Spain's debt fell by 117% of GDP in June for the first time since September 2020. However, in absolute terms it increased by 1.3% since May, to 1.475 trillion euros.
How Spain places its debt: filter for speculators, coordination with Italy and tension for every million in interest
Indebtedness stood at exactly 116.8% due to the increase in economic activity and inflation. And the Government is confident that "the trend of recent quarters is compatible with the forecast of a public debt ratio of 115.2% of GDP made in the Stability Program last April."
"In year-on-year terms, there is a clear slowdown in the increase in debt from the maximums reached during the pandemic," says the Ministry of Economic Affairs. Compared to GDP, it reached 125.2% in the first quarter of 2021, before the recovery after the COVID shock began.
“The reduction in the public debt ratio has continued thanks to the acceleration of economic growth, also taking into account how advanced the financing program of the Treasury of the Kingdom of Spain is for the year 2022 [con un objetivo de emisión neta de deuda de 75.000 millones]”, continues the Ministry.
"To date, 69.2% of the total emissions program for this year and 71.7% of the medium and long-term emissions have been executed," they continue from the institution headed by the first vice president Nadia Calvino.
The Treasury has stepped on the accelerator in the first part of the year in the issuance of debt with which public spending that exceeds income (the deficit) is financed. And it has done so to take advantage of extraordinary financing conditions that have been exhausted after the rise in official interest rates by the European Central Bank (ECB) to stop fueling inflation.
Spain already pays for all debt terms for the first time since 2015. The Public Treasury placed 3-month bills on Tuesday at a positive interest of 0.145%, after seven years charging for them.
The yield of the shortest maturity of all those to which Spain issues debt was the last one that was missing to enter positive territory in a context of generalized increase in the cost of financing.
This is a milestone in our country, which literally leaves the era of free money. The one inaugurated by the ECB after the euro crisis and the bank bailout in 2012 so as not to finish drowning the most indebted economies in the eurozone and favor recovery, slowed down by austerity measures.
This expansionary monetary policy intensified with the shock of the COVID pandemic, but the institution was forced from the end of 2021 to gradually withdraw this extraordinary stimulus, which consisted of lowering official interest rates to historical lows and creating billions euros to buy debt from states and companies to guarantee market demand, according to certain conditions.
Thus, it now faces the difficult challenge of tightening financing conditions across the board to stop feeding runaway inflation without particularly harming the countries with the most fiscal imbalances. Among them, Spain itself, and Portugal, Greece and Italy follow.
In this process, our country has been issuing since June —taking into account all maturities— at a cost higher than the average interest rate of all outstanding debt, according to Treasury statistics. Something that has not happened in recent decades (see graph), which means that after falling to a minimum due to the support of the ECB, the average cost is going to rise, also increasing the interest bill faced by the State, and that it had stabilized at around 2% of GDP.