article analyses the relationship between household consumption and that in their social
environment, defined as those households that live in nearby geographical areas. The results, rawn from the Spanish Household Expenditure Survey, reveal that, on average, approximately one-third of the non-durable goods consumption of the average Spanish household is influenced to some extent by the decisions of its peer group, a magnitude that is in line with the evidence available for other countries. The influence of the social environment appears to be greater for certain specific goods, such as tobacco, clothing, leisure activities and alcohol. This analysis may help us understand how specific shocks, which initially have a direct bearing only on the expenditure of very specific population groups, ultimately affect the consumption of other, broader population groups.

The results of the Bank Lending Survey show that during 2017 Q4 credit standards for new loans in Spain eased slightly in loans to households and were stable in loans to enterprises. The pattern was similar in the euro area, except in the case of consumer credit and other lending to households, where credit standards barely changed. Households’ demand for credit rose moderately in both areas, while demand from enterprises grew in the euro area but remained unchanged in Spain. As regards funding received by banks, both Spanish and euro area banks generally perceived some improvement in access to retail markets and to almost all wholesale markets. Lastly, in both areas, regulatory and supervisory measures seem to have prompted some increase in capital levels and risk-weighted assets. Spanish banks assessed these measures as having no significant impact on their funding conditions or on credit standards or margins on loans. In the case of the euro area, the measures appear to have brought a slight easing of bank funding conditions, while the effect on credit standards and margins on loans has generally been small.

In March 2016, the ECB announced the extension of the asset purchase programme (APP) to investment-grade bonds issued by non-financial corporations established in the euro area. Following the announcement of this new programme (known as the CSPP), there was a significant fall in the interest rates on bonds issued by Spanish companies eligible for purchase by the Eurosystem, which also extended to those on lower-rated securities, through the usual rebalancing of investment portfolios. At the same time, a significant increase was seen in bond issuance, as a result of which Spanish bond issuers (usually large corporations) reduced their demand for bank credit. Resident banks responded by shifting their credit offering towards other firms that do not have the same ability to issue bonds and that tend to be smaller in size. The analysis presented in this article reveals that for each euro reduction in the outstanding debt of large companies with Spanish banks during the three months after the announcement of the programme, some 78 cents were diverted to other non-issuing firms, including SMEs. These firms, in turn, increased their levels of real investment significantly.

This article analyses the trajectory and the main explanatory factors of changes in the labour market participation rate in the euro area in recent decades. First, these changes are compared with the United States, highlighting the extraordinary convergence that has taken place between the two areas owing to the momentum in the European labour market and the declining secular trend on the other side of the Atlantic. Second, the increase in participation in the euro area was led by females, particularly as a result of the higher probability of new cohorts joining the labour market against a background of significant socio-educational changes. In any event, in view of the demographic ageing in progress and the progressive exhaustion of the above-mentioned changes, the focus is on the need for specific policies aiming to raise labour participation of such population groups where there is still room to do so, i.e. older workers, in general, and women in countries where the gender gap is still large.