![]() Why Did Spain Give Wings To The Construction Sector?ĭelighted by the opportunities that lower interest rates brought in order to expand the economy, the government stoked the fire further by offering tax breaks to the construction sector.Īll sales within a country add to the national GDP. Thus, Spain experienced a boom stoked by cheap credit.Īlthough Spain is not officially classified as an emerging economy, its performance in the 1990s and through to the 2000s followed the classic emerging economy debt trap. When the government reduces the interest that it will pay on its bonds, the country’s banking sector reduces its lending interest rate accordingly. Spain is one of the southern European countries that experienced rapid economic expansion in the 1990s thanks to government debt servicing costs being reduced by Euro membership. So, when the Spanish government wanted to spend more, it just needed to increase the country’s GDP. The important metric is the debt to GDP ratio. The actual sale of government debt instruments has been delegated to a department of the Ministry, which is called Tesoro Publico.Īs the OECD graph above shows, the Spanish government did a very good job of reducing its national debt until 2007.Īs a member of the Euro, Spain was obliged to reduce its national debt to 60% of GDP and also control government budget deficits so that they didn’t rise above 3% of GDP.Īs you already know, the amount of debt doesn’t matter. The Madrid government’s Ministerio de Economía y Empresa (Ministry of Economy and Industry) is ultimately responsible for Spain’s national debt. Hence why economists are more interested in debt figures in relation to GDP than absolute values. This applies to the private sector as well as the public sector. When investigating Spain’s national debt sustainability, it is important to look into the country’s ability to repay its debts. Source: OECD (2019), General Government Debt, Data (accessed on 12/8/20) While the IMF judged Spain’s national debt to GDP ratio as 95.5 % for 2019, the OECD calculated the figure as 117.3% for the same year. There are many different ways to measure national debt. Although the nation’s pension obligations don’t count as part of gross debt, the state pension fund’s assets are included in the net debt figure. The difference between the two figures is that gross debt counts all of the money owed by the public sector, but the net figure deducts the nation’s assets. The IMF lists Spain’s gross debt to GDP ratio as 123% in October 2020 and its net debt to GDP ratio as 106.91%.a Outstanding payments represented by unpaid invoices.Obligations for future payments under the national pension scheme.There are many debts that the Spanish government doesn’t include in the national figure, even though they originate from the public sector and so should be within the remit of public debt. ![]() What Debt Is Not Included In Spanish National Debt? However, there is a lot of room for manoeuvre in those rules. ![]() This counts all public debt as the national debt. As with all Euro nations, the Kingdom of Spain is obliged to count its national debt according to the rules laid down in the Maastricht Treaty.
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