Spain’s public debt is on course to surpass the size of its economy as the balance at the end of 2013 stood at 961.555 billion euros, 93.7 percent of last year’s GDP.
Public debt has tripled since the start of the current crisis around 2008 and now stands at its highest level in a century, according to the historical series compiled by the IMF, which puts Spain’s all-time record at 123 percent of GDP.
The government’s initial target for the debt/GDP ratio for last year was 90.5 percent, but it subsequently raised that figure to 94.2 percent. Debt has been swelled by persistent deficits, fueled in part by ballooning unemployment benefits because of the high jobless rate and by the European bailout of some 41 billion euros to clean up the banking system.
After emerging in the third quarter of last year from its longest recession since the restoration of democracy, the Spanish economy faces a scenario of weak growth over the next few years, complicating the task of reducing the country’s level of indebtedness to more sustainable levels. The austerity drive to reduce the deficit has also weighed on activity, producing a sort of vicious cycle like a dog chasing its own tail.
In 2007 before the crisis broke, the debt/GDP ratio stood at 36 percent, practically half the average in Europe. In the third quarter of last year, it hit 93.4 percent, compared with an average for the euro zone of 92.2 percent, according to figures from the European Union’s statistics office, Eurostat. In that quarter, the single-currency zone managed to reduce its indebtedness for the first time since 2007, while Spain experienced the biggest increase after Cyprus and Greece.
The government expects debt to stabilize at 100 percent of GDP in 2016, although the 2014 state budget acknowledges that the ratio could exceed 100 percent in 2015.