Spain’s public debt soars

Spain’s public debt soared to a record high at the end of 2011, Bank of Spain figures showed yesterday, as Madrid struggled to slash costs and escape the eurozone debt crisis.

Public debt amounted to €734.96 billion, equal to 68.5 per cent of annual economic output at the end of 2011 – up from 66 per cent three months earlier and 61.2 per cent at the end of 2010.

The accumulated debts breach the European-Union agreed limit of 60 per cent of gross domestic product, but were still below the eurozone average, which approached 90 per cent in the third quarter last year.

It was the highest public debt ratio recorded in Spain since statistics in the current format were first published in 1995.

Spain’s public debt is rising fast because of runaway annual public deficits that have shot past EU-agreed targets, in part owing to high spending by regional governments.

The previous Socialist government, ousted by the conservative Popular Party in November elections, had forecast a debt of 67.2 per cent of GDP for the end of 2011, aiming to curb it to less than 70 per cent in 2014.

But the European statistics unit Eurostat was not so optimistic. It forecast a public debt of 69.6 per cent in 2011, 73.8 per cent in 2012 and 78 per cent in 2013.

Spain’s conservative government, which took power in December, has yet to announce a new public debt target.

The public debt ratio has grown without interruption since the first quarter of 2008 when, after nearly a decade of fast growth and budget surpluses, which trimmed the debt, it amounted to 35.8 per cent of GDP.

The situation in the 17 regions is particularly worrying: at the end of 2011 their accumulated debt rose to €140.1 billion, or a record 13.1 per cent of national GDP, from 11.4 per cent a year earlier.

Municipal debts, however, eased over the year to €35.4 billion or 3.3 per cent of GDP.

Regional governments enjoy a high level of autonomy, prompting concerns in financial markets that their spending could compromise the central government’s deficit-cutting goals.

Spain had agreed to cut its annual public deficit to six per cent of GDP in 2011 but it overran that target by a wide margin and ended up reporting a deficit of 8.51 per cent of GDP.

After winning a slight relaxation from Brussels in its goals for this year, Spain is now aiming for an annual deficit of 5.3 per cent in 2012 and three per cent in 2013.

But the regions are not entirely to blame. The central government’s finances also deteriorated in 2011, as its public debt rose to 52.1 per cent of GDP at the end of the year from 46.4 per cent a year earlier.