Update on Policy measures towards a sustained and balanced growth path

November 2011

Highlights
The reforms and macroeconomic developments in 2010 and 2011 are laying the foundations of a sound and rebalanced growth for the Spanish economy Two main questions: Are reforms during the last 2 years tackling the underlying problems? Existing evidence on fiscal consolidation, financial system reform, labour market reform, business environment says so Still some existing challenges have fostered new policies demonstrating the absence of reform fatigue and willingness to further underpin fiscal sustainability and labour market reforms to foster growth Can Spain grow? Spain has a diversified and competitive economy with enough resources to enhance growth in the future

 Reform strategy: fiscal, financial and factor markets Structural and economic rebalancing Funding and Debt Management

Fiscal consolidation (I)

Objectives regardless of macroeconomic performance Short-term: fiscal target of 6% deficit in 2011 Establishing a more transparent framework Ensuring long-term fiscal stability Instruments On-going commitment to deficit reduction Constitutional change limiting structural deficit and debt New spending rule: public spending linked to economic growth Pension reform: higher age of retirement, greater relationship between contribution and pension and sustainability factor
General Government commitments by unit (% of GDP) 2010 2009 2011
Commitment Execution

Approved 27/09/2011 Approved 14/07/2011 Approved 21/07/2011

2012 -4.4
-3.2 -1.3 -0.3 0.4

2013 -3.0
-2.1 -1.1 -0.2 0.4

2014 -2.1
-1.5 -1.0 0.0 0.4

General Government Budget Balance

Central Government Autonomous Communities Local Governments Social Security

-11.1
-9.3 -2.0 -0.6 0.8

-9.3
-5.9 (-6.7) -3.1 (-2.4) -0.6 (-0.4) 0.2

-9.3
-5.0 (-5.7) -3.4 (-2.8) -0.6 (-0.5) -0.2

-6.0
-2.3 (-4.8) -3.3 (-1.3) -0.8 (-0.3) 0.4

General Government Debt over GDP

53.3

62.8

60.4

67.3

68.5

69.3

68.9

Source: Stability Programme Update 2011-2014. In brackets: net of internal transfers among Public Administration units.

Fiscal consolidation (II)

The Central Government up to September 2011 (EDP) delivers on its commitment The cumulative deficit stands at 37.0 billion (-16.8 % yoy) Additional measures: - Changes in corporate tax, pharmaceuticals and wealth tax: Saving 2,980 M in 2011, 3,880 M in 2012, 3,800 in 2013 - Deposit Guarantee Fund privately funded to absorb FROB losses derived from the recapitalization process
Deficit(-)/Surplus(+) of the Central Government excl. Autonomous institutions (EDP) (% of GDP)
0% -1% -2% -3% -4% -5% -6% -7% -8% -9% -10% Apr Jun Jul Aug Mar May Jan
-5.5% -3.4% -4.6%

Approved 19/08/2011 and 16/09/2011

Approved 21/10/2011

2009 2010 2011

Nov Sep Feb Oct

-9.5%

Source: IGAE. Net of internal transfers.

Target of Central Government for 2011 (-4.8%). Autonomous Institutions add 0.2% deficit, as in 2010.

Dec

Fiscal consolidation (III)

Autonomous Communities Execution: Deficit of 1.2% of GDP up to Q2-2011. Regional Governments exceeding a 0.75% deficit under evaluation Monitoring: Authorisation for new issuance extended in three stages conditional on compliance with targets Ongoing Measures: Homogeneous reporting of approved regional rebalancing plans Future reporting of budget execution on National Account basis Approval of expenditure rules consistent with the approved on July 1st for the Central government Constitutional change to limit structural deficit
Council agreements 27/07/2011 Published 18/10/2011

Financial sector reform (I)

Restructuring: 13.2% reduction in branches and 10.5% staff since 2008 The number of savings banks has decreased from 45 to 15 in less than two years Corporate governance: Over 90% of the assets managed by savings banks transferred to commercial banks Governance structure improved by means of a Law Transparency: 93% of the financial sector in July 2011 stress tests. 5 institutions below 5% of CORE TIER 1 No Spanish institution requires additional capital on top of the existing commitments as they count on enough paid-up mitigating instruments Quarterly reporting on exposure and impaired assets since January 2011

Financial sector reform (II)

Solvency:
February 2011: solvency requirements increased to 8%/10% March 2011: Identification of capital requirements by the Bank of Spain to reach these new thresholds: 13 institutions which amounted to around 17 billion July 2011: 4 banks and 2 savings banks had already met their capital needs (4.5bn) through private funds. One saving bank has done so through public funds (2.8bn) Three savings banks already listed (accounting for 50% savings banks' assets) raised 5.2b capital September 2011: End of capitalisation process. 9 groups private capitalisation (7.0bn), 4 groups FROB (7.6bn).
Capital
Bankinter Bankpyme Barclays Bank, S.A. Deutsche Bank, S.A.E. Bankia Banca Cvica Caja Espaa Catalunya-Caixa Grupo BMN Novacaixagalicia Unimm CAM Liberbank 2,144 24 1,005 729 14,125 3,687 2,062 3,148 3,343 2,851 1,150

Capital ratio required

8.0 8.0 8.0 8.0 10.0--->8.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0

Capital needs Recapitalisation alternative Status ( mn)

333 8 552 182 847--->0 463 1,718 637 2,622 568 2,800 519
Instruments qualified as capital Integration with another institution Parent company Parent company Stock market listing, July 2011 Stock market listing, July 2011 Integration with another institution FROB Private investors FROB FROB FROB Private investors

10.0--->8.0 5,775--->1,795

Source: Bank of Spain and CNMV.

Labour market reform (I)

The first challenge of the Spanish labour market is related to the distribution of work among workers. Spain does not have a problem on the overall labour utilization Measures to increase flexibility and reducing the responsiveness of employment to negative activity shocks Spanish traditional high

Changes in unemployment and labour potential (Quarterly hours worked/potential hours of pop 15-64) Unemployment and labour utilization
Unemployment Change vs 2003-Q1 (in p.p.) Labour utilization Change vs 2003-Q1 (in p.p.)

Some data on labour market reform

Hiring and dismisals (Year-on-year growth rates)
May Dismissals
(% over firings)

Pre-reform period June 17.2 67.1 15.7 July 18.5 65.7 15.8

Avg rest 2010

Objective Disciplinary Other*

16.7 66.6 16.8

Post-reform period Avg 2011 23.9 20.5 65.1 60.6 14.4 15.4

Germany Italy France Ireland Spain

6.8% 8.7% 9.6% 14.2% 21.4%

-3.1 -0.5 1.0 9.5 9.4

51.7% 52.9% 46.4% 52.3% 48.3%

2.4 -1.5 -0.7 -8.0 -2.5

Collective reestructuring Other processes (% over total)

German model Collective agreements** Real wage Real labour cost Modification collective agreements

96.0 4.0 2009 2.7 3.5 3.8

97.4 90.5 2.6 9.5 2010Q1 2010Q2 1.5 0.9 0.0 1.3 0.2 -0.4

75.2 24.8 2010Q3 2010Q4 1.3 -1.8 -2.2 8% 1.3 -2.5 -2.8

75.2 24.8 2011Q1 3.0 -2.5 -2.7

Source: Eurostat. Note: Quarterly potential hours are defined as 13 weeks working 40 hours/week.

Wage developments

(% workers with agreement)

Source: Ministerio de Economa y Hacienda.

Labour market reform (II)

Hiring: Promotion Contrato de Fomento Improved definition of causes of fair dismissal Lower severance costs for employers at the moment of dismissal German Model: incentivises working-day reduction instead of dismissal or suspension. Internal flexibility: facilitates opting out from higher-level collective agreements if the company is under economic stress. Training contract for young people Elimination for next 2 years any limitation to roll over temporary contracts Collective bargaining: Incentives for firm-level collective agreements Incentives for renegotiating new collective agreements before the expiration of the previous agreement

Approved 19/09/2010

Approved 26/08/2011

Approved 22/06/2011

Labour market reform (III)

Unemployment rate is high (21.5%) mostly due to construction job losses. Thus, the second challenge is to reallocate 2M workers Even in the crisis trough high unemployment-employment flows: Quarter-to-quarter transition unemployment-employment 22% 25% for unemployed previously working in construction Active labour market policies should enhance the reallocation: Incentives part time hiring Personalised career advice Introduction of an unemployment assistance grant, conditional upon training courses once unemployment benefit has run out Creation of private employment agencies
Approved 11/02/2011

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Product market reforms

SMEs: Business angels: Exemptions on capital gains for entrepreneurial projects up to 25,000 Taxation: Reduction of the corporate tax rate for SMEs, 20%-25% depending on their size Liquidity: Payments to suppliers by municipalities have been facilitated. An ICO line has been set up to pay suppliers directly, with the guarantee provided by local entities' future revenues Enterprise incorporation: maximum time limit of five days for more than 80% of companies Bankruptcy Law: facilitates the viability of companies undergoing difficulties through agreements with creditors Extension of investments the free amortisation tax scheme for new
Approved 23/08/2011 Approved 03/12/10 and 07/07/11

VAT for housing purchase reduced temporarily to 4% from 8%

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Sector restructuring and Privatisation underway

Airports
Separation of airport operation and traffic control

Lotteries
New gambling law Separation of regulation and operation Regulation of on-line gambling

Telecommunications
Introduction of technological neutrality in the usage of spectrum Reallocation of the TDT extra-spectrum to telephone services Spectrum auction ddddddddddd Jul-Sep 2011

(Completed in February 2011) Major airports concessioned to private operators Postponed Privatisation of up to 49% of the National Airport System 1st quarter 2012 Expected revenues (in bn): 3-4

(Approved in May 2011) Privatisation of 30% of the National Lottery Postponed

Expected revenues (in bn): 7-9

Expected revenues (in bn): 1.8-2.0

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 Reform strategy: fiscal, financial and factor markets Structural and economic rebalancing Funding and Debt Management

13

Rapid downsizing of the residential construction sector

Without the adjustment of construction the Spanish economy grew 1.9% y-o-y in 2011 Residential investment accounted for 4.4% of GDP in 1995 and it increased to 9.3% by 2006. In 2011 this ratio is already below the 1995 level of 4.4% Stock of unsold houses (estimated at 725,000 in 2010) will continue to shrink in 2011
Relative size of the construction sector (employment over total employment and residential investment over GDP)
15% 13% 11% 9% 7% 5% 4.4% 3% 1% -1% 1995 2000 2007 2009 2010 6.1% 5.8% 4.7% 9.4% 11.2% 9.2% 13.8% 10.4% 800 700 600 500 400 300 200 100 0

Housing: units started and finished

(Thousand units)

9.3%

2007

2008

2009

2010

2011

2012

2013

Residential Investment
Source: INE.

Employment (FTE)

Built for sale finished homes Started homes New homes stock
Source: Ministerio de Economa y Hacienda.

2014

14

Housing stock is shrinking and prices are adjusting

A gradual reduction in the stock of unsold houses and trend housing demand (approx. 350.000 units), will normalise the sectors macroeconomic impact The adjustment in housing prices is more intense in the Mediterranean coastline as well as in Madrid and its surroundings
Real price adjustment of used houses per Province (From peak in each Province to 2011-Q3 in percent)
>>-30 -30 Average -23.9

Unoccupied housing stock per Province (2010, in percent of total stock in each Province)
>5 >5 5 5

Sources: Ministerio de Fomento.

-25
Average 2.7

4 4

-20 -15 -10 0

Source: Ministerio de Fomento.

3 3 2 2 1 1 0 0

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Intense adjustment of households and non-financial firms

High leverage was concentrated in real estate and construction Non-financial firms have also invested heavily abroad, seizing opportunities of global markets Deleveraging process in households is compatible with moderate consumption growth Credit growth will gradually approach nominal GDP growth
Sectoral balances Net Lending(+)/Borrowing(-) (% of GDP)
6.4 2.4 -0.1 1.9 5.4 2.6 1.8 0.8

8 6 4 2 0 -2 -4 -6 -8 -10 -12 2005 -7.8

Balances of Households and Non-financial firms Net Lending(+)/Borrowing(-) (% of GDP) 6.9 8

6 4 2 0 -2 1.0 3.8 0.6

-4.5 -4.7

-6.0 -9.3

-4.4

-3.0

-4 -6 -8 -10 -12 -6.9

-1.7

-2.6

-2.7

-1.7

-10.7 2006

-11.5 2007 2008

-11.2 2009 2010 2011f 2012f 2013f

-8.8 2005 2006 -10.7 2007

-7.5

2008

2009

2010

Public Sector Balance

Private Sector Balance

Source: INE.

Non-financial firms

Households

Source: INE and Ministerio de Economa y Hacienda.

16

Recent trends in price competitiveness

Between 2000 and 2008, Spain faced an increase in labour costs relative to its European peers Price competitiveness has been improving due to the rebalancing and structural adjustment of the Spanish economy
ULC Indexes relative to the Euro Area (Index 2000=100) Export price indexes relative to the Euro Area (Index 2000=100)

130 120 110 100 90 80

130 120 110 100 90 80

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009 Spain

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Germany Italy
Source: Eurostat.

Ireland France

Spain

Germany Italy
Source: Eurostat.

Ireland France

2010

17

are bolstering exports

The net borrowing of 11.4% of GDP in 2008-Q1 has shrunk to 2.9% in 2011-Q2, partly attributed to the adjustment in the residential real estate sector The current account deficit is adjusting due to the strong export performance. Exports are reacting to the downward pressure on domestic prices and labour cost moderation
Current Account Deficit (Seasonally and calendar adjusted, % of GDP) Trade balance with respect to the EU-27 (January to August of each year, in bn)

10 5 0 -5 -10

5 0 -5

-2.9

-10 -15

-10.8

-20 2009 2010 2011 -25 -30 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

-15 2000 2001 2002 2003 2004 2005 2006 2007 2008

Germany Italy
Source: Eurostat.

Ireland France

Spain

Source: Ministerio de Economa y Hacienda.

18

Spanish firms are competitive in a variety of sectors

Resilience of market share in world merchandise and of service exports other than transportation and tourism-related services Spanish exports are entering in new emerging markets: in 2009 (1999) 78.8% (82.5%) went to OECD and 56.7% (60.2%) to the Euro Area
Share in world merchandise exports by product
6% 5% 4% 3% 2% 1% 0%
Agricultural products Fuels and mining products Manufactures

Share in world exports of commercial services

8% 7% 6% 5% 4% 3% 2% 1% 0%
Personal, cultural and recreational Other business services Computer and information services Communications services Transportation Financial services Travel Royalties and license fees Construction Insurance services

<-------MANUFACTURES------->

Iron and steel

2000

2005

2010

Other manufactures

Automotive products

Machinery

Textiles

Chemicals

Clothing

2000

2005

2010

Source: World Trade Organisation.

Source: World Trade Organisation.

19

while growth potential remains high: employment

During the last decade Spain has increased its labour potential enormously Low share of workers above 50 years Active population has raised significantly Educational attainment of the labour force has also increased significantly
Share of workers below 50 years 2011-Q2
76% 75% 74% 73% 72% 71% 70% 69% 68% 67% 66%
Germany United Kingdom Italy France Ireland Spain

Growth of active population (Index 2000-Q1=100)

130 125 120 115 110 105 100 95 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Germany Spain Italy

Source: Eurostat. Source: Eurostat.

Ireland France UK

20

Growth based on capital and productivity

During the last decade Spain has increased its capital labour ratio considerably with private productive investment is well above other European countries Productivity measured by hours grew at a similar pace than the Euro Area. Recently catching up in levels and the change is structural since construction decrease its weight in the economy
Private productive investment excl.

housing investment
(% GDP 2010)

20% 18% 16% 14% 12% 10% 8% 6% 4% 2000 2001 2002

125 120 115 110 105 100 95 90

Productivity growth of selected European Union countries (Real labour productivity per hour)

2003

2004

2005

2006

2007

2008

2009

2010

2000

2001

2002

2003

2004

2005

2006

2007

2008 Spain UK

Germany Spain Italy Source: Eurostat.

Ireland France United Kingdom

Germany France
Source: Eurostat.

Ireland Italy

2009

21

A balanced and sustained growth path for the future

The combination of structural reforms and the correction of macroeconomic imbalances with the existence of a competitive body of firms and high labour potential will sustain a balanced growth path in the future Recent macroeconomic developments show the structural change in the economy Despite lower growth for 2011, projections for Spain in the medium-run are in line or above those for the Euro Area
Macroeconomic evolution (Growth rates, volume measures)
year-on-year 2010 2011 (f) quarter-on-quarter 2011 Q1 Q2

Comparison of growth forecasts

2011 2012 2013 2014 2015 2016 IMF 0.8 1.1 1.8 1.9 1.9 1.9 Spain OECD 0.9 1.6 EC 0.8 1.5 IMF 1.6 1.1 1.5 1.7 1.7 1.7

Final Consumption Expenditure

- Private consumption - Public Consumption

0.7
0.2 -0.7

0.4
0.9 -1.3

0.7

-0.2
0.6 -2.4

-0.1 2.9

Gross Fixed Capital Formation

- Equipment - Construction - Other products

-7.6
1.8 -11.1 -8.2

-1.3
3.2 -4.7

-1.6
0.0 -2.8 -0.6

-1.0
0.3 -0.9 -3.5

Euro Area OECD 2.0 2.0

EC 1.6 1.8

National demand* Exports of goods and services Imports of goods and services External demand*

-1.2 10.3 5.4 1.1

0.0 8.3 3.0 1.3

-0.9 5.8 5.0 1.3

-2.4 -1.9 -3.7 2.6

Sources: Ministerio de Economa y Hacienda. * Potential output.

GDP

-0.1

1.3

0.4

0.2

Source: National Statistics Institute, Spain.

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 Reform strategy: fiscal, financial and factor markets Structural and economic rebalancing Funding and Debt Management

23

Highlights of debt management

Substantial reduction of net issuance Refinancing risk contained through longer average portfolio maturity A solid and diversified investor base, instrumental in difficult times Transparency and predictability highly valued by investors

24

Debt to GDP well below EU average

61% at end 2010 Spains debt to GDP ratio was 25% lower than the Euro Area average A lower debt burden provides resiliency in terms of interest payments and refinancing needs (1.9% of GDP in 2010, projected at 2.3% in 2011)
Debt to GDP ratios
140% 120% 100% 80% 60% 40% 20% 0% UK Euro Area Italy Germany Spain France
120.6% 87.6% 85.5% 84.1%

6% 5%
81.1% 67.8% 4.8%

Interest Expenditures (% of GDP, EDP)

4% 3% 2% 1% 0% Euro Area Italy UK

3.0%

3.2%

2.6%

2.4%

2.3%

Germany

2007

2009

2010

2011

2007

2009

France

2010

2011

Sources: Eurostat. EDP Notification Tables October 2011.

Spain

25

The funding programme in 2011 (I)

Funding requirement 24% lower than 2010 execution, in accordance with frontloading of fiscal restraint measures As of October 31st, the gross issuance of medium- and long-term bonds stands at 75.7bn, 80.5% of the initially projected figure
Tesoro funding in 2011 (Billion Euro) 1: Funding requirement (=Net Issuance) 2: Redemptions of medium- and long-term bonds 3: Net issuance medium- and long-term bonds 4 = 2 + 3: Gross issuance of medium and long-term bonds 5: Net increase in T-Bills 6 = 5 + 3: Net change in outstanding debt 7: Forecast Outstanding Central Government Debt at end 2011 47.2 -46.6 47.2 93.8 0.0 47.2 588.0

Funding Programme. 2010-2011 (Net issuance in billion Euro)

80 70 60 50 40 30 20 10 0 -10
76.8 -19.1% 61.6 62.158.7 47.2 47.2 26.0 28.6 15.2 3.4 0 -2.6

Source: Direccin General del Tesoro y Poltica Financiera.

Total net issuance Medium- and long-term issues Letras del Tesoro net issues

* As of October 31st 2011.

New fiscal restraint measures imply lower funding needs than initially projected in the January 2011 programme
26

2011 Executed*

2010 Jan Projection

2010 Executed

2011 Jan Projection

The funding programme in 2011 (II)

Monthly announcements + potential announced Friday prior to the auction off-the-run medium and long-term lines

Limit size per line: 16.5 bn for lines of 10-years and above Tesoro Pblico is open to additional foreign currency issuance Private placements/Schuldschein loans
Letras del Tesoro

Short-term Auctions

3- & 6-Month 4th Tuesday of every month

12- & 18-Month 3rd Tuesday of every month

Yearly calendar
Bonos del Estado Obligaciones del Estado
10, 15, 30 -year benchmarks and off-the-run bonds

Medium- and long-term

3, 5-year benchmarks and off-the-run bonds

1st Thursday of every month

3rd Thursday of every month

Monthly announcement on 1st Thursday of every month (Obligaciones of current month and Bonos of next month)

New since July 29th: modification of the tax procedure to simplify the obligations of non-resident investors for the actual perception of their interest income free of withholding taxes. Investor identification obligations are eased and broadened in their geographical scope

27

Funding execution snapshots

Around 82% of the funding programme carried out via auctions On-going engagement with our investor base to update on the implementation of policy strategy and economic and budgetary developments
Cost of debt outstanding and cost at issuance (in percent)
6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Auctions of Bonos and Obligaciones (up to October 31st 2011)

10 ( bn) 9 8 7 6 5 4 3 2 1 0 2010

(Bid-to-cover) 3.0
2.5 2.0 1.5 1.0 0.5 0.0 2011

3.98 3.69 3.72 2.55

2010

2011*

Cost of debt outstanding

Cost at issuance

Amount Issued bn Avg. bid-to-cover 2010

Bid-to-cover ratio Avg. bid-to-cover 2011

Source: Direccin General del Tesoro y Poltica Financiera. * As of October 31st 2011.

Source: Direccin General del Tesoro y Poltica Financiera.

28

Recent behaviour of spreads and yields

Spanish spreads have risen throughout the year mostly due to the compression in Bunds 10-year yields have oscillated around 5.3%
Spreads Spain vs Germany 10 Year Bonds (in bps)
400 350 300 250 200 150 100
Mar-11 Apr-11 Jul-11 Jan-11 Jun-11 Feb-11 Sep-11 Aug-11 May-11 Oct-11
346.5

Spain vs Germany 10 Year Bonds (in percent)

7 6 5 4 3 2 1 0 Apr-11 Mar-11 Feb-11 Jan-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11
2.938
ESP GER

5.317

5.598

2.133

Source: Bloomberg.

Source: Bloomberg.

29

SMP action has reduced yields and volatility

Median, 25th-75th percentiles, extremes of Spanish Government Bonds

7,0 6,5 6,0 5,5

% 5,0

(June 1st August 7th 2011)

August 8th September 28th 2011

4,5 4,0 3,5 3,0 2 3 4 5 6 7 8 Tenors (in years) 9 10 15 30 2 3 4 5 6 7 8 Tenors (in years) 9 10 15 30

Source: Bloomberg

30

Lengthening of average life has enabled a prudent debt management

Average portfolio maturity has increased thanks to a reduced issuance of T-Bills and focus on medium- and long-term supply This effort helps reduce refinancing risk, enabling prudent debt management
Duration & Average Life to Maturity of the Portfolio. Average life to Maturity. As of October 31st 2011. As of October 31st 2011 (T-Bills and medium and long-term euro-denominated debt, (Letras, Bonos and Obligaciones) excluding inflation-linked bonds) (in years) (in years) 8 7.5
7.25

7 6 5 4 3 2 1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* 4.28 4.34 6.70 6.73

7.0 6.5 6.0 5.5 5.0

6.80

6.73 6.44 6.30

Belgium

Average life

Duration

Germany

Italy

France

Spain

Sources: Direccin General del Tesoro y Poltica Financiera and Bloomberg.

31

A diversified investor base

Non-resident investors have been of instrumental importance throughout various periods of uncertainty The geographical distribution of holdings of government bonds has remained relatively stable during the last two years
Total unstripped Government debt by Holder (Registered. In percent of total portfolio)
70% 60% 50% 40% 30% 20% 10% 0%
Pension, Insurance and Mutual Funds Credit Institutions Spanish official institutions Households & nonfinancials Nonresidents
2008 2009 2010 2011*

Source: Direccin General del Tesoro y Poltica Financiera. * As of September 30th 2011.

32

Robust Treasury Management System

Redemption dates of medium- and long-term bonds (principal and coupons) match the biggest inflows of tax revenues Transparency: regular and publicly available information about budgetary execution, change in cash balances, non resident holdings, Issuance schedule based on very conservative assumptions about budget execution Excess liquidity is lent in the money market each month through repo auctions Liquidity lines with banks provide an additional buffer
Monthly maturity structure as of October 31st 2011 (in billion Euros)
18 16 14 12 10 8 6 4 2 0 Nov Mar Apr Jan Jun Jul Aug Sep Feb May Dec Oct

Average seasonal index of tax revenues of the Central Government 2008-2010 250 (Index 100=average)
200 150 100 50 0 Nov Mar Apr Jan Jun Jul Aug Sep Feb May Dec Oct

Source: Direccin General del Tesoro y Poltica Financiera.

Letras

Bonds and long-term loans

Source: IGAE.

33

Risk and refinancing measures

Refinancing risk remains subdued thanks to a longer average life Redemptions of Euro-denominated debt remain well in line with those of peers
Maturity structure of medium- and long-term bonds (in billion Euros) 70
60 50 40 30 20 10 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2036 2037 2040 2041

Redemptions November 2011 to October 2012 (in % of 2011 GDP, Euro-denominated bonds and T-Bills)
19% 17% 15% 13% 11% 9% Belgium 7% Italy France Spain
8.9% 16.9% 15.1% 14.0% 12.0%

Source: Direccin General del Tesoro y Poltica Financiera.

Source: Direccin General del Tesoro y Poltica Financiera for Spain, Bloomberg for other countries and EDP Notification Tables October 2011, Eurostat.

Germany

34

More and updated information on the Spanish economy

http://www.thespanisheconomy.com

For data sources, please click links below each figure or table

35

Thank you for your attention

Jose Manuel Campa Secretary of State of Economy Soledad Nez General Director of the Treasury and Financial Policy
DirectorTesoro@tesoro.meh.es Ignacio Fernndez-Palomero Deputy Director for Funding and Debt Management ifernandez@tesoro.meh.es Rosa Moral rmmoral@tesoro.meh.es Leandro Navarro lnavarro@tesoro.meh.es Pablo de Ramn-Laca pramonlaca@tesoro.meh.es Ignacio Vicente ivicente@tesoro.meh.es Roco Chico mrchico@tesoro.meh.es Carla Daz cdiaza@tesoro.meh.es

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 For more information on recent developments: www.thespanisheconomy.com
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