Spain Is Far From Complying On Deficit And State Debt Targets

Spain GDPSpain economy slows in Q3

Spain has announced an official public deficit for 2017 of 3.1% of GDP. This will unravel a chain of consequences in the EU.

It’s still surprising that out of a total amount of debt issued equivalent to 137% of GDP, there can be an official debt of 98%, thanks to a cut which, under the EU’s conditions themselves, is fully approved. This growing divergence has been there for years, particularly since the PP entered government in November 2011.

It seems that it is in Spain’s interests, or more precisely in the government’s interests, to be the only country with the dishonourable qualification of the Excessive Deficit Protocol (EDP), because – I don’t know the exact reason – it’s easier to hide debt than if the deficit target is met. In other words, the government prefers to declare 3.1% than the requested 3%, because in that way it can magic up cutting the debt from 137% to 98% of GDP. A cut of nearly 40% of GDP, it’s not bad is it?

No, it’s not bad at all. The trick consists in the fact that under the “failed” qualification within the EDP, there are a lot of items which are allowed to be hidden, like suppliers’s commercial loans. But of course there are other items, in order to be able to camouflage 40% of GDP. Let’s look at the Bank of Spain table which shows total debt and its “skinhead haircut” to get to these figures. The haircut can be seen in columns 6 to 10. These have never been properly explained, but a part of it corresponds to commercial loans and delays in payments to suppliers. And the other part corresponds to consolidated debt between administrations, like that owed by the autonomous region of Catalonia to the central government, which is just fiction as it will never be paid back.

According to the latest published figure, Spain’s total debt is 138.8% of GDP, while the official EDP figure is 98.7%. A whole “package” buried under the carpet of 40% of GDP.

About the Author

Miguel Navascués
Miguel Navascués has worked as an economist at the Bank of Spain for 30 years, and focuses on international and monetary economics. He blogs in Spanish at: http://