Spain’s Public Debt Overcomes GDP

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Spain’s public debt reached an all-time high in June, almost 1.2 billion euros, which is equivalent to 100.9% of GDP, according to the latest data released Wednesday by the Bank of Spain. Specifically, in June public debt added 18.5 billion euros, an amount that has exceeded the level of one hundred percent of GDP for the third time since early 2015. Public debt reached 100% of GDP in the first quarter of last year, when it hit 100, 2%. In the same period this year, it reached 100.5%. The debt posted in June is the highest since early last century. According to historical data from the International Monetary Fund (IMF), Spanish public debt exceeded or touched 100% of GDP between 1900 and 1909, and had its maximum level of 149% of GDP in 1881, a year in which authorities began to record such data. Spain’s lowest debt to GDP ratio was seen in 1975, when it was at only 7.3% of GDP. The Ministry of Economy and Competitiveness recalled that the debt indicator has a significant seasonal component, since the main maturities occur in the months of January, April, July and October. According to the entity, taking into account this factor, the growth of debt remains in general in a “deceleration trend that started in 2013”. According to government data, the target set in the stability program this year will be of 99.1% of GDP, one tenth less compared to the end of 2015. During June, the Spanish Treasury obtained about 18,7 billion euros over four sovereign debt auctions, in which market tensions have forced to raise the marginal interest. That means that Spain is charging investors for purchasing this type of debt. The government further emphasizes that the trajectory of the risk premium which is stable near 100 basis points, with the interest on the benchmark 10-year low below 1%, which helps the public debt is “very sustainable”. Most of the new debt has been created by the Spanish government itself, which has had the largest increase in debt ever registered by the State. In June it added over 12.5 billion euros and marked a new high of more than 938 billion. Regionally speaking, there have also been new records set when it comes to debt. A new total of more than 273 billion has been added to their debt total, after it increased by 7 billion in June, while local corporations have reduced their debt by 929 million to 35.269 million. Administrations of Social Security has also reduced its debt by 5 million, bringing the total has dropped to 17 billion. The sum of public debt in the autonomous regions exceeds the total of the Spanish public debt because there are items that are recorded simultaneously by two administrations, as with the Financing Fund for payment to suppliers, the Liquidity Autonomic Fund or Financing Fund for Local Authorities.

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