In the case of the households and businesses, it is important both their own will and the determination of their creditors and funders, who reduce the credit due to the difficulty of raising resources and to the regulatory requirements regarding the backup equity capital.
The fastest and most effective way to cover the equity capital is to reduce the credit. Households repay mortgage loans month after month without replacing the credit that expires with new financing. Meanwhile, businesses prefer the self-financing as a result of the shortage of credit, which is difficult to achieve in reasonable conditions.
This is no the case of the Spanish Estate, who sells comfortably its debt issuances at low costs (also as a result of the situation of the euro and the generalised feeling of lack of defaulting risk). By the end of January, the Spanish debt that has been recognised and recorded, went up to €980 billion –just one step away from the trillion.
If we add the debt of those public companies that are not included in the accounting perimeter of the Estate (another €50 billion), as well as other projects that are also public debt (electricity and gas tariff deficit or bankrupt and guaranteed highways), then the trillion and the 100% GDP are well beyond exceeded.
Spain has a permanent and increasing problem with the public indebtedness, although it was ignored after the 2012 anxiety regarding the sovereign debt. The issue was ended thanks to Mario Draghi, who managed to delay the concern but couldn’t completely finish off the problem. And in the case of Spain, the problem remains even though Brussels doesn’t pay attention to the increase in the Spanish debt (which grows week after week).
It sets the alarm bells ringing that Spain exceeds one trillion in the debt and reaches 100% GDP with a revenue capacity so weakened. However, the threat isn’t perceived as something too serious yet. The Spanish economy improves by tenths, but the public debt doesn’t stop growing –there is any single week of calm.