Friday, July 1

Spain’s over-indebtedness of 26%: public debt at all-time highs and will go further

The public debt has served us, in what we have of pandemic crisis in order to achieve spending levels that we could not have otherwise achieved. Money from the financial markets, in that search for money by Spain that will take us, in the absence of a month to close the year at an increase in the level of debt of around 26% compared to the closing levels of 2019, which were 95.5% of GDP.

All that has served and is serving to pay for everything added, from aid to companies that do not come from the Next Generation EU community funds, until the ERTE, through the money for business support, freelancers and health support transferred to the CCAA to meet the expenses derived from Covid-19.

With the latest data in hand, the complete ones for the month of September, public debt in Spain reaches 1.43 trillion euros, with growth that it rises to 9.5% from last year. This increase, converted into millions of euros, has reached 12,885 million since August.

It is a record amount that has never been registered in Spain to date. Nevertheless, the weight of this debt on growth falls by three points from 125 to 122.1% of GDP, faced with the recovery, due to the greater increase in national wealth

Levels and evolution of public debt in Spain

As at the moment the fiscal rules are suspended with idea even, despite the frugal countries, If it is prolonged in time before the recovery halt, its amortization does not seem urgent. Nothing could be further from the truth, because an imbalance of this type can hinder the recovery on the horizon and the economic future of the next generations. All this without forgetting that, if its fall is not deepened, a coming crisis would place us with an added danger to face it and without the possibility of going into debt to combat it.

In this context, moreover, promises to rise in the face of falling growth expectations, that can be linked to a lower collection and the danger of returning to the market to borrow more money in the Spanish sovereign debt formula. And even that the returns to pay, which already correspond, together with the pensions, to one of the highest items in the budgets, increase.

At the moment, the outlook does not seem optimistic at all. Recovery is delayed with OECD growth reduction to 4.5%, from the previous 6.8%, which can have the opposite effect to what has happened these months: that the level of debt over GDP rises and that, in the future, this will pose a problem for us in the Brussels evaluations, when fiscal rules are reinstated.

From the Bank of Spain, Governor Pablo Hernández de Cos puts on the table, in his parliamentary appearance on the 2022 Budgets, the problems that it entails high indebtedness, which is expected to last for the next 15 years.

Consider what they could bring with them two sources of vulnerability: on the one hand, what higher market volatility raises profitability when investors buy public debt. For the other, a possible upward impact on financing conditions and that, the higher payment of returns detracts public resources that can be dedicated to other items.

The good part is that the economic vice president, Nadia Calviño has announced that the last debt auction scheduled by the Public Treasury for this December is suspended, with what in the end, 25% less than originally planned will be issued. Net debt that amounts to 75,000 million thanks to the improvement in tax collection, levels similar to those that will be issued in 2022.

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