The economic vice president lowers the tension due to the rise in the cost of paying interest
The recent tensions in the debt markets, resolved with the promise of the European Central Bank (ECB) to design an 'anti-fragmentation mechanism' to contain risk premiums, have, however, sounded the alarm for the Government. The beginning of a new cycle of increases in interest rates has already led to an increase in the cost of State financing.
But for weeks the Executive has defended that the situation is completely manageable, at a time when it is seeking, above all, to maintain the confidence of investors who buy Spanish debt. The economic vice president, Nadia Calviño, defended this Tuesday the indebtedness policy of the Public Treasury, which for years has been able to take advantage of the favorable context of negative rates to face the normalization of monetary policy in a good situation.
During the press conference after the council of ministers, Calviño recalled that this "prudent management" has allowed the Treasury to increase the average life of its debt to over 8 years, which reduces the risk of refinancing. "You only have to refinance 15% of that debt per year, which reduces the impact of rising interest rates," he insisted. In addition, the body dependent on the Ministry of Economy has already executed more than 60% of the total issues planned for this year, with a budgeted interest charge of 30,000 million euros, which allows it to comfortably face the expected rise in interest to from the next ECB meeting in July, when the first rate hike of 25 basis points in eleven years is expected.
Currently, the average cost of debt is, in fact, 1.59%, lower than at the end of 2021, when it stood at 1.64%, with the maximum being 3.6%, which was reached in 2013. Likewise, the cost of interest on debt over income fell to 5%, a level similar to that of the beginning of 2009, with a maximum of 9.2%, reached in 2013.
"The normalization to contain inflation is translating into higher interest rates on public debt, but the current ones are still low in historical terms," Calviño defended before the media.
Similarly, he indicated that international investors continue to show "great confidence in Spain", indicating that, although risk premiums pick up, the rise is moderate when compared to previous crises.
In this environment, Calviño indicated that "despite the current uncertainty, the war, the disruptions in supply chains, etc., the truth is that the Spanish economy maintains strong growth and we are taking advantage of it to continue progressing in fiscal consolidation" .
Specifically, the Government foresees in its Stability Program that the debt will fall below 110% of GDP in 2025, and the deficit will also be below the 3% set by the European stability pact, whose fiscal rules are currently suspended.
"The responsible management of recent years is allowing us to respond effectively to the challenges of these years without losing sight of the medium-term compass that allows us to continue progressing," Calviño said during his appearance.
In it, the Minister of Economy repeated the message launched this week, warning that Spain is in a moment of "high uncertainty" in which "the news about energy is not positive", insisting again that the situation The current situation has already forced numerous downgrades in growth forecasts in the euro zone.