A cumulative debt of 1,175 billion euros and growing, which swallows 56,000 euros per minute just for interest, in an economy with symptoms of slowdown and with a public sector that continues to produce red numbers. It is the delicate picture presented, as a whole, by the coffers of the Spanish administrations just when the European Central Bank (ECB) finishes the program of purchase of sovereign debt in the countries of the Eurozone. January 2019 is the deadline, after four years in which the ECB has been the great parapet that has protected countries especially exposed by their levels of indebtedness and, incidentally, has been an insurance to avoid vulnerabilities that could have infected the whole economy of the Euro.
The ECB has decided to close that tap for which they have left several trillion euros in these three years, although folding candles gradually. In any case, the withdrawal of this debt purchase policy opens a new scenario of uncertainties. The fundamental is what will happen before the foreseeable rebound of types and how it will affect potentially vulnerable countries due to their levels of accumulated public debt.
Spain is one of those states with indigestible debt figures and one of the most directly alleviated by those financial protection policies deployed by the ECB in the last three years. Suffice a datum: Spain pays less interest than in 2012, although it accumulates a public debt 32% higher that six years ago. The reason lies in the fact that interest rates have remained flat and, in addition, the State has extended its umbrella over autonomies to -in practice- subsidize the price of its debt and avoid the additional cost that would have been financed directly in the markets -Cataluña has been the most benefited, with a regional debt that has been installed for years in the "junk bond" rating.
Expenses in sight
From now on it remains to be seen how much it will cost the end of the ECB debt purchase program and the increase in the interest rates that the experts take for granted. From the start, Spain starts with an indebtedness that continues in record figures and with some interests that it has to pay with added indebtedness, because the operating costs of its public sector continue to be much higher than the income it is capable of generating.
Last year, the whole of the Spanish Public Administration -state, local, autonomic and Social Security- paid 29,817 million euros in interest on a consolidated basis, once the internal payments made between them have been discounted – the fundamental, the interests that the autonomies pay to the State for the money that has been lent to them. Of those 29,817 million, around 83% of the bill corresponds to the debt of the State Administration, 15% to the autonomic and about 2% to the local entities. It is significant that the autonomies pay only 15% of that bill, when in reality they account for 25% of Spain's public debt. The reason is that a large part of the price of the regional debt falls on the backs of the State Administration, as a consequence of the extraordinary financing mechanisms -case of the FLA- that it deployed to help the autonomies and, especially, Catalonia.
Currently, with the price of money in tatters, interest on the Spanish public debt swallows around 2.5% of GDP. From January 1 to September 30, the last available official data, Spain disbursed 21,730 million euros for its public debt. In the whole last year, 29,817 million; 31,356 million in 2016 … Figures that contrast with less than 17,000 million annual payments in 2005, 2006 and 2007, when Spain's public debt was three times lower than now.
More and more voices are warning of the risks that Spain faces due to its high level of public debt and the foreseeable extra cost that it will generate. «The free liquidity bar of the ECB is over, a rate hike is being announced and, unless they go up, the Spanish Administration's spending will worsen », explains Juan Carlos Higueras, professor of EAE Business School. "It's a problem" that will be complicated "even more if it coincides with a change in the economic cycle", with a GDP downward.
Spain counts among what Higueras calls «Governments» 'yonkies'' of debt », countries that "base their political programs on public spending beyond their means". And warns that "as long as there is not a firm will not to spend more than what is paid and to reach levels of surplus with which to develop stable growth policies, it will be necessary to continue issuing debt in a sort of vicious circle on key elements such as the deficit, the taxes and the debt itself ». The The International Monetary Fund (IMF) has also been insisting for some time that Spain must reduce public debta and tackle the deficit. In October, the IMF revised downward the GDP growth forecasts, and again urged the State to act more vigorously to put the deficit and debt in balance, because "the economic cycle is coming to maturity and several risks they darken the medium-term panorama ».