Nevertheless, by mid-1988 symptoms of reheating began to appear, which were reflected in a upward inflationary spiral and in the deterioration in the balance of payments on current account. Therefore, although production was growing at a satisfactory rate, domestic demand increased to an average annual rate almost three points above production. This excess in demand over national production produced a rise in domestic prices and an increase in foreign purchases. The deterioration of the balance in foreign trade, principally due to an accelerated rate of growth in internal demand, was also a result of the opening up of Spain's economy upon its accession to the Common Market.

To confront these symptoms of overheating, measures relating to demand as well as to supply have been adopted. The former are designed to reduce the growth of demand, while the latter have been implemented with a view to increasing the potential or non-inflationary growth of the economy. An income policy was drawn up to accompany this combination of supply and demand policies, and since then, these have been the coordinates of the economic policy endorses by the convergence criteria ratified in Maastricht in December 1991.

With respect to demand, a restrictive financial (monetary and fiscal) policy has been implemented.

In conclusion, after 1989, the Government implemented restrictive demand measures in order to correct the imbalances of the economy. It was deemed necessary to make the objectives for the improvement of infrastructure and social benefits compatible with the correction of excess demand, and the State made an effort to contain fiscal policy through limiting certain revenue expenditures.

It is particularly interesting to note how the moderation of revenue expenditure becomes more complicated as the deceleration of economic ectivities is prolonged. As a result, in the 1993 budget, severe measures have been taken, such as the elimination of the wage review clause based on inflation for public sector employees, or the freezing of public employment during 1992 and 1993. These measures demonstrate the Government's desire to fulfill the Maastricht criteria and reduce the public deficit.

With respect to supply, a series of structural measures have been adopted that are desgined to make the economy more flexible, less inflationary and more efficient.

To complement these policies of restrictive demand and more flexible supply, the Government, concerned about the development of labour costs and the loss of economic competitiveness, has tried to stimulate an income policy on several occassions.