Spain has seen a remarkable fiscal consolidation in the past few years. Tight expenditure control, coupled with declining interest payments and strong revenues, led the general government balance to achieve a surplus of 0.3% of GDP in 2003, compared with a 1.2% deficit in 1999. The 2004 general government balance is forecast to show a deficit of 0.7% of GDP, largely reflecting one-off expenditures, but is expected to return to a broadly balanced position from 2005 onward. In parallel, the debt-to-GDP ratio has declined rapidly to 49.6% in 2004, from 63% in 1999. These compare with the 'AAA' median deficit- and debt-to-GDP ratios of 0.65% and 46.0%, respectively, in 2004. Reforms to labor and product markets have increased the resilience
